<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
JETFAX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 3577 77-0182451
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION
INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION) NUMBER)
1376 WILLOW ROAD
MENLO PARK, CALIFORNIA 94025
(415) 324-0600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
EDWARD R. PRINCE, III
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
JETFAX, INC.
1376 WILLOW ROAD
MENLO PARK, CALIFORNIA 94025
(415) 324-0600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
CLIFFORD S. ROBBINS, ESQ. JOHN F. SEEGAL, ESQ.
SUSAN J. SKAER, ESQ. IAIN MICKLE, ESQ.
GENERAL COUNSEL ASSOCIATES LLP BRETT E. COOPER, ESQ.
1891 LANDINGS DRIVE ORRICK, HERRINGTON & SUTCLIFFE LLP
MOUNTAIN VIEW, CALIFORNIA 94043 400 SANSOME STREET
(415) 428-3900 SAN FRANCISCO, CALIFORNIA 94111
(415) 392-1122
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value................. 4,025,000 shares $10.00 $40,250,000 $12,197
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 525,000 shares that the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a).
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION -- DATED MARCH 21, 1997
PROSPECTUS
- --------------------------------------------------------------------------------
3,500,000 Shares
[LOGO OF JETFAX]
Common Stock
- --------------------------------------------------------------------------------
Of the 3,500,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby, 2,750,000 shares are being offered by JetFax, Inc.
("JetFax" or the "Company") and 750,000 shares are being sold by certain
stockholders of the Company (the "Selling Stockholders"). The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Stockholders. See "Principal and Selling Stockholders."
Prior to this offering (the "Offering"), there has been no public market for
the Common Stock of the Company. It is currently anticipated that the initial
public offering price will be between $8.00 and $10.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company has applied for quotation of its
Common Stock on The Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "JTFX."
SEE "RISK FACTORS" ON PAGES 6 TO 15 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
COMMON STOCK OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discount and Proceeds to Selling
Public Commissions (1) Company (2) Stockholders
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share................. $ $ $ $
- --------------------------------------------------------------------------------
Total (3)................. $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $800,000.
(3) The Company has granted to the several Underwriters a 30-day over-allotment
option to purchase up to 525,000 additional shares of the Common Stock on
the same terms and conditions as set forth above. If all such additional
shares are purchased by the Underwriters, the total Price to Public will be
$ , the total Underwriting Discount and Commissions will be
$ , the total Proceeds to Company will be $ and the total
Proceeds to Selling Stockholders will be $ . See "Underwriting."
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters, subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares of Common Stock to the
Underwriters is expected to be made at the office of Prudential Securities
Incorporated, One New York Plaza, New York, New York, on or about May , 1997.
PRUDENTIAL SECURITIES INCORPORATED COWEN & COMPANY
May , 1997
<PAGE>
[APPEARS IN SIDEBAR TO THE LEFT:]
JETFAX'S EMBEDDED SYSTEM TECHNOLOGY, BRANDED PRODUCTS AND DESKTOP SOFTWARE
SOLUTIONS MAKE JETFAX A LEADER IN THE MULTIFUNCTION PRODUCT ("MFP") MARKET.
JETFAX DEVELOPS AND PROVIDES COMPLETE HARDWARE AND SOFTWARE SOLUTIONS TO MEET
THE MULTIFUNCTION NEEDS OF OEMS AND END USERS, FROM SMALL OFFICE/HOME OFFICE
(SOHO) TO CORPORATE WORKGROUPS.
[APPEARS TO RIGHT OF SIDEBAR:]
[JETFAX LOGO]
BRANDED PRODUCTS
JetFax manufactures and
markets innovative MFP
solutions under the JetFax brand name
to corporate end users.
MULTIFUNCTION PRODUCT (MFP)
PRINT-FAX-COPY-SCAN
IN A SINGLE, INTEGRATED DEVICE
[APPEARS SIDEWAYS ON RIGHT:]
EMBEDDED SYSTEM
JetFax's proven embedded
system provides
the intelligence of the MFP,
controlling and optimizing
the print, fax, copy and scan
functions.
[APPEARS SIDEWAYS ON LEFT:]
JETSUITE SOFTWARE
JetSuite, an all-in-one
software application, enables
end users to fully utilize
the print, fax, copy and scan
capabilities of a MFP
from their desktops.
- --------------------------------------------------------------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE,
PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
"JETFAX," "JETSUITE," "JETSOFT," "JETPCL," "JETFILE," "CONCORDE" AND THE
"JETFAX" LOGO ARE TRADEMARKS OF THE COMPANY. TRADEMARKS OF OTHERS ARE ALSO
REFERRED TO IN THIS PROSPECTUS.
2
<PAGE>
EMBEDDED SYSTEM
[Picture of an embedded system board featuring a "JetFax" ASIC. There is an
arrow pointing to the right and down from the picture.]
JETFAX'S PROVEN
EMBEDDED SYSTEM
TECHNOLOGY INTEGRATES
MULTIFUNCTION
CAPABILITIES.
BY UTILIZING JETFAX'S
EMBEDDED SYSTEM
EXPERTISE AND ABILITY
TO CUSTOMIZE SYSTEMS TO
OEMS' SPECIFICATIONS,
JETFAX BELIEVES
IT ENABLES ITS OEM
CUSTOMERS TO REDUCE
TIME-TO-MARKET AS WELL AS
DEVELOPMENT AND PRODUCT COSTS.
CORPORATE MARKET
[Picture of corporate users representing the corporate market. Three people are
gathered around a JetFax M5.]
JETFAX'S AWARD WINNING BRANDED
PRODUCTS ARE TARGETED
AT THE CORPORATE MFP
MARKET AND HAVE MORE
ADVANCED FEATURES THAN
THOSE FOUND ON TYPICAL
SMALL OFFICE/HOME
OFFICE (SOHO) MFPs.
THESE CORPORATE
FEATURES INCLUDE HIGHER
SCANNING AND
TRANSMISSION SPEEDS,
INCREASED MEMORY AND
PAPER CAPACITIES,
IMPROVED PERFORMANCE
AND A TWO-LINE UPGRADE.
<PAGE>
[ON LEFT SIDE BAR:]
SOHO MARKET
[Picture of SOHO user representing the SOHO market. One person sitting at a desk
talking on phone using a SOHO MFP which contains JetFax embedded system
technology.]
JETFAX SERVES THE
GROWING MARKET OF
THE SMALL OFFICE/HOME
OFFICE (SOHO) USERS BY
LICENSING ITS CORE
MULTIFUNCTION TECHNOLOGY
AND DESKTOP SOFTWARE
TO OEMs FOR USE IN
A BROAD RANGE OF
MODERATELY PRICED
PRODUCTS. SOHO USERS
ENJOY THE ECONOMIC
BENEFITS AND SPACE
SAVINGS THAT RESULT FROM
THE PURCHASE OF A SINGLE
DEVICE THAT MEETS
MULTIPLE OFFICE NEEDS.
JETSUITE SOFTWARE
[Screen picture of JetSuite software showing thumbnail pictures of documents on
a desktop. Also displayed are icons for print, fax, copy, mail and OCR. There is
an arrow pointing up and to the left of the picture.]
JETSUITE INTEGRATES PRINTING, PC FAXING, COPYING, SCANNING, DOCUMENT
MANAGEMENT AND DEVICE CONFIGURATION INTO ONE PACKAGE,
ELIMINATING THE NEED TO INSTALL AND LEARN MULTIPLE APPLICATIONS.
JETSUITE IS CURRENTLY EXPECTED TO BE RELEASED WITH SEVERAL OEM
PRODUCTS IN THE SECOND QUARTER OF 1997.
[ON RIGHT SIDE BAR:]
[JETFAX LOGO]
JETFAX LICENSES AND SELLS ITS EMBEDDED
SYSTEM TECHNOLOGY, DESKTOP SOFTWARE AND
BRANDED PRODUCTS TO A NUMBER OF
MANUFACTURERS AND
DISTRIBUTORS INCLUDING:
HEWLETT-PACKARD COMPANY
IKON OFFICE SOLUTIONS
INTEL CORPORATION
OKI DATA CORPORATION
SAMSUNG ELECTRONICS CORPORATION
XEROX CORPORATION
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Unless otherwise indicated, the information in this
Prospectus assumes: (i) the conversion of all outstanding Preferred Stock into
Common Stock except for the Series P Redeemable Preferred Stock, (ii) the
redemption of all outstanding shares of Series P Redeemable Preferred Stock,
(iii) the issuance of 501,685 shares of Common Stock upon the automatic net
exercise in full of certain warrants, (iv) the issuance of 143,886 shares of
Common Stock upon the conversion of cumulative unpaid dividends on the Series F
Convertible Preferred Stock and (v) that the Underwriters' over-allotment
option will not be exercised.
THE COMPANY
JetFax, Inc. is a leading developer and provider of integrated embedded
system technology, branded products and desktop software solutions for the
multifunction product ("MFP") market, which consists of electronic office
devices that combine print, fax, copy and scan capabilities in a single unit.
The Company focuses on two distinct segments of the MFP market: the small
office/home office ("SOHO") segment and the corporate segment. According to CAP
Ventures, Inc., the total United States market for MFPs is expected to increase
from approximately $1.9 billion in 1996 to $7.6 billion in 2000, representing a
compound annual growth rate of more than 40%. Drivers of this growth include
the increasing number of SOHO offices and telecommuters, the rising demand for
cost, space and production efficiency and the expanding volume of information
conveyed through fax, the Internet and e-mail. Rather than making several trips
to a fax or copier, queuing for a particular office device or purchasing and
maintaining multiple single-function office devices, today's office workers can
perform print, fax, copy and scan functions with one device that provides
nearly seamless document management directly from their desktops.
The Company's embedded system technology consists of proprietary ASICs,
software and firmware that reside on a modular controller circuit board (an
"embedded system"). This technology provides the intelligence of a MFP and
coordinates, controls and optimizes a MFP's printing, faxing, copying and
scanning operations. JetFax licenses and manufactures its embedded system and
desktop software for a range of MFP solutions sold under the JetFax brand name
and the brand names of its OEM customers. With outsourcing becoming
increasingly attractive to OEMs, JetFax believes it has a number of advantages
over competitive suppliers of MFP technology due to its proven industry
expertise and its ability to offer OEMs a variety of advanced solutions. The
Company believes its embedded system technology and desktop software enable
OEMs to offer more competitive products with improved price/performance,
shortened development cycles and reduced development and product costs. The
Company currently licenses its embedded system technology or desktop software
to 25 licensees worldwide, including Hewlett-Packard Company, Oki Data
Corporation, Samsung Electronics Corporation, Xerox Corporation and Intel
Corporation. For example, in March 1997, the Company entered into a development
and license agreement with Hewlett-Packard for the inclusion of JetFax embedded
system technology and JetSuite software in a Hewlett-Packard product which is
currently under development.
Since its inception in 1988, the majority of the Company's revenues have been
generated from sales of JetFax branded products and consumables, including the
JetFax M5, the Company's current branded product. A substantial portion of the
Company's branded products sales is through IKON Office Solutions, one of the
leading distributors of office equipment. The Company believes that it offers
the most advanced and innovative MFP solutions currently available in its
product class. For example, the JetFax M5 was the first MFP to support two
telephone lines for simultaneous receiving and sending of faxes, and the
Company was one of the first to market a MFP with a high speed 33.6 Kbps modem.
JetFax has received a number of highly acclaimed industry awards and
distinctions for its innovative contributions to MFP technology, including the
following for the JetFax M5: Buyer's Laboratory's "Pick of the Year" in 1996,
"Editor's Choice '96 for Premium Laser Fax" by Better Buys for Business and
"Win 100" for top computer hardware products in 1996 by Windows Magazine.
3
<PAGE>
The Company believes its JetSuite software will define a new category of all-
in-one software for MFPs that will replace the piecemeal software applications
historically bundled by MFP vendors. JetSuite's portable document software
enables a user to view, manage, transmit and process information from the
desktop, providing full fax, scan, optical character recognition, print, copy
and e-mail functionality. As a result, SOHO and corporate workers can increase
productivity and realize substantial time and cost savings relative to
traditional office protocols and equipment usage. The Company's JetSuite
desktop software can be sold on a stand-alone basis or bundled with the JetFax
embedded system to provide a complete, integrated hardware and software
solution. The Company plans to release JetSuite with several OEM products in
the second quarter of 1997. The Company also offers JetPCL software, which
provides high quality conversion of documents encoded in Hewlett-Packard's
Printer Control Language ("PCL"), the industry standard.
The Company's objective is to become a leading, single source for
multifunction products and solutions providing proven embedded system
technology, high quality branded products and advanced desktop software. To
accomplish this goal, JetFax intends to (i) penetrate the SOHO market through
OEM licensing agreements of the JetFax embedded system and JetSuite software,
(ii) increase the installed base of JetFax's branded products and related
higher margin consumables, upgrades and accessory sales, (iii) establish
JetSuite as an industry standard in the MFP market, (iv) leverage the Company's
experience and relationships in international markets and (v) continue to
anticipate the needs of the MFP market and respond with innovative, complete
MFP solutions.
The Company's executive offices are located at 1376 Willow Road, Menlo Park,
California 94025, and its telephone number is (415) 324-0600. The Company was
incorporated in Delaware in August 1988.
THE OFFERING
<TABLE>
<C> <S>
Common Stock Offered by the Company.......... 2,750,000 shares
Common Stock Offered by the Selling
Stockholders................................ 750,000 shares
Common Stock to be Outstanding after the
Offering.................................... 10,685,148 shares (1)
Use of Proceeds by the Company............... For redemption of Series P Redeemable
Preferred Stock, payment of acquisition
obligations, repayment of indebtedness,
working capital and general corporate
purposes.
Proposed Nasdaq National Market Symbol....... JTFX
</TABLE>
- --------
(1) Excludes (i) 1,034,785 shares of Common Stock issuable upon exercise of
stock options outstanding at December 31, 1996 under the Company's stock
option plans with a weighted average exercise price of $0.54 per share,
(ii) 401,999 shares of Common Stock issuable upon exercise of options
granted outside of the Company's stock option plans with an exercise price
of $1.72 per share, (iii) 388,500 shares of Common Stock issuable upon
exercise of warrants outstanding at December 31, 1996 with an exercise
price of $2.75 per share and (iv) 100,000 shares of Common Stock issuable
upon exercise of warrants outstanding at December 31, 1996 with an exercise
price of $1.75 per share. Subsequent to December 31, 1996: (i) the Company
granted to employees and directors options to purchase 144,100 shares of
Common Stock at a weighted average exercise price of $5.93 per share and
(ii) warrants to acquire 13,953 shares of Common Stock at $2.15 per share
were exercised (of which 10,368 shares of Common Stock have been included
in the Common Stock outstanding after the Offering as such warrants would
have been automatically net exercised upon the closing of the Offering).
See "Management--Incentive Stock Plans," "Certain Transactions" and Note 10
of Notes to Financial Statements.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------- ------------------
1993 1994 1995 1996 1995 1996 (1)
-------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Product............... $ 4,542 $ 6,086 $ 6,413 $ 11,143 $ 7,336 $ 10,205
Development fees...... -- 75 1,200 699 466 1,416
Software and
technology license
fees................. -- -- 139 1,345 667 1,241
-------- -------- ------- -------- -------- --------
Total revenues....... 4,542 6,161 7,752 13,187 8,469 12,862
Costs and expenses:
Cost of product
revenues............. 3,695 5,486 5,249 11,102 7,793 8,495
Research and
development.......... 1,397 1,311 1,118 1,249 919 1,709
Selling and marketing. 633 1,303 1,325 2,710 1,745 2,785
General and
administrative....... 1,019 615 746 750 500 823
-------- -------- ------- -------- -------- --------
Total costs and
expenses............ 6,744 8,715 8,438 15,811 10,957 13,812
-------- -------- ------- -------- -------- --------
Loss from operations... (2,202) (2,554) (686) (2,624) (2,488) (950)
Interest and other
income (expense)...... (18) (5) (68) (270) (192) 13
-------- -------- ------- -------- -------- --------
Loss before
extraordinary item and
income taxes.......... (2,220) (2,559) (754) (2,894) (2,680) (937)
Provision for income
taxes................. -- -- -- 35 35 105
-------- -------- ------- -------- -------- --------
Loss before
extraordinary item.... (2,220) (2,559) (754) (2,929) (2,715) (1,042)
Extraordinary item (2). -- -- 349 -- -- --
-------- -------- ------- -------- -------- --------
Net loss............... $ (2,220) $ (2,559) $ (405) $ (2,929) $ (2,715) $ (1,042)
======== ======== ======= ======== ======== ========
PRO FORMA DATA (3):
Net loss per share..... $ (0.14)
========
Common and common
equivalent shares used
in computing net loss
per share............. 8,453
========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED (4)
------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........ $ 1,962 $ 20,256
Total assets........... 6,121 23,913
Long-term note payable,
less current portion.. 198 --
Redeemable preferred
stock................. 2,726 --
Total stockholders'
equity................ 219 21,437
</TABLE>
- --------
(1) Effective December 31, 1996, the Company changed its fiscal year end from
March 31 to a 52-53 week reporting year ending on the first Saturday on or
after December 31. The 40-week period from April 1, 1996 to January 4, 1997
is referred to herein as the nine months ended December 31, 1996. For
presentation purposes, the Company refers to its reporting year ended
January 4, 1997 as ending on December 31, 1996.
(2) Represents a gain on exchange of stockholder debt and receivables for notes
payable. See Note 2 of Notes to Financial Statements.
(3) For an explanation of the determination of the number of shares used in
computing pro forma net loss per share, see Note 1 of Notes to Financial
Statements.
(4) Reflects (i) the conversion of each of the outstanding shares of
convertible preferred stock, except the Series P Redeemable Preferred
Stock, upon the closing of the Offering, (ii) the redemption of all
outstanding shares of Series P Redeemable Preferred Stock, (iii) the
issuance of 501,685 shares of Common Stock upon the automatic net exercise
in full of certain warrants upon the closing of the Offering, (iv) the
issuance of 143,886 shares of Common Stock upon the conversion of
cumulative unpaid dividends on the Series F Convertible Preferred Stock
upon the closing of the Offering and (v) the sale by the Company of the
2,750,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $9.00 per share, after deducting the underwriting
discount and commissions and estimated offering expenses, and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information set forth in this Prospectus, in connection
with the investment in the shares of Common Stock.
When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934 regarding events,
conditions and financial trends that may affect the Company's future plans of
operations, business strategy, results of operations and financial position.
Prospective investors are cautioned that any forward-looking statements are
not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those
included within the forward-looking statements as a result of various factors.
Factors that could cause or contribute to such differences include, but are
not limited to, those described below, under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Prospectus.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT. The Company had net losses
of approximately $405,000, $2.9 million and $1.0 million for the fiscal years
ended March 31, 1995 and March 31, 1996, and the nine months ended December
31, 1996, respectively. The Company's historical losses and certain preferred
stock dividends have resulted in an accumulated deficit of approximately $13.7
million as of December 31, 1996. There can be no assurance that the Company
will achieve profitability on a quarterly or annual basis in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. The Company in the past has
experienced, and in the future may experience, significant fluctuations in
quarterly operating results that have been or may be caused by many factors
including: the timing of introductions of new products or product enhancements
by the Company, its OEMs and their competitors; initiation or termination of
arrangements between the Company and its existing and potential significant
OEM customers or dealers and distributors; the size and timing of and
fluctuations in end user demand for the Company's branded products and OEM
products incorporating the Company's technology; inventories of the Company's
branded products or products incorporating the Company's technology carried by
the Company, its distributors or dealers, its OEMs or the OEMs' distributors
that exceed current or projected end user demand; the phase-out or early
termination of the Company's branded products or OEM products incorporating
the Company's technology; the amount and timing of development agreements,
one-time software licensing transactions and recurring licensing fees; non-
performance by the Company, its suppliers or its OEM or other customers
pursuant to their plans and agreements; seasonal trends; competition and
pricing; customer order deferrals and cancellations in anticipation of new
products or product enhancements; industry and technology developments;
changes in the Company's operating expenses; software and hardware defects;
product delays or product quality problems; currency fluctuations; and general
economic conditions. The Company expects that its operating results will
continue to fluctuate significantly as a result of these and other factors.
For example, during the fiscal year ended March 31, 1996, the Company recorded
a $760,000 loss on a purchase commitment with a supplier due to a reduction in
the selling price of the Company's product. A substantial portion of the
Company's operating expenses is related to personnel, development of new
products, marketing programs and facilities. The level of spending for such
expenses cannot be adjusted quickly and is based, in significant part, on the
Company's expectations of future revenues and anticipated OEM commitments. If
such commitments do not result in revenues or operating expenses are
significantly higher, the Company's business, financial condition and results
of operations will be adversely affected, which could have a material adverse
effect on the price of the Company's Common Stock.
Furthermore, the Company has often recognized a substantial portion of its
revenues in the last month of a quarter, with such revenues frequently
concentrated in the last weeks or days of a quarter. The Company's branded
products are primarily sold through dealers, and such dealers often place
orders for products at or near the end of a quarter. As a result, because one
or more key orders that are scheduled to be booked and shipped at
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the end of a quarter may be delayed until the beginning of the next quarter or
cancelled, revenues for future quarters are not predictable with any
significant degree of accuracy. For these and other reasons, the Company
believes that period-to-period comparisons of its results of operations are
not necessarily meaningful and should not be relied upon as indicators of
future performance. It is likely that in future quarters, the Company's
operating results, from time to time, will be below the expectations of public
market analysts and investors, which could have a material adverse effect on
the price of the Company's Common Stock.
The accuracy of quarterly license revenues from OEMs reported by the Company
has been, and the Company believes will continue to be, dependent on the
timing and accuracy of product sales reports received from the Company's OEMs.
These reports are provided only on a quarterly basis (which may not coincide
with the Company's quarter) and are subject to delay and potential revision by
the Company's OEMs. Therefore, the Company is required to estimate all of the
recurring license revenues from OEMs for each quarter. As a result, the
Company will record an estimate of such revenues prior to public announcement
of the Company's quarterly results. In the event the product sales reports
received from the Company's OEMs are delayed or subsequently revised, the
Company may be required to restate its recognized revenues or adjust revenues
for subsequent periods, which could have a material adverse effect on the
Company's business, financial condition and results of operations and the
price of the Company's Common Stock. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
DEPENDENCE ON THE MFP MARKET. The market for MFPs is relatively new and
rapidly evolving. The Company's future success is dependent to a significant
degree upon broad market acceptance of the type of MFPs on which the Company
is focusing its development efforts. This success will be dependent in part on
the ability of the Company and its OEM customers to develop MFPs that provide
the functionality, performance, speed and connectivity demanded by the market
at acceptable price points and to convince end users to broadly adopt MFPs for
office and home office use. There can be no assurance that the market for MFPs
will continue to develop, that the Company and its OEM customers will be
successful in developing MFPs that gain broad market acceptance, that the
Company will be able to offer in a timely manner its embedded system
technology, branded products or desktop software or that the Company's OEM
customers will choose the Company's technology for use in their MFPs. The
failure of any of these events to occur would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Customers."
RISKS ASSOCIATED WITH CHANGE IN FOCUS OF THE COMPANY'S BUSINESS. The Company
has historically focused primarily on the development, manufacture and sale of
its branded MFPs and currently derives a substantial portion of its revenues
from the sale of its branded MFPs. The Company expects that its revenue
growth, commencing in 1997, will be dependent, in part, on increased licensing
of the Company's embedded system technology and desktop software products.
However, there can be no assurance that the Company will realize growth in
revenues from sales and licensing of its embedded system technology or desktop
software. If such growth in revenues does not occur and if revenues from the
sale of the Company's branded MFPs were not to continue at past growth rates,
due either to a change in the Company's deployment of resources or otherwise,
it could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--JetFax Strategy."
RISKS ASSOCIATED WITH INCREASED FOCUS ON MFP DESKTOP SOFTWARE
BUSINESS. Commencing in the second half of 1997, the Company expects that its
business, financial condition and results of operations will be more dependent
on sales of its MFP desktop software, particularly JetSuite, which will be
sold both separately and bundled with the Company's branded products and
embedded system technology. JetSuite is expected to be released with several
OEM products in the second quarter of 1997. There can be no assurance that
such release will not be delayed or that errors will not be found in new
products, including JetSuite, after commencement of commercial shipments. Such
errors may result in a delay in market acceptance or a product recall. In July
1996, the Company acquired substantially all of the assets of Crandell Group,
Inc. (the "Crandell Acquisition"), a developer of desktop software products
(the "Crandell Group"). Prior to the Crandell Acquisition, the Company had
limited experience in developing, marketing and supporting desktop software
products. The Company's on-going ability to develop its MFP desktop software
products business will depend upon several factors, including,
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but not limited to, the commercial acceptance of the Company's MFP desktop
software products, upgrades and add-on software products, the ability of the
Company's personnel and distribution channels to sell and support MFP desktop
software products and the Company's ability to continue to integrate the
operations and personnel of the Crandell Group into the Company. Because the
market for MFP desktop software products is new and emerging, there can be no
assurance that a significant market, if any, will develop for sales of the
Company's MFP desktop software products, or for sales of upgrades and add-on
software products, and such a failure would likely have a material adverse
effect on the Company's MFP desktop software products business. There can be
no assurance that the Company's MFP desktop software products business will be
successful. Any failure by the Company to develop a successful MFP desktop
software products business would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Products," "--Technology" and "Certain Transactions."
DEPENDENCE ON DEALERS AND DISTRIBUTORS. The Company has derived a
substantial portion of its revenues from sales of its branded MFPs through
dealers and distributors. The Company expects that sales of these products
through its dealers and distributors will continue to account for a
substantial portion of its revenues for the foreseeable future. The Company
currently maintains distribution relationships with dealers associated with
IKON Office Solutions (formerly Alco Standard), a national group of office
equipment dealers ("IKON"). Sales to these IKON dealers accounted for 13% and
21% of the Company's total revenues in the fiscal year ended March 31, 1996
and the nine months ended December 31, 1996, respectively. Each of the
Company's dealers and distributors can cease marketing the Company's products
with limited notice and with little or no penalty. There can be no assurance
that the Company's dealers and distributors will continue to offer the
Company's products or that the Company will be able to recruit additional or
replacement dealers and distributors. The loss of one or more of the Company's
major dealers and distributors could have a material adverse effect on the
Company's business, financial condition and results of operations. The
Company's dealers and distributors also offer competitive products
manufactured by third parties. There can be no assurance that the Company's
dealers and distributors will give priority to the marketing of the Company's
products as compared to its competitors' products. Any reduction or delay in
sales of the Company's products by its dealers and distributors could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business --Sales and Marketing."
DEPENDENCE ON OEMS. The Company has derived a significant portion of its
revenues from licensing of its embedded system technology and software and
from development services to OEMs. The Company currently has OEM relationships
with Hewlett-Packard Company ("Hewlett-Packard"), Oki Data Corporation ("Oki
Data"), Samsung Electronics Corporation ("Samsung") and Xerox Corporation
("Xerox"). Revenues from these OEMs accounted for 17%, 15% and 17% of the
Company's total revenues in the fiscal years ended March 31, 1995 and March
31, 1996, and the nine months ended December 31, 1996, respectively. Revenues
from Xerox accounted for 17%, 10% and 6% of the Company's total revenues in
the fiscal years ended March 31, 1995 and March 31, 1996, and the nine months
ended December 31, 1996, respectively. The Company anticipates that a
significant portion of its revenues will be derived from OEMs in the future
and that the Company's revenues will be increasingly dependent upon, among
other things, the ability and willingness of OEMs to timely develop and
promote MFPs that incorporate the Company's technology. The ability and
willingness of these OEMs to do so is based upon a number of factors, such as
the timely development by the Company and the OEMs of new products with
additional functionality, increased speed and enhanced performance at
acceptable prices to end users; development costs of the OEMs; licensing and
development fees of the Company; compatibility with emerging industry
standards; technological advances; intellectual property issues; general
industry competition; and overall economic conditions. Many of these factors
are beyond the control of the Company and its OEMs. Many OEMs, including some
of the Company's OEM customers, are concurrently developing and promoting MFPs
that do not incorporate the Company's technology. In such cases, the OEMs may
have profitability or other incentives to promote internal solutions or
competing products in lieu of products incorporating the Company's technology.
No assurance can be given as to the ability or willingness of the Company's
OEMs to continue developing, marketing and selling products incorporating the
Company's technology. For example, the Company no longer receives royalties
from the Xerox WorkCenter 250 MFP,
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which incorporated the Company's embedded system technology, as Xerox has
ceased production of that model. The loss of any of the Company's significant
OEMs could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Customers."
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE. The market for the Company's
products and services is characterized by rapidly changing technology,
evolving industry standards and needs, and frequent new product introductions.
The Company currently derives all of its revenues from the sale of its branded
MFPs and related consumables, the licensing of its technology and software,
and the provision of related development services. The Company anticipates
that these sources of revenues will continue to account for substantially all
of its revenues for the foreseeable future. The market expects the Company and
its OEMs to develop and release, in a regular and timely manner, new MFPs with
better performance and improved features at competitive price points. As the
complexity of product development increases and the expected time-to-market
continues to decrease, the risk and difficulty in meeting such schedules
increase as well as the costs to the Company and its OEMs. In addition, the
Company, its OEMs and their competitors, from time to time, may announce new
products, capabilities or technologies that may replace or shorten the life
cycles of the Company's branded products and software and the OEM products
incorporating the Company's technology. The Company's success will depend on,
among other things, market acceptance of the Company's branded products,
software and embedded system technology and the demand for MFPs by the
Company's OEM customers; the ability of the Company and its OEM customers to
respond to industry changes and market demands in a timely manner; achievement
of new design wins by the Company in the Company's development of its branded
products as well as the OEMs' development of associated new MFPs; the ability
of the Company and its OEM customers to reduce production costs; and the
regular and continued introduction of new and enhanced technology, services
and products by the Company and its OEMs on a timely and cost-effective basis.
There can be no assurance that the products and technology of competitors of
the Company or its OEMs will not render the Company's branded products,
technology, software or its OEMs' products noncompetitive or obsolete. Any
failure by the Company or its OEMs to anticipate or respond adequately to the
rapidly changing technology and evolving industry standards and needs, or any
significant delay in development or introduction of new and enhanced products
and services, could result in a loss of competitiveness or revenues, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Research and Development."
RELIANCE ON LIMITED PRODUCT LINE. The Company has been primarily engaged in
the development, manufacture and sale of MFPs and related technology and has
derived a substantial portion of its revenues from sales of its branded MFPs
and consumables. Sales of the Company's branded products and related
consumables accounted for 83%, 84% and 79% of the Company's total revenues in
the fiscal years ended March 31, 1995 and March 31, 1996, and the nine months
ended December 31, 1996, respectively. Dependence on a single product line
makes the Company particularly vulnerable to the successful introduction of
competitive products. The Company currently derives a substantial portion of
its branded product revenues from sales of the JetFax M5. A reduction in
demand for the JetFax M5, or the Company's failure to timely introduce its
next MFP, would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Products."
RISKS ASSOCIATED WITH PRODUCT DEVELOPMENT AND INTRODUCTION; PRODUCT
DELAYS. The Company's future success is dependent to a significant degree on
its ability to further develop its embedded system technology and software for
MFPs in the time frame required by its OEM and other customers and to develop
technology with the quality, speed and other specifications required by its
OEM and other customers. The Company in the past has experienced delays in
product development, and the Company may experience similar delays in the
future. Prior delays have resulted from numerous factors such as changing OEM
product specifications, delays in receiving necessary components, difficulties
in hiring and retaining necessary personnel, difficulties in reallocating
engineering resources and other resource limitation difficulties with
independent contractors, changing market or competitive product requirements
and unanticipated engineering complexity. The Company has experienced delays
in one of its current development projects and, pursuant to certain provisions
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of its development agreement, the final milestone payment thereunder could be
reduced. In addition, the Company's software and hardware have in the past,
and may in the future, contain undetected errors or failures that become
evident upon product introduction or as product production volumes increase.
There can be no assurance that errors will not be found; that the Company will
not experience problems or delays in meeting the delivery schedules for or in
the acceptance of products by the Company's OEMs or other customers; that
there will not be problems or delays in shipments of the Company's branded
products or OEMs' products; or that the Company's new products and technology
will meet performance specifications under all conditions or for all
anticipated applications. Given the short product life cycles in the MFP
market, any delay or difficulty associated with new product development,
introductions or enhancements could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Products," "--Technology" and "--Research and Development."
HIGHLY COMPETITIVE INDUSTRY. The market for MFPs and related technology and
software is highly competitive and characterized by continuous pressure to
enhance performance, to introduce new features and to accelerate the release
of new products. The Company's branded products compete primarily with the
dominant vendors in the fax market, all of whom have substantially greater
resources than the Company and include, among others, Canon Inc., Panasonic, a
division of Matsushita Electrical Industrial Co., Ltd., Pitney Bowes Inc.,
Ricoh Co. Ltd., Sharp Electronics Corporation and Xerox. The Company also
competes on the basis of vendor name and recognition, technology and software
expertise, product functionality, development time and price.
The Company's technology, development services and software primarily
compete with solutions developed internally by OEMs. Virtually all of the
Company's OEMs have significant investments in their existing solutions and
have the substantial resources necessary to enhance existing products and to
develop future products. These OEMs have or may develop competing
multifunction technologies and software which may be implemented into their
products, thereby replacing the Company's proposed or current technologies,
eliminating a need for the Company's services and products to these OEMs. The
Company also competes with technologies, software and development services
provided in the MFP market by other systems and software suppliers to OEMs.
With respect to MFP embedded system technologies, the Company competes with,
among others, Peerless Systems Corporation, Personal Computer Products, Inc.
and Xionics Document Technologies, Inc. With respect to desktop software, the
Company competes with, among others, Caere Corporation, Simplify Development
Corporation, Smith Micro Software, Inc., Visioneer Inc., Wordcraft
International and Xerox.
As the MFP market continues to develop, the Company expects that competition
and pricing pressures will increase from OEMs, existing competitors and other
companies that may enter the Company's existing or future markets with similar
or substitute products or technologies. Software solutions may also be
introduced by competitors that are less costly or provide better performance
or functionality. The Company anticipates increasing competition for its MFPs,
technologies and software under development. Most of the Company's existing
competitors, many of its potential competitors and all of the Company's OEMs
have substantially greater financial, technical, marketing and sales resources
than the Company. In the event that price competition increases, competitive
pressures could cause the Company to reduce the price of its branded products,
to reduce the amount of royalties received on new licenses and to reduce the
fees for its development services in order to maintain existing business and
generate additional product sales and license and development revenues, which
could reduce profit margins and result in losses and a decrease in market
share. No assurances can be given as to the ability of the Company to compete
favorably with the internal development capabilities of its current and
prospective OEM customers or with other third-party vendors, and the inability
to do so would have a material adverse effect on the Company's business,
financial condition and results of operations.
EFFECT OF RAPID GROWTH ON EXISTING RESOURCES; POTENTIAL ACQUISITIONS. The
Company has grown rapidly in recent years. A continuing period of rapid growth
could place a significant strain on the Company's management, operations and
other resources. The Company's ability to manage its growth will require it to
continue to invest in its operational, financial and management information
systems, procedures and controls, and to attract, retain, motivate and
effectively manage its employees. The Company recently installed and
implemented a new management information system and used the accounting
applications of the system for the
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first time in connection with the December 31, 1996 monthly accounting close.
The Company has also begun using the manufacturing applications for inventory
control and product ordering. However, further improvements in these systems
are needed and will continue to be needed in order to manage additional growth
in revenues and assets. There is no guarantee that the implementation of the
management information system will contribute to the Company's ability to
manage its growth and, furthermore, any problems encountered as a result of
the implementation of such system, including additional modules and features,
could adversely affect the Company's operations. There can be no assurance
that the Company will be able to manage its growth effectively and to
successfully utilize the new management information system, and failure to do
so would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Manufacturing and
Operations."
The Company may, from time to time, pursue the acquisition of other
companies, assets or product lines that complement or expand its existing
business. Acquisitions involve a number of risks that could adversely affect
the Company's operating results, including the diversion of management's
attention, the assimilation of the operations and personnel of the acquired
companies, the amortization of acquired intangible assets and the potential
loss of key employees. JetFax has no present commitments nor is it engaged in
any discussions or negotiations with respect to possible acquisitions. No
assurance can be given that any acquisition by the Company will not materially
and adversely affect the Company or that any such acquisition will enhance the
Company's business.
DEPENDENCE ON OUTSIDE SUPPLIERS; DEPENDENCE ON SOLE SOURCE SUPPLIERS. The
Company relies on various suppliers of components for its products. Many of
these components are standard and generally available from multiple sources.
However, there can be no assurance that alternative sources of such components
will be available at acceptable prices or in a timely manner. The Company
generally buys components under purchase orders and does not have long-term
agreements with its suppliers. Although alternate suppliers may be readily
available for some of these components, for other components it could take an
undetermined amount of time to qualify a replacement supplier and order and
receive replacement components. The Company does not always maintain
sufficient inventory to allow it to fill customer orders without interruption
during the time that would be required to obtain an adequate supply of single
sourced components. Although the Company believes it could develop other
sources for single source components, no alternative source currently exists
and the process could take several months or longer. Therefore, any
interruption in the supply of such components could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Many of the components used in the Company's products are purchased from
suppliers located outside the United States. Foreign manufacturing facilities
are subject to risk of changes in governmental policies, imposition of tariffs
and import restrictions and other factors beyond the Company's control. There
can be no assurance that United States or foreign trading policies will not
restrict the availability of components or increase their cost. Any
significant increase in component prices or decrease in component availability
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Certain components used in the Company's products are available only from
one source. The Company is dependent on Oki America, Inc. ("Oki America"), as
the supplier of major components, including the printer engine, of the JetFax
M5. Oki America is also a competitor of the Company. The Company is also
dependent on American Microsystems, Inc. ("AMI") to provide unique application
specific integrated circuits ("ASICs") incorporating the Company's imaging and
logic circuitry, Motorola, Inc. ("Motorola") to provide microprocessors, Pixel
Magic, Inc., a subsidiary of Oak Technology, Inc. ("Pixel"), to provide a
specialized imaging processor and Rockwell Semiconductor Systems ("Rockwell")
to provide modem chips. If Oki America, AMI, Motorola, Pixel or Rockwell were
to limit or reduce the sale of such components to the Company, or if such
suppliers were to experience financial difficulties or other problems which
prevented them from supplying the Company with the necessary components, it
could have a material adverse effect on the Company's business, financial
condition and results of operations. These sole source providers are subject
to quality and performance issues, materials shortages, excess demand,
reduction in capacity and/or other factors that may disrupt the flow of goods
to the Company or its customers and thereby adversely affect the Company's
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business and customer relationships. Any shortage or interruption in the
supply of any of the components used in the Company's products, or the
inability of the Company to procure these components from alternate sources on
acceptable terms, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Manufacturing and Operations."
DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS; RISK OF INFRINGEMENT. The
Company's success is heavily dependent upon its proprietary technology. To
protect its proprietary rights, the Company relies on a combination of
copyright, trade secret and trademark laws and nondisclosure and other
contractual restrictions. The Company has no patents or patent applications
pending. As part of its confidentiality procedures, the Company generally
enters into nondisclosure agreements with its employees, consultants, OEMs and
strategic partners and limits access to and distribution of its designs,
software and other proprietary information. Despite these efforts, the Company
may be unable to effectively protect its proprietary rights and, in any event,
enforcement of the Company's proprietary rights may be expensive. The
Company's source code also is protected as a trade secret. However, the
Company from time to time licenses portions of its source code and designs to
OEMs and also places such source code and designs in escrow to be released to
OEMs in certain circumstances, which subjects the Company to the risk of
unauthorized use or misappropriation despite the contractual terms restricting
disclosure. In addition, it may be possible for unauthorized third parties to
copy the Company's products or to reverse engineer or obtain and use the
Company's proprietary information. Further, the laws of some foreign countries
do not protect the Company's proprietary rights to the same extent as do the
laws of the United States. There can be no assurance that the Company's means
of protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.
As the number of patents, copyrights, trademarks and other intellectual
property rights in the Company's industry increases, products based on the
Company's technology increasingly may become the subject of infringement
claims. The Company has in the past received communications from third parties
asserting that the Company's trademarks or products infringe the proprietary
rights of third parties or seeking indemnification against such infringement.
The Company is generally required to agree to indemnify its OEMs from third
party claims asserting such infringement. There can be no assurance that third
parties will not assert infringement claims against the Company or its OEMs in
the future. Any such claims, regardless of merit, could be time consuming,
result in costly litigation, cause product shipment delays or require the
Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company, or at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the Company may initiate claims or litigation against third parties
for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Litigation to determine the
validity of any claims, whether or not such litigation is determined in favor
of the Company, could result in significant expense to the Company and divert
the efforts of the Company's technical and management personnel from daily
operations. In addition, the Company may lack sufficient resources to initiate
a meritorious claim. In the event of an adverse ruling in any litigation
regarding intellectual property, the Company may be required to pay
substantial damages, discontinue the use and sale of infringing products,
expend significant resources to develop non-infringing technology or obtain
licenses to infringing or substituted technology. The failure of the Company
to develop, or license on acceptable terms, a substitute technology could have
a material adverse affect on the Company's business, financial condition and
results of operations. See "Business--Intellectual Property and Proprietary
Rights."
DEPENDENCE ON KEY PERSONNEL. The Company is largely dependent upon the
skills and efforts of its senior management, particularly Edward R. Prince,
III ("Rudy Prince"), its President and Chief Executive Officer, and Lon Radin,
its Vice President of Engineering, and other officers and key employees, some
of whom only recently have joined the Company. The Company maintains a key
person life insurance policy on Rudy Prince. None of the Company's officers or
key employees, other than Michael Crandell, Vice President of Software, are
covered by an employment agreement with the Company. The Company believes that
its future success will depend in large part upon its ability to attract and
retain highly skilled engineering, managerial, sales, marketing and operations
personnel, many of whom are in great demand. Competition for such personnel,
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especially engineering, has recently increased significantly. The loss of key
personnel or the inability to hire or retain qualified personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management."
INTERNATIONAL ACTIVITIES. Revenues from sales to the Company's customers
outside the United States accounted for 22%, 39% and 26% of the Company's
total revenues for the fiscal years ended March 31, 1995 and March 31, 1996,
and the nine months ended December 31, 1996, respectively. The Company expects
that revenues from customers located outside the United States may increase in
both absolute dollars and as a percentage of total revenues in the future. The
international market for the Company's branded products and products
incorporating the Company's technology and software is highly competitive, and
the Company expects to face substantial competition in this market from
established and emerging companies and technologies developed internally by
its OEM customers. Risks inherent in the Company's international business
activities also include currency fluctuations and restrictions, the burdens of
complying with a wide variety of foreign laws and regulations, including
Postal, Telephone and Telegraph ("PTT") regulations, longer accounts
receivable cycles, the imposition of government controls, risks of localizing
and internationalizing products to local requirements in foreign countries,
trade restrictions, tariffs and other trade barriers, restrictions on the
repatriation of earnings and potentially adverse tax consequences, any of
which could have a material adverse effect on the Company's business,
financial condition and results of operations. Substantially all of the
Company's international sales are currently denominated in U.S. dollars and,
therefore, increases in the value of the U.S. dollar relative to foreign
currencies could make the Company's products less competitive in foreign
markets. Because of the Company's international activities, it faces certain
currency exposure and translation risks. To date, the Company has not hedged
against currency exposure or translation risks. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON SINGLE MANUFACTURING FACILITY; RISKS RELATED TO POTENTIAL
DISRUPTION. The Company's manufacturing operations are located in its facility
in Northern California. In addition, a number of the suppliers of components
for the Company's products and providers of outsourced assembly, upon which
the Company relies, are located in Northern California. Since the Company does
not currently operate multiple facilities in different geographic areas, or
have alternative sources for many of its components or outsourced assembly, a
disruption of the Company's manufacturing operations, or the operations of its
suppliers, resulting from sustained process abnormalities, human error,
government intervention or natural disasters such as earthquakes, fires or
floods could cause the Company to cease or limit its manufacturing operations
and consequently have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Manufacturing
and Operations."
CERTAIN CHARGES TO BE INCURRED THROUGH THE CLOSING OF THE OFFERING. Upon the
closing of the Offering, the Company will incur certain significant charges
relating to the Crandell Acquisition. Based upon an assumed closing date of
May 19, 1997 and an assumed initial public offering price of $9.00 per share,
the Company anticipates such charges to be an aggregate of $1.8 million, with
no related tax benefit due to the Company's operating losses. Such charges,
which will have been expensed through the closing of the Offering, relate to
estimated royalty payment obligations of $120,000 and noncash compensation
charges of $725,000 from a variable warrant issued to the selling
stockholder/employees of the Crandell Group. In addition, nonrecurring charges
of approximately $1.0 million will be expensed at the closing of the Offering
in lieu of future royalty payments to the Crandell Group. Subsequent to the
closing of the Offering, no further charges to earnings will be incurred
related to these items. See Note 3 of Notes to Financial Statements.
NO PRIOR PUBLIC MARKET; DETERMINATION OF PUBLIC OFFERING PRICE; POSSIBLE
VOLATILITY OF STOCK PRICE. Prior to the Offering, there was no public market
for the Common Stock, and there can be no assurance that an active trading
market will develop or be sustained upon completion of the Offering. The
initial public offering price will be determined by negotiation between the
Company and the representatives of the Underwriters based on a number of
factors, including market valuations of other companies engaged in activities
similar to those of the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the Company's management and other factors deemed relevant. The
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initial public offering price may not be indicative of the market price of the
Common Stock following completion of the Offering. The trading price of the
Common Stock could also be subject to significant fluctuations in response to
variations in quarterly results of operations, announcements of new products
by the Company or its competitors, developments or disputes with respect to
proprietary rights, general trends in the industry, overall market conditions
and other factors. In addition, the stock market historically has experienced
extreme price and volume fluctuations, which have particularly affected the
market price of securities of many high technology companies and which at
times have been unrelated or disproportionate to the operating performance of
such companies. These market fluctuations may adversely affect the market
price of the Common Stock. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Upon completion of the
Offering, the Company will have 10,685,148 shares of Common Stock outstanding
(11,210,148 shares if the Underwriters' over-allotment option is exercised in
full), 3,500,000 (4,025,000 if the Underwriters' over-allotment option is
exercised in full) of which will be freely tradeable without restriction or
the requirement of future registration under the Securities Act of 1933, as
amended (the "Securities Act"). All of the remaining 7,185,148 shares of
Common Stock are "restricted securities" as that term is defined by Rule 144
promulgated under the Securities Act. Of such shares, no shares will be
eligible for sale in the public market immediately following commencement of
the Offering and 7,111,148 shares will become eligible for sale 90 days
following commencement of the Offering. All of the Company's officers and
directors and certain stockholders, including the Selling Stockholders, owning
upon completion of the Offering, in the aggregate, 7,033,944 shares of Common
Stock, have executed agreements pursuant to which each has agreed that they
will not, for a period of 180 days from the date of this Prospectus, directly
or indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital
stock of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock, or other capital stock of the
Company without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters. In addition, certain other
stockholders of the Company holding an aggregate of 101,266 shares are subject
to 90 day lock-up agreements with the Company and stockholders holding an
aggregate of 49,938 shares are subject to 180 day lock-up agreements with the
Company. Further, holders of outstanding warrants and vested stock options
for, in the aggregate, an additional 1,327,188 shares of Common Stock are
subject to 180 day lock-up agreements with the Company and/or Prudential
Securities Incorporated. The Company has agreed that it will not, for a period
of 180 days from the date of this Prospectus, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or other capital stock of the
Company or any securities convertible into, or exercisable or exchangeable
for, any shares of Common Stock, or other capital stock of the Company without
the prior written consent of Prudential Securities Incorporated, on behalf of
the Underwriters, except that such agreement does not prevent the Company from
granting additional options under the Company's 1995 Stock Plan (the "1995
Plan") or the 1997 Director Stock Option Plan (the "Director Plan") or from
issuing shares under the 1997 Employee Stock Purchase Plan (the "Purchase
Plan"). Upon the expiration of or release from such lock-up agreements,
7,111,148 shares will be eligible for immediate sale under Rule 144 or Rule
701 and 1,327,188 additional shares subject to outstanding warrants and vested
stock options could also be sold, subject in some cases to compliance with
certain volume limitations. The remaining 74,000 shares held by existing
stockholders will become eligible for sale at various times over a period of
less than one year. Prudential Securities Incorporated may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. Sales of such shares in the future
could adversely affect the prevailing market price of the Common Stock. No
prediction can be made as to the effect, if any, that future sales of shares
or the availability of shares for sale will have on the market price for
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock in the public market, or the perception of the availability of
shares for sale, could adversely affect the prevailing market price of the
Common Stock and could impair the Company's ability to raise capital through
the sale of its equity securities. Beginning in November 1997, the holders of
an aggregate of 7,370,549 shares of Common Stock of the Company which
14
<PAGE>
are "restricted securities" (including shares purchasable upon exercise of
outstanding warrants) (the "Registrable Securities") will be entitled to
certain rights with respect to registration of such shares. If exercised, such
registration rights could result in the Registrable Securities being sold
earlier than otherwise allowable under Rule 144, and could adversely affect
the prevailing market price of the Common Stock. See "Description of Capital
Stock--Registration Rights of Certain Holders" and "Shares Eligible for Future
Sale."
CONTROL BY EXISTING STOCKHOLDERS. Upon completion of the Offering, the
current officers, directors and their affiliates and five percent stockholders
will beneficially own approximately 42.3% of the outstanding shares of the
Common Stock of the Company (40.4% if the Underwriters' over-allotment option
is exercised in full). Accordingly, such persons, if they act together, likely
will have effective control over the Company through their ability to control
the election of directors and all other matters that require action by the
Company's stockholders, irrespective of how other stockholders may vote. Such
persons could prevent or delay a change in control of the Company, which may
be favored by a majority of the remaining stockholders. The ability to prevent
or delay a change in control of the Company also may have an adverse effect on
the market price of the Common Stock. See "Management--Executive Officers and
Directors," "Principal and Selling Stockholders" and "Description of Capital
Stock."
EFFECT OF ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's
Certificate of Incorporation (the "Charter") and Bylaws (the "Bylaws") and
certain provisions of Delaware law could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the Company. Such provisions could limit the
price that investors might be willing to pay in the future for the Company's
Common Stock. These provisions permit the issuance of "blank check" preferred
stock by the Board of Directors without stockholder approval, require super-
majority approval to amend certain provisions in the Charter and Bylaws,
require that all stockholder actions be taken at duly called annual or special
meetings and not by written consent and impose various procedural and other
requirements that could make it more difficult for stockholders to effect
certain corporate actions. Furthermore, the Company will be subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation
Law, which prohibits the Company from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person first becomes an "interested stockholder,"
unless the business combination is approved in a prescribed manner. Such
application of Section 203 could also have the effect of delaying or
preventing a change of control of the Company. See "Description of Capital
Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of Common Stock in the
Offering will experience immediate and substantial dilution in the net
tangible book value of the Common Stock from the assumed initial public
offering price. To the extent outstanding options and warrants to purchase
shares of the Company's Common Stock are exercised, there will be further
dilution. See "Dilution."
NO PRESENT INTENTION TO PAY DIVIDENDS; RESTRICTION ON PAYMENT OF
DIVIDENDS. The Company has never declared or paid cash dividends on its Common
Stock and intends to retain all available funds for use in the operation and
expansion of its business. The Company therefore does not anticipate that any
cash dividends will be declared or paid in the foreseeable future. In
addition, the Company's credit facility prohibits the payment of cash
dividends without the consent of the lender.
15
<PAGE>
THE COMPANY
JetFax, Inc. is a leading developer and provider of integrated embedded
system technology, branded products and desktop software solutions for the
multifunction product ("MFP") market, which consists of electronic office
devices that combine print, fax, copy and scan capabilities in a single unit.
The Company focuses on two distinct segments of the MFP market, the small
office/home office ("SOHO") segment and the corporate segment.
The Company's embedded system technology is made up of proprietary ASICs,
software and firmware that reside on a modular controller circuit board (an
"embedded system"). This technology provides the intelligence of a MFP and
coordinates, controls and optimizes a MFP's printing, faxing, copying and
scanning operations. JetFax licenses and manufactures its embedded system and
desktop software for a range of MFP solutions sold under the JetFax brand name
and the brand names of its OEM customers. The Company believes its embedded
systems technology and desktop software enable OEMs to offer more competitive
products with improved price/performance, shortened development cycles and
reduced development and product costs. The Company currently licenses its
embedded system technology or software to 25 licensees worldwide, including
Hewlett-Packard, Oki Data, Samsung, Xerox and Intel Corporation ("Intel").
Since its inception in 1988, the majority of the Company's revenues have
been generated from sales of JetFax branded products and consumables,
including the JetFax M5, the Company's current branded product. The Company
believes that it offers the most advanced and innovative MFP solutions
currently available in its product class. For example, the JetFax M5 was the
first MFP to support two telephone lines for simultaneous receiving and
sending of faxes, and the Company was one of the first to market a MFP with a
high speed 33.6 Kbps modem.
The Company believes its JetSuite software will define a new category of
all-in-one software for MFPs that will replace the piecemeal software
components historically bundled by MFP vendors. As a result, SOHO and
corporate workers can increase productivity and realize substantial time and
cost savings relative to traditional office protocols and equipment usage. The
Company's JetSuite desktop software can be sold on a stand-alone basis or
bundled with the JetFax embedded system to provide a complete, integrated
hardware and software solution. The Company plans to release JetSuite with
several OEM products in the second quarter of 1997. The Company also offers
JetPCL software, which provides high quality conversion of documents encoded
in Hewlett-Packard's Printer Control Language ("PCL"), the industry standard.
The Company's executive offices are located at 1376 Willow Road, Menlo Park,
California 94025, and its telephone number is (415) 324-0600. The Company was
incorporated in Delaware in August 1988.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,750,000 shares of
Common Stock offered by the Company hereby are estimated to be $22,217,500
(approximately $26,611,750 if the Underwriters' over-allotment option is
exercised in full) assuming an initial public offering price of $9.00 per
share, and after deducting the underwriting discount and commissions and
estimated offering expenses. The Company expects to use approximately
$2,726,000 of the net proceeds from the Offering for payment to the holders of
the Company's Series P Redeemable Preferred Stock in redemption thereof
pursuant to the terms of the Company's Certificate of Designation of Series P
Redeemable Preferred Stock. The Company expects to use approximately
$1,250,000 of the net proceeds received by it from the Offering for payment to
the Crandell Group in lieu of future royalty payments and for repayment of a
related note payable. The Company also intends to repay amounts outstanding
under its equipment term loan and line of credit facility ($450,000 at
December 31, 1996) with a portion of the net proceeds of the Offering. The
interest rate on the line of credit is the bank's prime rate (8.25% as of
December 31, 1996) plus 1.0% and the interest rate on the equipment term loan
is the bank's prime rate plus 1.5%. The Company intends to use the remaining
net proceeds for working capital and other general corporate purposes. Pending
such uses, the Company intends to invest the net proceeds from the Offering in
short-term, investment-grade, interest-bearing instruments. The Company will
not receive any proceeds from the sale of shares of Common Stock by the
Selling Stockholders. See "Certain Transactions," "Principal and Selling
Stockholders" and Note 7 of Notes to Financial Statements.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on shares of its
Common Stock and does not expect to declare or pay cash dividends on its
Common Stock in the foreseeable future. The Company intends to retain any
earnings for future growth. In addition, the Company's credit facility
prohibits the payment of cash dividends without the consent of the lender. See
Note 7 of Notes to Financial Statements.
17
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1996: (i) the actual
capitalization of the Company, (ii) the unaudited pro forma capitalization of
the Company reflecting the conversion of all outstanding preferred stock,
except the Series P Redeemable Preferred Stock, into 6,293,978 shares of
Common Stock; the issuance of 501,685 shares of Common Stock upon the
automatic net exercise in full of certain warrants at $2.15 per share and the
issuance of 143,886 shares of Common Stock upon the conversion of
approximately $970,000 of cumulative unpaid dividends on the Series F
Convertible Preferred Stock at a conversion price equal to 75% of the assumed
initial public offering price; and (iii) the unaudited pro forma
capitalization of the Company as adjusted to give effect to the sale of the
2,750,000 shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $9.00 per share, after deducting the
underwriting discount and commissions and estimated offering expenses, the
application of the estimated net proceeds therefrom including the redemption
of all outstanding shares of Series P Redeemable Preferred Stock, as set forth
under the caption "Use of Proceeds" and the increase in the authorized number
of shares of Common Stock to 35,000,000 and the decrease in the authorized
number of shares of Preferred Stock to 5,000,000.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable (1)............................. $ 198 $ 198 $ --
-------- -------- --------
Redeemable preferred stock, $0.01 par value,
500,000 shares authorized, actual, pro forma
and as adjusted; 344,350 shares outstanding,
actual and pro forma; none outstanding, as
adjusted.................................... 2,726 2,726 --
-------- -------- --------
Stockholders' equity:
Preferred stock, $0.01 par value, 9,000,000
shares authorized, actual and pro forma;
5,000,000 shares, as adjusted; 6,293,978
shares outstanding, actual; no shares
outstanding, pro forma and as adjusted..... 63 -- --
Common stock, $0.01 par value, 13,500,000
shares authorized, actual and pro forma;
35,000,000 shares, as adjusted; 995,599
shares outstanding, actual; 7,935,148
shares outstanding, pro forma; 10,685,148
shares outstanding, as adjusted (2)........ 10 79 107
Additional paid-in capital.................. 13,880 13,874 36,064
Accumulated deficit......................... (13,734) (13,734) (14,734)
-------- -------- --------
Total stockholders' equity................... 219 219 21,437
-------- -------- --------
Total capitalization..................... $ 3,143 $ 3,143 $ 21,437
======== ======== ========
</TABLE>
- --------
(1) See Note 7 of Notes to Financial Statements.
(2) Excludes (i) 1,034,785 shares of Common Stock issuable upon exercise of
stock options outstanding at December 31, 1996 under the Company's stock
option plans with a weighted average exercise price of $0.54 per share,
(ii) 401,999 shares of Common Stock issuable upon exercise of options
granted outside of the Company's stock option plans with an exercise price
of $1.72 per share, (iii) 388,500 shares of Common Stock issuable upon
exercise of warrants outstanding at December 31, 1996 with an exercise
price of $2.75 per share and (iv) 100,000 shares of Common Stock issuable
upon exercise of warrants outstanding at December 31, 1996 with an
exercise price of $1.75 per share. Subsequent to December 31, 1996: (i)
the Company granted to employees and directors options to purchase 144,100
shares of Common Stock at a weighted average exercise price of $5.93 per
share and (ii) warrants to acquire 13,953 shares of Common Stock at $2.15
per share were exercised (such warrants would otherwise have been
automatically net exercised into 10,368 shares of Common Stock upon the
closing of the Offering). See "Management--Incentive Stock Plans,"
"Certain Transactions" and Note 10 of Notes to Financial Statements.
18
<PAGE>
DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in the pro forma net tangible book value of the Common
Stock from the assumed initial public offering price. The pro forma net
tangible book value of the Company as of December 31, 1996 was $(270,000) or
$(0.03) per share. Pro forma net tangible book value per share is determined
by dividing the net tangible book value of the Company (tangible assets less
liabilities) by the pro forma number of shares of the Company's Common Stock
outstanding as of December 31, 1996. Without taking into account any changes
in net tangible book value subsequent to December 31, 1996, other than to give
effect to the receipt of the net proceeds of the sale of the 2,750,000 shares
of Common Stock offered by the Company hereby at an assumed initial public
offering price of $9.00 per share, after deducting the underwriting discount
and commissions and estimated offering expenses, and the application of the
net proceeds therefrom, the pro forma net tangible book value of the Common
Stock as of December 31, 1996 would have been $20,948,000, or $1.96 per share.
This represents an immediate dilution in pro forma net tangible book value of
$7.04 per share to new investors purchasing shares in the Offering. The
following table illustrates the per share dilution as of December 31, 1996:
<TABLE>
<S> <C> <C>
Assumed initial public offering price......................... $ 9.00
Pro forma net tangible book value at December 31, 1996...... $ (0.03)
Increase per share attributable to new investors............ 1.99
-------
Pro forma net tangible book value after the Offering.......... 1.96
------
Dilution per share to new investors........................... $ 7.04
======
</TABLE>
The following table sets forth, on an as adjusted basis as of December 31,
1996, after giving effect to the conversion of all outstanding Preferred Stock
into Common Stock, except the Series P Redeemable Preferred Stock, the
differences between existing stockholders and purchasers of Common Stock in
the Offering at an assumed initial public offering price of $9.00 per share
with respect to the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1)..................... 7,935,148 74.3% $ 13,488,853 35.3% $ 1.70
New investors (1)........ 2,750,000 25.7 24,750,000 64.7 9.00
---------- ----- ------------ -----
Total.................. 10,685,148 100.0% $ 38,238,853 100.0%
========== ===== ============ =====
</TABLE>
- -------
(1) Sales by the Selling Stockholders in the Offering will reduce the number
of shares held by existing stockholders to 7,185,148, or approximately
67.2% of the total number of shares of Common Stock to be outstanding
after the Offering, and will increase the number of shares held by new
investors to 3,500,000, or approximately 32.8% of the total number of
shares of Common Stock to be outstanding after the Offering. If the
Underwriters' over-allotment option is exercised in full, the number of
shares held by new investors will increase to 4,025,000 shares, or
approximately 35.9% of the total number of shares to be outstanding after
the Offering. See "Principal and Selling Stockholders."
The foregoing tables assume no exercise of the Underwriters' over-allotment
option or stock options or warrants outstanding at December 31, 1996. At
December 31, 1996, there were (i) 1,034,785 shares of Common Stock issuable
upon exercise of outstanding stock options at a weighted average exercise
price of $0.54 per share, (ii) 401,999 shares of Common Stock issuable upon
exercise of options granted outside of the Company's stock option plans with
an exercise price of $1.72 per share, (iii) 388,500 shares of Common Stock
issuable upon exercise of outstanding warrants with an exercise price of $2.75
per share and (iv) 100,000 shares of Common Stock issuable upon exercise of
outstanding warrants with an exercise price of $1.75 per share. Subsequent to
December 31, 1996: (i) the Company granted to employees and directors options
to purchase 144,100 shares of Common Stock at a weighted average exercise
price of $5.93 per share and (ii) warrants to acquire 13,953 shares of Common
Stock at $2.15 per share were exercised (of which 10,368 shares of Common
Stock have been included in the number of shares purchased by existing
stockholders as such warrants would have been automatically net exercised upon
the closing of the Offering). To the extent that outstanding options and
warrants are exercised in the future, there will be further dilution to new
investors. See "Management--Incentive Stock Plans," "Certain Transactions" and
Note 10 of Notes to Financial Statements.
19
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data set forth below for the fiscal years ended
March 31, 1995 and 1996, and the nine months ended December 31, 1996, and the
balance sheet data at March 31, 1996 and December 31, 1996 are derived from
the financial statements of the Company included elsewhere in this Prospectus,
which have been audited by Deloitte & Touche LLP, independent auditors. The
statement of operations data for the fiscal years ended March 31, 1993 and
1994, and the balance sheet data at March 31, 1993, 1994, and 1995, are
derived from audited financial statements not included herein. The selected
financial data for the nine months ended December 31, 1995 have been derived
from unaudited financial statements that have been prepared on the same basis
as the audited financial statements and which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the Company's results of operations. The
following financial data is qualified in its entirety by, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------------- ------------------
1993 1994 1995 1996 1995 1996 (1)
--------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Product............... $ 4,542 $ 6,086 $ 6,413 $ 11,143 $ 7,336 $ 10,205
Development fees ..... -- 75 1,200 699 466 1,416
Software and
technology license
fees................. -- -- 139 1,345 667 1,241
--------- -------- -------- -------- -------- --------
Total revenues ...... 4,542 6,161 7,752 13,187 8,469 12,862
Costs and expenses:
Cost of product
revenues ............ 3,695 5,486 5,249 11,102 7,793 8,495
Research and
development ......... 1,397 1,311 1,118 1,249 919 1,709
Selling and marketing
..................... 633 1,303 1,325 2,710 1,745 2,785
General and
administrative ...... 1,019 615 746 750 500 823
--------- -------- -------- -------- -------- --------
Total costs and
expenses ........... 6,744 8,715 8,438 15,811 10,957 13,812
--------- -------- -------- -------- -------- --------
Loss from operations .. (2,202) (2,554) (686) (2,624) (2,488) (950)
Interest and other
income (expense)...... (18) (5) (68) (270) (192) 13
--------- -------- -------- -------- -------- --------
Loss before
extraordinary item and
income taxes ......... (2,220) (2,559) (754) (2,894) (2,680) (937)
Provision for income
taxes ................ -- -- -- 35 35 105
--------- -------- -------- -------- -------- --------
Loss before
extraordinary item ... (2,220) (2,559) (754) (2,929) (2,715) (1,042)
Extraordinary item (2). -- -- 349 -- -- --
--------- -------- -------- -------- -------- --------
Net loss............... $ (2,220) $ (2,559) $ (405) $ (2,929) $ (2,715) $ (1,042)
========= ======== ======== ======== ======== ========
PRO FORMA DATA (3):
Net loss per share..... $ (0.14)
========
Common and common
equivalent shares used
in computing net loss
per share............. 8,453
========
<CAPTION>
MARCH 31,
--------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1996
--------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........ $ (2,138) $ (4,636) $ (2,097) $ 3,780 $ 1,962
Total assets........... 2,939 2,527 3,434 9,619 6,121
Long-term note payable,
less current portion.. 4 4 2,372 -- 198
Redeemable preferred
stock................. -- -- -- 2,610 2,726
Total stockholders'
equity (deficiency)... (1,899) (4,458) (4,185) 1,369 219
</TABLE>
- --------
(1) Effective December 31, 1996, the Company changed its fiscal year end from
March 31 to a 52-53 week reporting year ending on the first Saturday on or
after December 31. The 40-week period from April 1, 1996 to January 4,
1997 is referred to herein as the nine months ended December 31, 1996. For
presentation purposes, the Company refers to its reporting year ended
January 4, 1997 as ending on December 31, 1996.
(2) Represents a gain on exchange of stockholder debt and receivables for
notes payable. See Note 2 of Notes to Financial Statements.
(3) For an explanation of the determination of the number of shares used in
computing pro forma net loss per share, see Note 1 of Notes to Financial
Statements.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
thereto included elsewhere in this Prospectus. Except for the historical
information contained herein, the discussions in this Prospectus contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed below and in the section entitled "Risk Factors"
as well as those discussed elsewhere in this Prospectus.
OVERVIEW
JetFax, Inc. is a leading developer and provider of integrated embedded
system technology, branded products and desktop software solutions for the MFP
market, which consists of electronic office devices that combine print, fax,
copy and scan capabilities in a single unit. The Company was incorporated in
August 1988 and since that time has engaged in the development, manufacture
and sale of its branded MFPs, including the 8000-D, the JetFax 4 and the
JetFax M5, and has entered into agreements with a number of OEMs for the
customization and integration of the Company's embedded system technology and
desktop software in OEMs' MFPs. In July 1996, the Company purchased
substantially all of the assets of the Crandell Group. At the time of the
acquisition, the Crandell Group's products included desktop software for
document conversion and portable document handling and products in development
included a fully integrated Microsoft Windows desktop application for MFPs.
The Company has continued to develop this software, under the JetSuite name,
and plans to release JetSuite with several OEM products in the second quarter
of 1997.
Effective December 31, 1996, the Company changed its fiscal year end from
March 31 to a 52-53 week reporting year ending on the first Saturday on or
following December 31. The 40-week period from April 1, 1996 to January 4,
1997 is referred to herein as the nine months ended December 31, 1996. For
presentation purposes, the Company refers to its reporting year ended January
4, 1997 as ending on December 31, 1996. The most recent fiscal year discussion
and analysis is based on the nine months ended December 31, 1996 compared to
the nine months ended December 31, 1995.
Revenues increased from $4.5 million for the fiscal year ended March 31,
1993 to $13.2 million for the fiscal year ended March 31, 1996. Revenues were
$12.9 million for the nine months ended December 31, 1996. At December 31,
1996, the Company had an accumulated deficit of $13.7 million and total
stockholders' equity of $219,000.
The Company's revenues are derived from three sources: (i) product revenues
consisting of sales of JetFax branded MFPs, consumables and upgrades; (ii)
development fees for engineering services; and (iii) software and technology
license fees related to both its embedded system technology for MFPs and its
desktop software. Historically, product revenues have accounted for the
majority of the Company's total revenues. For the nine months ended December
31, 1996, product revenues, development fees and software and technology
license fees, as a percentage of total revenues, were 79%, 11%, and 10%,
respectively. For the nine months ended December 31, 1996, revenues generated
from the desktop software business acquired from the Crandell Group in July
1996 included $628,000 of software license fees and $388,000 of development
fees.
Product revenues result from the sale of the Company's branded MFP products
into the corporate market through business equipment dealers. Product revenues
are generally recognized when the product is shipped to the customer.
Development fee revenues are derived from customizing the Company's embedded
system technology and software for inclusion in specific applications for its
OEMs' products. Development fee revenues are recognized on the percentage of
completion method over the development period. See Note 1 of Notes to
Financial Statements.
21
<PAGE>
The Company's development contracts with certain OEM customers have enabled
JetFax to accelerate its product development efforts. The Company classifies
all development costs related to such contracts as research and development
expenses because such development fees have only partially funded the
Company's product development activities, and the Company generally retains
ownership of the technology developed under these agreements.
Software and technology license fees result from licensing the Company's
proprietary embedded system technology and desktop software to OEMs for
integration into their products. These payments can take the form of one-time
license fees, non-refundable prepaid royalties or recurring per unit
royalties. One-time license fees and non-refundable prepaid royalties are
recognized upon the later of delivery of the contracted technology or
satisfaction of contractual milestones, if any. Recurring license revenues
from per unit fees paid by the Company's OEMs are recognized upon the
manufacture or shipment of products incorporating the Company's technology as
specified in the related agreements. The recurring license revenues reported
by the Company are dependent on the timing and accuracy of product
manufacturing or sales reports received from the Company's OEM customers.
These reports are provided on a quarterly basis which may not coincide with
the Company's quarter end. However, the Company attempts to get verbal
estimates more frequently. The quarterly reports, as well as any verbal
estimates, are subject to delay and potential revision by the OEM. Therefore,
the Company may be unable to estimate such revenues accurately prior to public
announcement of the Company's quarterly results. In such an event, the Company
may subsequently be required to revise its previously reported revenues when
it publishes its financial statements or adjust revenues for subsequent
periods, which could have a material adverse effect on the Company's business,
financial condition and results of operations and the price of the Company's
Common Stock.
A substantial portion of the Company's branded products sales is to dealers
in the IKON network. These IKON dealers accounted for 21% of the Company's
total revenues for the nine months ended December 31, 1996. The Company's OEM
customers for engineering development and technology licenses are Hewlett-
Packard, Oki Data, Samsung, Xerox and Intel Corporation. The royalty payments
owed the Company by Xerox under the existing technology agreements were
largely completed during the nine months ended December 31, 1996. The Company
expects that the ongoing obligations under existing OEM contracts will
generate future royalty payments. The termination of a major dealer
relationship or an OEM agreement would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors--Dependence on Dealers and Distributors" and "--Dependence on OEMs."
International revenues accounted for 22%, 39% and 26% of total revenues for
the fiscal years ended March 31, 1995 and March 31, 1996, and the nine months
ended December 31, 1996, respectively. The increase from the fiscal year ended
March 31, 1995 to the fiscal year ended March 31, 1996 was primarily due to
higher sales of the JetFax 4 in Europe. The decrease from the fiscal year
ended March 31, 1996 to the nine months ended December 31, 1996 was primarily
due to higher than normal inventory levels of the JetFax M5 in Germany at the
prior fiscal year end. All of the development fees and software and technology
license revenues, and most of the product revenues, have been denominated and
collected in United States dollars. The Company has not hedged the foreign
currency exposure related to product sales denominated in foreign currencies
as the impact has not been significant. See "Risk Factors--International
Activities."
The gross margins for the Company's branded MFP products have been and are
expected to continue to be constrained by the competitive nature of the
marketplace, pricing pressures and the greater name recognition of the larger
companies with which JetFax competes. The Company believes that sales of its
branded MFP products provide a substantial revenue base, an opportunity to
stay in close touch with evolving customer and market needs and a high level
of credibility in demonstrating the Company's advanced technology. The margins
on consumables, such as toner cartridges and drums, and on upgrades, such as
the two-line upgrade, are typically higher than on the base unit. In addition,
the Company's consumables generate recurring revenues which tend to increase
as the cumulative number of units sold increases.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues, certain
items in the Company's statements of operations for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
------------------- -------------------
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product.......................... 82.7% 84.5% 86.6% 79.3%
Development fees................. 15.5 5.3 5.5 11.0
Software and technology license
fees............................ 1.8 10.2 7.9 9.7
-------- -------- -------- --------
Total revenues................. 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of product revenues......... 67.7 84.2 92.0 66.0
Research and development......... 14.4 9.5 10.9 13.3
Selling and marketing............ 17.1 20.6 20.6 21.7
General and administrative....... 9.6 5.7 5.9 6.4
-------- -------- -------- --------
Total costs and expenses....... 108.8 119.9 129.4 107.4
-------- -------- -------- --------
Loss from operations............... (8.8) (19.9) (29.4) (7.4)
Interest and other income
(expense)......................... (0.9) (2.0) (2.3) 0.1
-------- -------- -------- --------
Loss before extraordinary item and
income taxes....................... (9.7) (21.9) (31.7) (7.3)
Provision for income taxes......... -- 0.3 0.4 0.8
-------- -------- -------- --------
Loss before extraordinary item..... (9.7) (22.2) (32.1) (8.1)
Extraordinary item................. 4.5 -- -- --
-------- -------- -------- --------
Net loss........................... (5.2)% (22.2)% (32.1)% (8.1)%
======== ======== ======== ========
</TABLE>
Nine Months Ended December 31, 1996 Compared to Nine Months Ended December 31,
1995
Revenues. Total revenues increased 52% from $8.5 million for the nine months
ended December 31, 1995 to $12.9 million for the nine months ended December
31, 1996. Product revenues increased 39% from $7.3 million for the nine months
ended December 31, 1995 to $10.2 million for the nine months ended December
31, 1996, reflecting primarily increased unit shipments and higher average
selling prices of the Company's MFPs as the Company transitioned from the
JetFax 4, an inkjet MFP, to the JetFax M5, a high performance, laser/LED MFP,
which began commercial shipment in June 1995. In addition, during the nine
months ended December 31, 1996, the Company expanded the number of large
business equipment dealers marketing the Company's products. Development fees
increased 203% from $466,000 for the nine months ended December 31, 1995 to
$1.4 million for the nine months ended December 31, 1996 as major programs
were initiated or continued for OEMs. Software and technology license fees
increased 86% from $667,000 for the nine months ended December 31, 1995 to
$1.2 million for the nine months ended December 31, 1996. This increase was
primarily due to the Crandell Acquisition in July 1996 which added software
license fees of $628,000 for the last two quarters of the nine months ended
December 31, 1996, but the increase was partially offset by a decline in
royalties from Xerox due to the end of life of a related Xerox product.
Cost of Product Revenues. Cost of product revenues consists primarily of
purchased materials; direct production labor and supervision for assembly and
test; subcontracted manufacturing, mainly for printed circuit boards; indirect
labor for inventory management, shipping and receiving, purchasing,
manufacturing engineering, document control and operations management; and
related facility and support costs. Cost of product revenues may vary as a
percentage of total revenues in the future as a result of a number of factors
including: relative production volumes; the mix of product shipped and the
varying proportion of MFPs versus consumables and upgrades; changes in
production yields, especially those associated with the introduction of new
products; risk of inventory obsolescence and excess inventory; pricing
pressures in the market; and vendor quality or supply problems.
23
<PAGE>
Cost of product revenues increased 9% from $7.8 million for the nine months
ended December 31, 1995 to $8.5 million for the nine months ended December 31,
1996, due to increased sales levels. The product gross margin increased from
negative 6.2% for the nine months ended December 31, 1995 to 16.8% for the
nine months ended December 31, 1996. The product gross margin for the nine
months ended December 31, 1995 was adversely affected by reserves of $760,000
taken in the quarter ended September 30, 1995 for the write down of certain
inventory to net realizable value and to record estimated losses on purchase
commitments related to the pricing decline on the JetFax 4. The Company had a
fixed price order from Xerox for JetFax 4 units, but the price at which the
units could be sold in the market had declined substantially due to
competition from other manufacturers' new product introductions. A settlement
of the purchase commitment from Xerox was negotiated in the quarter ended
September 30, 1996, which resulted in a reduction of the inventory reserve and
a credit to cost of product revenues of $280,000.
Excluding the impact of these reserves, the product gross margin was 4.1%
for the nine months ended December 31, 1995 as compared to 14.0% for the nine
months ended December 31, 1996. The lower product gross margin in the prior
nine month period primarily reflected the impact of competitive pricing
pressures in the inkjet MFP market and the startup and higher initial
production costs associated with the June 1995 commercial release of the
JetFax M5.
Research and Development. Research and development expenses were comprised
mainly of personnel related costs, engineering prototypes and supplies,
engineering contractors, computer equipment depreciation and facilities
expenses. Research and development expenses increased 86% from $919,000 for
the nine months ended December 31, 1995 to $1.7 million for the nine months
ended December 31, 1996. This increase resulted primarily from: (i) the
software development personnel added with the Crandell Acquisition in July
1996; (ii) certain compensation expenses associated with the continuing
employment of the founders of the Crandell Group, which are based on a
percentage of ongoing desktop software sales (these compensation expenses will
be paid in full and terminate upon the closing of the Offering); and (iii)
quick turnaround engineering prototype expenses for the development of an
embedded system. See "Certain Transactions."
Selling and Marketing. Selling and marketing expenses consisted primarily of
personnel related costs and commissions, travel and entertainment expenses of
direct sales and marketing personnel, advertising and promotional expenses,
marketing communications, customer support and service and facilities
expenses. Selling and marketing expenses increased 59% from $1.7 million for
the nine months ended December 31, 1995 to $2.8 million for the nine months
ended December 31, 1996. The increase was primarily related to higher
commissions resulting from higher sales levels and to continuing efforts to
increase the number of large dealers selling the Company's branded products in
the business equipment dealer marketing channel.
General and Administrative. General and administrative expenses included
personnel related costs for administrative, finance and executive personnel,
outside professional fees and facilities expenses. The expenses related to
general and administrative functions increased 65% from $500,000 for the nine
months ended December 31, 1995 to $823,000 for the nine months ended December
31, 1996. The increase was primarily due to higher personnel costs, legal and
consulting expenses and bank fees related to the establishment of a credit
facility.
Interest and Other Income (Expense). Interest and other income (expense)
consisted primarily of interest expense, a small amount of interest income and
miscellaneous items of other income and expense. Interest and other income
(expense) was a net expense of $192,000 for the nine months ended December 31,
1995 and net income of $13,000 for the nine months ended December 31, 1996.
During the nine months ended December 31, 1995, the Company incurred interest
expense on approximately $3.0 million of the Company's 10% senior subordinated
secured convertible notes outstanding on December 31, 1995. These notes were
repaid or converted into shares of preferred stock in March 1996. In addition,
the investment proceeds from the sale of Convertible Preferred Stock in March
1996 resulted in net interest income of $22,000 for the nine months ended
December 31, 1996.
Provision for Income Taxes. Due to the Company's net losses, there was no
provision for federal or state income taxes for the nine months ended December
31, 1995 or the nine months ended December 31, 1996. The
24
<PAGE>
$35,000 income tax provision for the nine months ended December 31, 1995 and
the $105,000 income tax provision for the nine months ended December 31, 1996
were related to foreign withholding taxes on certain development fees.
At December 31, 1996, net operating loss carryforwards of approximately
$11.1 million and $6.3 million were available to offset future federal and
state taxable income, respectively, and research and development tax credits
of $108,000 and $156,000 were available to offset future federal and state
income taxes, respectively. The operating loss and credit carryforwards will
expire, if not utilized, at various dates beginning in 2003 through 2011.
Utilization of the net operating loss and credit carryforwards may be subject
to significant limitations as a result of certain ownership changes. See Note
11 of Notes to Financial Statements.
The Company recognizes deferred tax assets and liabilities based on the
difference between financial reporting and tax bases of assets and liabilities
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Based on the weight of available
evidence, which includes the Company's historical losses since inception, and
the uncertainties regarding future results of operations, the Company has
provided a full valuation allowance against its net deferred tax assets of
$4.9 million at December 31, 1996, as it is more likely than not that the
deferred tax assets will not be realized. See Note 11 of Notes to Financial
Statements.
Fiscal Year Ended March 31, 1996 Compared to Fiscal Year Ended March 31, 1995
Revenues. Total revenues increased 70% from $7.8 million for the fiscal year
ended March 31, 1995 to $13.2 million for the fiscal year ended March 31,
1996. This increase resulted primarily from the June 1995 commercial release
of the JetFax M5 and, to a lesser extent, increased sales of consumables and
upgrades. Product revenues increased 74% from $6.4 million for the fiscal year
ended March 31, 1995 to $11.1 million for the fiscal year ended March 31,
1996. Development fees decreased 42% from $1.2 million for the fiscal year
ended March 31, 1995 to $699,000 for the fiscal year ended March 31, 1996, due
to the completion of a major development project for Xerox. Correspondingly,
software and technology license fees increased from $139,000 for the fiscal
year ended March 31, 1995 to $1.3 million for the fiscal year ended March 31,
1996, reflecting receipt of royalties on the Xerox products that had begun
production.
Cost of Product Revenues. Cost of product revenues increased 111% from $5.2
million for the fiscal year ended March 31, 1995 to $11.1 million for the
fiscal year ended March 31, 1996. The decline in product gross margin was
primarily due to reserves of $760,000 taken in the quarter ended September 30,
1995 for the write-down of certain inventories to net realizable value and to
record losses on purchase commitments due to the pricing decline on the JetFax
4. Excluding the impact of these reserves, the product gross margin was 18.2%
for the fiscal year ended March 31, 1995 as compared to 7.2% for the fiscal
year ended March 31, 1996. The lower product gross margin primarily reflected
the impact of the competitive pricing pressures in the inkjet MFP market and
the startup and higher initial production costs associated with the June 1995
commercial release of the JetFax M5. For the quarter ended March 31, 1996, the
product gross margin had increased to 13.1%.
Research and Development. Research and development expenses increased from
$1.1 million for the fiscal year ended March 31, 1995 to $1.2 million for the
fiscal year ended March 31, 1996, but declined as a percentage of total
revenues from 14.4% to 9.5%, respectively, primarily due to the increase in
total revenues. The major technical development effort for Xerox and the
internal development of the second generation embedded system used in the
Company's JetFax M5 were largely completed during the fiscal year ended March
31, 1995, leading to a relatively minor increase in research and development
expenses for the fiscal year ended March 31, 1996 as personnel were deployed
to other development programs.
Selling and Marketing. Selling and marketing expenses increased 105% from
$1.3 million for the fiscal year ended March 31, 1995 to $2.7 million for the
fiscal year ended March 31, 1996. The higher expenses for marketing and sales
personnel, commissions, product communication materials, dealer incentives and
25
<PAGE>
cooperative advertising shared with the dealers were related to the commercial
release of the JetFax M5 and building the Company's network of business
equipment dealers.
General and Administrative. General and administrative expenses were
approximately $750,000 for both the fiscal years ended March 31, 1995 and
March 31, 1996, but declined as a percentage of total revenues from 9.6% for
the fiscal year ended March 31, 1995 to 5.7% for the fiscal year ended March
31, 1996.
Interest and Other Income (Expense). Interest expense increased from $68,000
for the fiscal year ended March 31, 1995 to $270,000 for the fiscal year ended
March 31, 1996. The increase in interest expense for the fiscal year ended
March 31, 1996 was related to the issuance of 10% senior secured convertible
notes throughout the year ended March 31, 1995 which totaled $2.0 million at
such year end. The highest balance owed under such notes was $3.0 million in
March 1996 when such notes were either repaid or converted into shares of
Convertible Preferred Stock.
Provision for Income Taxes. Due to the Company's net losses, there was no
provision for federal or state income taxes for the fiscal years ended March
31, 1995 or March 31, 1996. The $35,000 income tax provision for the fiscal
year ended March 31, 1996 was related to foreign withholding taxes.
QUARTERLY RESULTS OF OPERATIONS
The Company's quarterly results may be subject to fluctuations resulting
from a variety of factors, including: the timing of introductions of new
products or product enhancements by the Company, its OEMs and their
competitors; initiation or termination of arrangements between the Company and
its existing and potential significant OEM customers or dealers and
distributors; the size and timing of and fluctuations in end user demand for
the Company's branded products and OEM products incorporating the Company's
technology; inventories of the Company's branded products or products
incorporating the Company's technology carried by the Company, its
distributors or dealers, its OEMs or the OEMs' distributors that exceed
current or projected end user demand; the phase-out or early termination of
the Company's branded products or OEM products incorporating the Company's
technology; the amount and timing of development agreements, one-time software
licensing transactions and recurring licensing fees; non-performance by the
Company, its suppliers or its OEM or other customers pursuant to their plans
and agreements; seasonal trends; competition and pricing; customer order
deferrals and cancellations in anticipation of new products or product
enhancements; industry and technology developments; changes in the Company's
operating expenses; software and hardware defects; product delays or product
quality problems; currency fluctuations; and general economic conditions. The
Company expects that its operating results will continue to fluctuate
significantly as a result of these and other factors. A substantial portion of
the Company's operating expenses is related to personnel, development of new
products, marketing programs and facilities. The level of spending for such
expenses cannot be adjusted quickly and is based, in significant part, on the
Company's expectations of future revenues and anticipated OEM commitments. If
such commitments do not generate revenues or operating expenses are
significantly higher, the Company's business, financial condition and results
of operations will be adversely affected, which could have a material adverse
effect on the price of the Company's Common Stock. As a result, the Company
does not believe that its operating results for any one quarter are
necessarily indicative of results for any future interim period. See "Risk
Factors--Potential Fluctuations in Quarterly Results."
The following quarterly information has been prepared on the same basis as
the Financial Statements and related Notes included elsewhere in this
Prospectus and in the opinion of the Company's management reflects all
adjustments, consisting only of normal, recurring adjustments, necessary for a
fair presentation in accordance with generally accepted accounting principles
for the periods presented.
26
<PAGE>
The following table presents the unaudited statements of operations for each
of the Company's last seven quarters.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1996 1996 1996 1996
-------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Product................ $ 1,691 $ 2,388 $ 3,257 $ 3,807 $ 3,290 $ 3,173 $ 3,742
Development fees....... -- 233 233 233 217 380 819
Software and technology
license fees.......... 107 120 440 678 289 518 434
------- -------- ------- ------- ------- ------- -------
Total revenues........ 1,798 2,741 3,930 4,718 3,796 4,071 4,995
Costs and expenses:
Cost of product
revenues.............. 1,635 3,152 3,006 3,309 2,948 2,549 2,998
Research and
development........... 347 272 300 330 349 662 698
Selling and marketing.. 389 576 780 965 925 924 936
General and
administrative........ 142 131 227 250 182 293 348
------- -------- ------- ------- ------- ------- -------
Total costs and
expenses............. 2,513 4,131 4,313 4,854 4,404 4,428 4,980
------- -------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (715) (1,390) (383) (136) (608) (357) 15
Interest and other
income (expense)....... (50) (67) (75) (78) 16 3 (6)
------- -------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary item and
income taxes........... (765) (1,457) (458) (214) (592) (354) 9
Provision for income
taxes.................. 35 -- -- -- 1 63 41
------- -------- ------- ------- ------- ------- -------
Net loss................ $ (800) $ (1,457) $ (458) $ (214) $ (593) $ (417) $ (32)
======= ======== ======= ======= ======= ======= =======
The following table sets forth certain revenue and expense items as a
percentage of total revenues for each of the Company's last seven quarters.
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1996 1996 1996 1996
-------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product................ 94.0% 87.1% 82.9% 80.7% 86.7% 77.9% 74.9%
Development fees....... -- 8.5 5.9 4.9 5.7 9.3 16.4
Software and technology
license fees.......... 6.0 4.4 11.2 14.4 7.6 12.7 8.7
------- -------- ------- ------- ------- ------- -------
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of product
revenues.............. 90.9 115.0 76.5 70.1 77.7 62.6 60.0
Research and
development........... 19.3 9.9 7.6 7.0 9.2 16.3 14.0
Selling and marketing.. 21.6 21.0 19.9 20.5 24.4 22.7 18.7
General and
administrative........ 7.9 4.8 5.8 5.2 4.8 7.2 7.0
------- -------- ------- ------- ------- ------- -------
Total costs and
expenses............. 139.8 150.7 109.8 102.8 116.0 108.8 99.7
------- -------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (39.8) (50.7) (9.8) (2.8) (16.0) (8.8) 0.3
Interest and other
income (expense)....... (2.8) (2.5) (1.9) (1.7) 0.4 0.1 (0.1)
------- -------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary item and
income taxes........... (42.6) (53.2) (11.7) (4.5) (15.6) (8.7) 0.2
Provision for income
taxes.................. 1.9 -- -- -- -- 1.5 0.8
------- -------- ------- ------- ------- ------- -------
Net loss................ (44.5)% (53.2)% (11.7)% (4.5)% (15.6)% (10.2)% (0.6)%
======= ======== ======= ======= ======= ======= =======
</TABLE>
27
<PAGE>
Product revenues increased each quarter during the fiscal year ended March
31, 1996, resulting mainly from the introduction of the JetFax M5 in the first
quarter and the steadily increasing unit shipments as the year progressed.
Product revenues decreased during the quarters ended March 31, 1996 and June
30, 1996, due primarily to the decline in unit shipments and sales price of
the JetFax 4, which had substantial pricing competition in the market; and to
a lesser extent to a decline in international unit shipments of the JetFax M5
and the resulting lower overall JetFax M5 average selling price. Higher unit
prices are normally achieved in international markets. Product revenues
increased in the quarter ended December 31, 1996 from the prior two quarters,
due mainly to an increase in domestic JetFax M5 unit shipments resulting from
increased numbers of large dealers selling the Company's branded products in
the business equipment dealer marketing channel.
Development fees increased in the quarters ended September 30, 1996 and
December 31, 1996 due to initiation of major development programs for several
OEM customers.
Cost of product revenues increased in the quarter ended September 30, 1995.
The product gross margin was adversely affected by reserves of $760,000 taken
in the quarter ended September 30, 1995 for the write down of certain
inventory to net realizable value and to record estimated losses on purchase
commitments related to the pricing decline on the JetFax 4. The Company had a
fixed price order from Xerox for JetFax 4 units, but the price at which the
units could be sold in the market had declined substantially due to
competition from other manufacturers' new product introductions. A settlement
of the purchase commitment with Xerox was negotiated in the quarter ended
September 30, 1996, which resulted in a reduction of the inventory reserve and
a credit to cost of product revenues of $280,000.
Excluding the impact of these reserves, the product gross margin was
negative 0.2% for the quarter ended September 30, 1995 compared to 7.2% for
the fiscal year ended March 31, 1996. Excluding the impact of the $280,000
credit to cost of product revenues in the quarter ended September 30, 1996,
product gross margin improved from 10.4% for the quarter ended June 30, 1996,
to 10.8% for the quarter ended September 30, 1996, to 19.9% for the quarter
ended December 31, 1996.
Research and development expenses increased in the quarters ended September
30, 1996 and December 31, 1996 primarily due to software development personnel
added with the Crandell Acquisition in July 1996. The increase in research and
development expenses was also due to increased compensation expenses related
to the continuing employment of the founders of the Crandell Group. These
compensation expenses were based on a percentage of ongoing desktop software
sales and will be paid in full and terminate upon the closing of the Offering.
Additionally, quick turnaround prototype expenses for ASICs and printed
circuit board manufacture related to the Company's third generation controller
for laser MFPs contributed to higher expenses in the quarter ended September
30, 1996.
General and administrative expenses decreased in the quarter ended June 30,
1996 from the quarter ended March 31, 1996 due to lower headcount. Expenses in
the September 30, 1996 and December 31, 1996 quarters increased due to higher
headcount, legal and consulting expenses and bank fees.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date principally through private
placements of debt and equity securities, proceeds from borrowings under a
bank line of credit and debt associated with the Crandell Acquisition. The
total amount of equity raised through December 31, 1996 in the form of Common
Stock and Series A through F Convertible Preferred Stock was $14.0 million.
Additionally, $2.7 million of Series P Redeemable Preferred Stock was
outstanding on December 31, 1996. See Notes 9 and 10 of Notes to Financial
Statements. The Series A through F Convertible Preferred Stock will convert
into Common Stock upon the closing of the Offering. The holder of the Series P
Redeemable Preferred Stock has elected to have the stock and accrued dividends
redeemed at the closing of the Offering.
28
<PAGE>
At December 31, 1996, $700,000 of debt was outstanding, which consisted of
$200,000 under a bank line of credit, a $250,000 equipment term loan and a
$250,000 note payable related to the Crandell Acquisition. At December 31,
1996, the Company had $746,000 available under its bank credit facility. See
Note 7 of Notes to Financial Statements. This lending facility is
collateralized by substantially all of the Company's assets. The maximum
amount available under the line of credit is the lesser of $1.5 million or 75%
of the Company's eligible outstanding accounts receivable. The revolving line
of credit terminates in August 1997 and is subject to renegotiation at that
time. The Company also has $250,000 outstanding under an equipment loan due in
monthly installments through February 2000. The interest rate on the line of
credit is the bank's prime rate (8.25% as of December 31, 1996) plus 1.0%; the
interest rate on the equipment term loan is the bank's prime rate plus 1.5%.
The line of credit and equipment term loan contain certain covenants which,
among other things, require the Company to maintain tangible net worth (as
defined) of $2.5 million, quarterly net income, a quick ratio of 0.8 to 1.0, a
maximum debt to net worth ratio (as defined) of 2.0 to 1.0 (1.5 to 1.0 after
December 31, 1996) and certain minimum liquidity and debt service coverage. In
addition, the agreement prohibits the payment of cash dividends. At December
31, 1996, the Company was not in compliance with the quarterly net income
covenant and subsequently received a waiver of this covenant through June 30,
1997 from the lender. The $250,000 note payable to the Crandell Group is
subordinated to the bank loan, is non-interest bearing and matures July 31,
1997. See Notes 3 and 7 of Notes to Financial Statements. The note to the
Crandell Group is to be repaid in full upon the closing of the Offering. See
"Use of Proceeds."
Cash and cash equivalents decreased from $3.5 million at March 31, 1996 to
$106,000 at December 31, 1996, due primarily to cash used in operations, which
included a $2.9 million reduction in accounts payable and accrued liabilities.
Accounts receivable increased by $515,000 from $1.9 million at March 31, 1996
to $2.4 million at December 31, 1996, mainly as a result of the higher revenue
levels. Inventories declined $1.0 million from $3.4 million at March 31, 1996
to $2.3 million at December 31, 1996, primarily attributable to more effective
inventory management. Net property and other assets increased by $1.0 million
from $199,000 at March 31, 1996 to $1.2 million at December 31, 1996, due
primarily to the software technology acquired in connection with the Crandell
Acquisition, the software and computers purchased for the integrated
manufacturing and accounting system, and material handling equipment. During
the nine months ended December 31, 1996, the Company borrowed $450,000 against
its bank line of credit to cover cash requirements.
Cash and cash equivalents increased from $122,000 at March 31, 1995 to $3.5
million at March 31, 1996, due principally to the issuance of Series F
Convertible Preferred Stock in March 1996. Accounts payable and accrued
liabilities increased by $2.6 million from $3.0 million at March 31, 1995 to
$5.6 million at March 31, 1996, resulting mainly from an extension of
payments. Accounts receivable increased by $467,000 from $1.5 million at March
31, 1995 to $1.9 million at March 31, 1996, primarily due to the higher
revenue levels. Inventories increased $1.9 million from $1.5 million at March
31, 1995 to $3.4 million at March 31, 1996, as the Company prepared for
forecasted increases in product shipment levels. Net property and other assets
were relatively unchanged at March 31, 1995 as compared to March 31, 1996.
The Company currently believes that the net proceeds of the Offering,
together with available borrowings under its line of credit and funds from
current and anticipated operations, will be sufficient to meet the Company's
working capital and capital expenditure requirements for at least the next 18
months. If the Company acquires one or more businesses or products, the
Company's capital requirements could increase substantially. In the event of
such an acquisition or should any unanticipated circumstances arise which
significantly increase the Company's capital requirements, there can be no
assurance that necessary additional capital will be available on terms
acceptable to the Company, if at all.
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BUSINESS
OVERVIEW
JetFax, Inc. is a leading developer and provider of integrated embedded
system technology, branded products and desktop software solutions for the
multifunction product ("MFP") market, which consists of electronic office
devices that combine print, fax, copy and scan capabilities in a single unit.
The Company focuses on two distinct segments of the MFP market, the small
office/home office ("SOHO") segment and the corporate segment.
The Company's embedded system technology is made up of proprietary ASICs,
software and firmware that reside on a modular controller circuit board (an
"embedded system"). This technology provides the intelligence of a MFP and
coordinates, controls and optimizes a MFP's printing, faxing, copying and
scanning operations. JetFax licenses and manufactures its embedded system and
desktop software for a range of MFP solutions sold under the JetFax brand name
and the brand names of its OEM customers. The Company believes its embedded
systems technology and desktop software enable OEMs to offer more competitive
products with improved price/performance, shortened development cycles and
reduced development and product costs. The Company currently licenses its
embedded system technology or software to 25 licensees worldwide, including
Hewlett-Packard, Oki Data, Samsung, Xerox and Intel.
Since its inception in 1988, the majority of the Company's revenues have
been generated from sales of JetFax branded products and consumables,
including the JetFax M5, the Company's current branded product. The Company
believes that it offers the most advanced and innovative MFP solutions
currently available in its product class. For example, the JetFax M5 was the
first MFP to support two telephone lines for simultaneous receiving and
sending of faxes, and the Company was one of the first to market a MFP with a
high speed 33.6 Kbps modem.
The Company believes its JetSuite software will define a new category of
all-in-one software for MFPs that will replace the piecemeal software
components historically bundled by MFP vendors. As a result, corporate and
SOHO workers can increase productivity and realize substantial time and cost
savings relative to traditional office protocols and equipment usage. The
Company's JetSuite desktop software can be sold on a stand-alone basis or
bundled with the JetFax embedded system to provide a complete, integrated
hardware and software solution. The Company plans to release JetSuite with
several OEM products in the second quarter of 1997. The Company also offers
JetPCL software, which provides high quality conversion of documents encoded
in Hewlett-Packard's Printer Control Language ("PCL"), the industry standard.
INDUSTRY BACKGROUND
Within the overall electronic office devices market, which includes
printers, faxes, copiers and scanners, the market for MFPs is rapidly growing.
The two fastest growing segments of the MFP market are the SOHO and corporate
segments based on unit sales. According to CAP Ventures, Inc., the total
United States market for MFPs is expected to increase from approximately $1.9
billion in 1996 to $7.6 billion in 2000, an annual compound growth rate of
more than 40%. The advent of MFPs has eroded the boundaries between the
previously distinct printer, fax, copier and scanner markets, allowing MFPs to
have particular success as a value-added substitute in the fax market. MFPs
are also recognized as an attractive alternative to single-function printers
because of the MFP's ability to manage and process information in both paper
and electronic formats. CAP Ventures, Inc. anticipates that 50% of the United
States fax market and 23% of the United States printer market will consist of
MFPs by the year 2000, with annual unit sales in the United States growing
from 1.3 million MFPs in 1996 to more than 5.9 million MFPs in 2000.
Because the SOHO end user is price sensitive and space limited, MFPs which
provide printing, plain paper and PC faxing, copying and scanning in one unit
for under $1,000 represent an efficient and affordable solution. In 1996,
there were $683 million in MFP sales into the SOHO market and in 2000, CAP
Ventures, Inc. expects there to be more than $2.3 billion in MFP sales into
the SOHO market, a compound annual growth rate of more than 35%.
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The corporate segment of the MFP market is evolving to meet information
processing and management demands that exceed the capabilities of traditional
electronic office devices. Historically, corporate end users have purchased
single-function fax machines as a cost-effective solution to their real-time
document communications needs. Today, MFPs are replacing stand-alone fax
machines by offering convenient access to printing, copying and scanning
capabilities without compromising the traditional corporate fax functionality.
CAP Ventures, Inc. forecasts that sales of MFPs into the United States
corporate market segment will grow from $294 million in 1996 to $1.2 billion
in 2000, a compound annual growth rate of 42%. Typical MFPs sold in the
corporate market sell for between $1,000 and $4,000 and are based on
laser/LED, rather than ink jet, printing engines, feature higher scanning and
transmission speeds and increased memory and paper capacities.
The Company believes that the increased demand for MFPs and related desktop
software is due to a number of favorable industry trends, including the
following:
Rapid, Widespread Growth of Paper and Electronic Information. The demand for
technology that addresses the needs for real-time processing, managing and
transmitting paper and electronic information is growing. As fax, e-mail and
the Internet become increasingly ubiquitous, electronic distribution of
documents is being recognized as a more efficient alternative than physical
distribution by mail or courier. Today's office workers benefit from the
ability to directly send, receive, print and scan documents at their PC.
Traditionally, this multitasking capability required purchasing, placing and
servicing separate single-function office products.
Increased Outsourcing by OEMs. The increasing rates of technological change
and product obsolescence continue to shorten the manufacturing, time-to-market
and product life cycles in today's MFP market. OEMs are under constant
pressure to develop new MFPs with enhanced functionality at the lowest
possible cost, resulting in increased complexity and development challenges.
Developing and manufacturing such increasingly complex MFPs requires advanced,
proven technology and broad research and development expertise. Unlike the
development of single function office products, MFP development requires
knowledge of printer, fax, copier and scanner technologies. Most single
function device manufacturers do not have expertise in all of the required
areas. Consequently, many OEMs opt to outsource their MFP design and software,
assembly of controller boards and product manufacturing to reduce costs and
time-to-market.
Demand for MFP Software. The architecture and software used by MFPs
represent a major departure from those used by stand-alone devices. MFPs
typically are shipped with a number of software packages intended for single
function use, requiring a customer to install and learn three or four
different interfaces to fully utilize their MFP. Today, the principal vendors
of MFPs bundle software packages which neither integrate nor easily exploit
all of the capabilities of the MFP. Most of the bundled software packages are
minor modifications of existing PC fax or scanner applications. In order to
fully utilize all of the capabilities of a MFP, users need fully integrated
desktop software.
Proliferation of SOHO Business Environment. Corporate restructuring and
downsizing and advances in telecommunication technologies have resulted in the
rapid growth of the number of SOHO offices. SOHO workers have essentially the
same quality and functional needs as workers in large corporate offices, but
lack the space and financial resources required for separate single-function
machines. MFPs offer print, fax, copy and scan functions in a single unit for
significantly less cost than would otherwise be incurred by purchasing each of
these products separately.
Increased Use of the Internet for Document Transmissions. As the number of
e-mail and Internet users increases, the use of the Internet for transmitting
and routing scanned documents has become very compelling. By using a MFP to
input documents to be routed over the Internet, the costs of transmitting
documents can be greatly reduced or eliminated and documents can be sent with
greater resolution and clarity than with typical fax transmissions. In
addition, documents sent directly to an individual's e-mail address as a file
attachment can be viewed, printed or deleted at their PC, thereby providing
improved confidentiality.
Increased Use of Consumables. By supporting multiple output functions
including PC printing, copying and receipt of plain paper faxes, MFPs may
consume a greater level of toner or ink cartridges than single function
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products such as printers or copiers. For a typical corporate MFP, the cost of
the consumables may match or exceed the cost of the actual MFP during the
first several years of the product's life. Typically, these consumables
generate higher margins than those of the products themselves.
THE JETFAX SOLUTION
JetFax's comprehensive solution is to offer to the SOHO and corporate
markets its proven embedded system technology, high quality branded MFPs and
advanced desktop software. JetFax's embedded system solutions for MFPs consist
of proprietary ASICs, software and firmware that reside on a controller
circuit board and represent the Company's core MFP technology. The MFP
embedded system is essentially the intelligence of the MFP, processing and
managing the print, fax, copy and scan functions of a MFP. The Company's third
generation embedded system technology is designed to enable OEMs to offer more
competitive products with improved price/performance, shorter development
cycles and reduced development and product costs. JetFax believes that its
embedded system technology allows an OEM to refresh or broaden its product
lines more quickly than it could through internal development of products.
JetFax manufactures and markets MFPs for resale under the JetFax brand name.
In addition, the Company has in the past manufactured products for its OEMs.
The products manufactured by the Company are targeted at the corporate MFP
market and have more advanced features than those found on typical SOHO MFPs.
These corporate features include higher scanning and transmission speeds,
increased memory and paper capacities, and improved reliability and
performance at greater usage levels. Through its branded products, the Company
believes that it is able to more quickly bring advanced and innovative MFP
features to market. For example, the JetFax M5 was the first MFP in its
product class to support two telephone lines for simultaneous receiving and
sending of faxes, and was one of the first to market a MFP with a high speed
33.6 Kbps modem. By integrating and testing products incorporating these
features, JetFax believes that it is able to reduce time-to-market for its
branded MFPs as well as those of its OEMs. JetFax also sells consumables for
its branded products that the Company believes will represent increasing
amounts of total product revenues as its installed base of MFPs grows.
The Company's primary software product, JetSuite, which is expected to be
released with several OEM products in the second quarter of 1997, provides a
fully integrated software application for a MFP. JetSuite operates with
JetFax's embedded system designs, as well as with those of its OEMs, to
provide an end user with access to all of the MFP's capabilities. JetSuite
integrates printing, PC faxing, scanning, document management and device
configuration into one package, eliminating the need to install and learn
multiple applications. JetSuite's foundation in portable document technology
allows the user to move easily between the hard copy world of printers and
faxes and the electronic world of e-mail and the Internet. By storing and
viewing all documents in JetSuite's portable document format, pages which are
either scanned at the MFP, created from any Windows application, or copied
from the Internet can be easily e-mailed and viewed by anyone using Microsoft
Windows 3.1 or Windows 95. As a single source of JetSuite software and JetFax
embedded system technology, JetFax believes it simplifies and accelerates an
OEM's ability to introduce MFPs into the market.
JETFAX STRATEGY
The Company's objective is to become a leading, single source for
multifunction products and solutions providing proven embedded system
technology, high quality branded products and advanced desktop software. The
key elements of the JetFax strategy include:
Offer Compelling MFP Solutions to OEMs. The Company plans to continue
leveraging its embedded system and software technologies by offering OEMs
compelling MFP solutions which reduce the OEM's time-to-market and development
and product costs. The Company licenses its embedded system technology and
software to OEMs for use in their MFPs which are sold into the SOHO and
corporate markets. The Company also offers a variety of product options,
ranging from assembled circuit boards to fully integrated products. The
Company is allocating substantial resources to the continued development of
innovative technologies which address the SOHO and corporate market
requirements for future MFP solutions.
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Expand Sales of JetFax Branded MFP and Related Consumables. The Company
seeks to increase the sales of its branded MFPs and consumables in the
corporate market through growth of its distribution channel and its
relationships with key dealers and major accounts. In the United States and
Canada, the Company distributes JetFax branded products, options and
consumables through IKON and office equipment dealers primarily associated
with Business Technology Association, formerly known as NOMDA, the largest
national association of office machine dealers focused on the sale of fax
machines and copiers ("BTA"). The Company intends to increase its penetration
of both the IKON and BTA dealer channels. The Company also intends to leverage
its dealer network and installed base of JetFax branded MFPs to increase sales
of consumables, thereby generating recurring revenues.
Establish JetSuite as the Leading MFP Desktop Software Application. JetFax
plans to establish its JetSuite software as the leading MFP desktop software
and anticipates releasing JetSuite with several OEM products in the second
quarter of 1997. JetSuite is designed to provide an end user with access to
all of the capabilities of a MFP from a single, integrated Microsoft Windows
application. This level of integration will enable OEMs to support a single
software package rather than the multiple, discrete applications utilized with
most MFPs today. The Company plans to license JetSuite software to a number of
OEMs. For example, the Company entered into license agreements for JetSuite
with Hewlett-Packard in March 1997 and Oki Data in September 1996. The Company
intends to maintain use of the Company's JetSuite trademark with OEM products
in order to gain further name recognition for both the Company and its
products. The Company also plans to offer upgrades and add-on software
products to end users who have purchased MFPs bundled with JetSuite software.
JetFax intends to build on JetSuite's foundation in portable document
technology to take advantage of a variety of document delivery systems
including the Internet.
Leverage International Relationships and Experience. Most foreign countries
require independent testing of each new MFP for compliance with
telecommunications and safety laws, which can take several months. The Company
has successfully taken products through international regulatory approval
processes in over 35 countries. JetFax believes that its international
experience and focus provide a competitive advantage and international markets
represent a source of potential growth. The Company plans to build on its long
history of international relationships, including those with a number of
dealers, distributors and telecom regulatory authorities, to market its
products abroad and obtain international regulatory approvals on new products.
By being able to offer its OEMs proven worldwide solutions and regulatory
experience, the Company believes it will enable its OEMs to achieve broader
international distribution in a shorter amount of time.
PRODUCTS
JetFax offers the following products and solutions to its OEMs and other
customers:
JetFax Branded Products and Related Consumables. JetFax develops,
manufactures and markets a high quality MFP under the JetFax brand name. For
this branded solution, JetFax procures an integrated printing and scanning
engine and integrates its embedded system technology with the engine at its
facility.
The Company's current branded MFP is the JetFax M5, which the Company began
shipping commercially in June 1995. The JetFax M5 offers the functionality of
a high-volume, full-featured plain paper fax machine in addition to its
multifunction print, copy and scan capabilities. The JetFax M5 is based on a
LED printer engine, which uses the same drum and toner print technology as a
laser printer ("laser/LED"). A range of upgrades is made available by the
Company to expand the capabilities of the JetFax M5, including a two-line
upgrade which allows simultaneous receiving and sending of faxes and a high-
speed modem upgrade for single-line models which allows the modem speed to be
increased from 14.4 Kbps to 33.6 Kbps, thereby reducing the transmission time
of a typical fax. List prices of the JetFax M5 range from approximately $3,000
to more than $4,000 depending on the options included.
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The following table lists the principal branded products developed, marketed
and shipped by the Company since 1989:
<TABLE>
<CAPTION>
PRODUCT NAME PRODUCT CATEGORY DATES SHIPPED AWARD(S) WON
- --------------------------------------------------------------------------------------------
<C> <C> <C> <S>
JetFax M5 High-volume 1995-present . "Pick of the Year" in 1996
laser/LED MFP by Buyer's Laboratory
. "Editor's Choice 96 Premium Laser Fax"
by Better Buys for Business
. "Win 100" for top computer hardware
by Windows Magazine in 1996
. "Sehr gut" award by Facts magazine
in 1996
- --------------------------------------------------------------------------------------------
JetFax 4 Inkjet 1995-1996 . "Sehr gut" award by Facts
multifunction magazine in 1996
fax machine
- --------------------------------------------------------------------------------------------
JetFax 8000-D High-volume laser 1992-1995 . "Pick of the Year" by Buyer's
fax machine Laboratory in 1993
. "Award of Merit" by BYTE
magazine in 1992
- --------------------------------------------------------------------------------------------
JetFax II Printer add-on with 1991-1994 . "Best Fax Server" by
LAN fax server LAN magazine in 1991
capability
- --------------------------------------------------------------------------------------------
JetFax Laser printer add- 1989-1991 . "Best of Show" Comdex by
on for plain paper fax PC Week magazine in 1988
- --------------------------------------------------------------------------------------------
</TABLE>
The Company also sells consumables for its products, including toner
cartridges, imaging drums and inkjet cartridges. These consumables, which need
to be purchased periodically by customers over the life of the product, are
typically procured by the Company from the manufacturer of the printing engine
and are labeled with the JetFax brand name. Certain consumables not procured
from the Company or its suppliers are not easily used with JetFax products or
do not provide optimal functionality. Revenues from sales of consumables
represented 16% of the Company's total revenues in the nine months ended
December 31, 1996. The Company believes that such revenues will increase as
the installed base of JetFax branded MFPs grows.
Embedded System Technology. JetFax develops and licenses its embedded system
technology for manufacture and integration by its OEM customers into their
MFPs. This technology includes a complete embedded system design, modified to
meet the OEMs' specifications and requirements. Such hardware and software
modifications are performed by JetFax and typically include changes to the
printer and scanner interfaces and to the control panel and user interface.
The Company generally receives development fees in return for such
modifications, in addition to prepaid and per unit royalties for the license.
The Company's embedded system technology has been customized and licensed for
use in the Minoltafax 1000, the Xerox 3006, the Xerox WorkCenter 250 and the
dex 855 manufactured by Samsung, and it is being customized for use by
Hewlett-Packard.
The Company offers completely assembled embedded system circuit boards to
its OEMs as well as systems integration services. An OEM can choose to procure
the embedded system boards directly from JetFax for integration at the OEM's
facility or the OEM can ship its printing/scanning engine to JetFax for final
assembly and testing. The Company believes its ability to offer a variety of
manufacturing and systems integration capabilities provides OEMs with a means
to reduce development costs and time-to-market.
JetSuite Software. The Company believes its JetSuite software will define a
new category of all-in-one software for MFPs that will replace the piecemeal
software components historically bundled by MFP vendors.
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Versions of JetSuite for Microsoft Windows 3.1 and Microsoft Windows 95 are
scheduled for commercial release with several OEM products, in the second
quarter of 1997. A version for Microsoft Windows NT is under development.
JetSuite software is designed to provide a comprehensive software solution for
users of MFPs. JetSuite is installed on a user's PC and combines low-level
device drivers for printing, faxing, copying and scanning with a visual
"desktop" application that allows a user to organize, convert and manage
documents created or received using a MFP. In addition to basic MFP device
support and its desktop manager, JetSuite will provide other advanced
capabilities. Using JetSuite, a user will be able to create a self-viewing,
portable version of any document, whether "printed" electronically, captured
from an Internet Web page, scanned or faxed. Such a portable document can then
be e-mailed and viewed without requiring the recipient to have a specific
software application or viewer installed on their system. All of the
document's original formatting, layout, colors and look are maintained in a
portable JetSuite document. As a document communication tool, JetSuite will
fully support both fax-based and e-mail-based document transmission. JetSuite
will also provide links to popular third party software applications, such as
word processors and graphics programs, allowing users to move documents in and
out of the JetSuite desktop easily.
The Company offers JetSuite to OEMs for use with the OEMs' embedded system
or bundled with JetFax's embedded system technology. The Company also intends
to include JetSuite with JetFax branded MFPs. The Company will offer JetSuite
to OEM customers and end users in both standard and more full featured "pro"
versions. The Company also intends to develop JetSuite add-on software
products offering additional or advanced document management capabilities such
as advanced optical character recognition ("OCR") and enhanced search and
retrieval tools. JetFax believes that both the "pro" version and any add-on
products could be promoted to any base of standard JetSuite users as upgrades,
and that the "pro" version could also be promoted directly to end users of
existing MFPs that do not include JetSuite.
JetPCL. Hewlett-Packard's Printer Control Language ("PCL") is the industry
standard method of delivering commands from a PC software package to a
printer. The Company's JetPCL software is a PCL-emulator that provides high-
quality conversion of documents encoded in PCL into various image formats,
including fax. JetPCL is currently a leading PCL conversion package for
suppliers of standalone fax and network fax server products and the Company
has licensed JetPCL to more than 25 OEM customers. JetPCL also supports host-
based conversion of PCL for print devices, allowing lower cost printers to
support legacy DOS applications that generate PCL output. JetPCL is included
in the Company's JetSuite software, providing PCL capability for DOS-based
printing on MFPs. JetPCL supports PCL versions 4, 5 and 5E and is available on
the following platforms: DOS, DOS Extender, OS/2, NetWare NLM, Microsoft
Windows 3.1, Microsoft Windows 95, Microsoft Windows NT and major UNIX
platforms.
TECHNOLOGY
Embedded System Technology. JetFax's third generation embedded system
technology is based on the Company's application specific integrated circuit
("ASIC") semiconductor designs integrated with a Motorola 680X0
microprocessor. The specialized ASICs perform most of the heavy computational
tasks, allowing the single 680X0 microprocessor to drive the embedded system
and service all of the functions--printing, faxing, copying and scanning--
required by a MFP. The ASICs perform a variety of imaging functions and
provide high-speed data paths for large image data files that are quickly
moving through the various processes in the system. The ASIC imaging functions
include error diffusion scanning, edge enhancement, background compensation,
scaling and print smoothing. A high-speed image bus and numerous direct memory
access (DMA) channels are also provided by the ASICs to optimize system
performance and provide easy access to a specialized compression/decompression
imaging processor. The Company believes it has developed an economical
hardware design with enough modularity built in to support a range of products
and speeds, including such features as high speed 33.6 Kbps modems, quick
scanning of under three seconds per page and extensive battery-protected
memory.
The firmware in JetFax's embedded system is centered on the Company's task-
swapping, real-time operating system. The operating system rotates among the
various functions such as printing, faxing, copying or
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scanning, allocating enough processing time for each task to prevent any
significant performance deterioration when swapping among other tasks. The
majority of firmware in the Company's embedded system, including the operating
system, is written in assembly code, which the Company believes provides
greater efficiency and maximum use of available processing power. The Company
constantly evaluates the level of assembly coding used in its systems and
incorporates higher-level languages in those areas where the use of such
languages may result in greater efficiencies.
Software Technology. The foundation of JetSuite, the Company's primary
software product, is its portable document technology which replicates
documents for storage, transmission and viewing. JetSuite portable documents
use a highly compressed print-imaging format containing a combination of text,
fonts, color, graphic elements (such as lines and circles) and bitmaps. This
portable document technology allows a single document data base to handle both
hard copy images from scanned or faxed documents and electronically created
documents. JetSuite portable documents (.JSD files) can easily be shared with
others by using a freely distributable compact version of the JetSuite viewer
that combines with a .JSD file to create a self-viewing document. Self-viewing
documents can be transmitted to other PC users through standard e-mail without
requiring the recipient to have a particular viewer or software application.
JetSuite integrates with leading e-mail applications to allow users to e-mail
any document displayed on the desktop by dragging and dropping the document to
the installed e-mail application icon.
JetSuite also provides a range of imaging functionality for fast viewing,
zooming and panning, as well as document markup and cleanup functionality. The
JetSuite scan function includes support of the industry standard TWAIN
interface, allowing users to scan documents directly to other scanning
applications. In its fax application, JetSuite includes full functionality for
both sending and receiving faxes, a phone book for managing names, addresses,
phone numbers and fax groups and an inbox and outbox for managing faxes.
JetSuite also includes integrated third party OCR technology, which allows
users to convert scanned text documents to editable text files in a variety of
different word processor and spreadsheet formats.
CUSTOMERS
The Company's customers include office equipment dealers and distributors
who resell the Company's branded MFPs, options and consumables as well as OEMs
that license the Company's embedded system technology and software and
manufacture and distribute MFPs.
JetFax Branded Products. In the United States and Canada, the Company
distributes JetFax branded products, options and consumables through office
equipment dealers, primarily through IKON and dealers associated with BTA. In
the fiscal year ended March 31, 1996 and the nine months ended December 31,
1996, revenues recorded by the Company from dealers associated with IKON
represented 13% and 21%, respectively, of the Company's total revenues. The
Company also distributes its products through regional distributors. As of
December 31, 1996, the Company had approximately 200 dealer sales locations in
the United States and Canada.
OEM Relationships and JetSuite Software. The Company receives license fees
and development fees for the Company's embedded system technology and desktop
software from a number of manufacturers of MFPs. JetFax currently licenses
embedded system technology or desktop software to 25 companies and has OEM
relationships with Hewlett-Packard, Oki Data, Samsung, Xerox and Intel.
Hewlett-Packard Company. In March 1997, the Company entered into a
development and license agreement with Hewlett-Packard for the inclusion of
the JetFax embedded system technology and JetSuite software in a Hewlett-
Packard product which is currently under development.
Oki Data Corporation. In September 1996, the Company entered into a license
agreement with Oki Data for the inclusion of JetSuite software with a number
of Oki Data MFPs which are currently under development.
Samsung Electronics Corporation. In June 1995, the Company entered into a
development agreement with Samsung for the use of the Company's third
generation embedded system technology in a new laser multifunction product.
This product which will originally be marketed by Danka Corporation in the
United States, was announced in February 1997 as the dex 855.
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Xerox Corporation. JetFax began developing MFPs for Xerox in 1993, resulting
in the launch of the Xerox 3006 in November 1994 as the industry's first
inkjet 4-in-1 (print, fax, copy and scan) multifunction product. The Company
designed the complete mechanical enclosure of the Xerox 3006 in addition to
licensing the embedded system technology and software drivers for Xerox's
manufacture. The Xerox 3006 was launched in more than 30 countries and
continues to be sold through both Xerox direct sales forces and dealers in
both Europe and the United States. Subsequent to this development, JetFax
delivered a modified version of its embedded system technology to Xerox for
use in the Xerox WorkCenter 250, a retail MFP launched in October 1995
targeted at the SOHO market. The WorkCenter 250 received numerous industry
awards, including PC Magazine's "Best of 1995," Imaging Magazine's "Product of
the Year" for 1995, Home PC magazine's "Editor's Choice" in April 1996 and
Windows Magazine's "Win 100" Best Product in 1996.
Intel Corporation. The Company licenses its portable document software
technologies to Intel Corporation. Pursuant to the license agreement entered
into in 1994, Intel utilizes the Company's portable document technology in
Intel's Proshare video-conferencing system. This technology enables video-
conference users to capture and share documents on the screen during a video
conference call.
For a discussion of certain risks relating to the Company's reliance on its
OEMs, dealers and distributors, see "Risk Factors--Dependence on Dealers and
Distributors" and "--Dependence on OEMs."
SALES AND MARKETING
The Company markets and sells its products worldwide to OEMs, dealers and
distributors. The Company maintains separate sales forces for its branded
products and OEM/licensing businesses, and its marketing department supports
all aspects of the Company's worldwide business. As of March 1, 1997, the
sales and the marketing department (including order entry, technology support
and customer service personnel) consisted of 24 employees and contractors.
OEM Relationships. The Company licenses its embedded system technology,
JetSuite software and JetPCL software to OEMs. The Company continues to
enhance its relationships with existing OEMs and seeks to obtain new OEM
customers through dedicated account management and marketing programs. The
Company works closely with OEM accounts to define product requirements, create
development plans and manage development programs. The marketing group
promotes JetFax as a leading provider to OEMs of MFP solutions through a
combination of public relations and press coverage, exhibits and presentations
at trade shows, product brochures and other marketing promotions.
JetFax Branded Products. The Company's branded products are primarily sold
in the United States through office equipment dealers. The Company's sales
force provides dealer training programs, sales incentive programs which
include cash incentives, group trips, volume discounts and market development
funds. Marketing activities to promote JetFax branded products include direct
mail, print advertising and an ongoing public relations program.
JetSuite Software. The Company anticipates releasing JetSuite with several
OEM products in the second quarter of 1997, and the Company's software
marketing strategy is to license JetSuite software for bundling with multiple
OEM products. In addition, the Company intends to promote JetSuite upgrades
and add-on software products in a number of ways, including in-box flyers,
software installation and reminder screens, mailings to registered users,
website advertisements and co-promotions with OEMs.
The Company's international sales efforts are focused on Western Europe,
Australia and New Zealand. The Company's branded products are sold
internationally through office equipment distributors in Australia, Canada,
Germany, the Netherlands, New Zealand, Scandinavia, Switzerland and the United
Kingdom. The Company also sells directly to office equipment dealers in
Germany and the United Kingdom. The Company has sales, service or support
personnel located in Germany, the Netherlands, Ireland and the United Kingdom.
International marketing efforts are focused on providing country specific
marketing materials, sales incentive programs for dealers and participation in
trade shows.
37
<PAGE>
RESEARCH AND DEVELOPMENT
JetFax's principal research and development activities are located at the
Company's headquarters in Menlo Park, California and at its software
applications division located in Santa Barbara, California. As of March 1,
1997, the Company's research and development department consisted of 25
employees. The primary activities of these employees are new product
development, enhancement of existing products, product testing and technical
documentation.
The Company's research and development efforts focus on ongoing development
of both the Company's MFP embedded system technology and desktop software. The
Company is in the process of developing future MFPs with both improved feature
sets and reduced manufacturing costs. These improvements are expected to
include increased printing speed, additional base memory, higher speed
scanning, simpler PC connectivity and advanced compression algorithms that
will decrease fax transmission cost while increasing memory storage. In the
second half of 1997, the Company intends to begin commercial shipment of its
new branded MFP, which will include JetSuite software. The Company believes
that its branded product development efforts provide the Company with a
competitive advantage for its embedded system technology and software by
defining the needs for new products, guiding future enhancements and testing
new implementations. By introducing advanced new features in the corporate
market, the Company believes that it is able to maintain its technology lead
while further refining such features before introducing them to its OEMs. See
"Risk Factors--Risks Associated with Product Development and Introduction;
Product Delays."
COMPETITION
The market for MFPs and related technology and software is highly
competitive and characterized by continuous pressure to enhance performance,
to introduce new features and to accelerate the release of new products. The
Company's branded products compete primarily with the dominant vendors in the
fax market, all of whom have substantially greater resources than the Company
and include, among others, Canon Inc., Panasonic, a division of Matsushita
Electrical Industrial Co., Ltd., Pitney Bowes Inc., Ricoh Co. Ltd., Sharp
Electronics Corporation and Xerox. The Company also competes on the basis of
vendor name and recognition, technology and software expertise, product
functionality, development time and price.
The Company's technology, development services and software primarily
compete with solutions developed internally by OEMs. Virtually all of the
Company's OEMs have significant investments in their existing solutions and
have the substantial resources necessary to enhance existing products and to
develop future products. These OEMs have or may develop competing
multifunction technologies and software which may be implemented into their
products, thereby replacing the Company's proposed or current technologies,
eliminating a need for the Company's services and products to these OEMs. The
Company also competes with technologies, software and development services
provided in the MFP market by other systems and software suppliers to OEMs.
With respect to MFP embedded system technologies, the Company competes with,
among others, Peerless Systems Corporation, Personal Computer Products, Inc.
and Xionics Document Technologies, Inc. With respect to desktop software, the
Company competes with, among others, Caere Corporation, Simplify Development
Corporation, Smith Micro Software, Inc., Visioneer Inc., Wordcraft
International and Xerox.
As the MFP market continues to develop, the Company expects that competition
and pricing pressures will increase from OEMs, existing competitors and other
companies that may enter the Company's existing or future markets with similar
or substitute products or technologies. Software solutions may also be
introduced by competitors that are less costly or provide better performance
or functionality. The Company anticipates increasing competition for its MFPs,
technologies and software under development. Most of the Company's existing
competitors, many of its potential competitors and all of the Company's OEMs
have substantially greater financial, technical, marketing and sales resources
than the Company. In the event that price competition increases, competitive
pressures could cause the Company to reduce the price of its branded products,
to reduce the amount of royalties received on new licenses and to reduce the
fees for its development services in order to maintain existing business and
generate additional product sales and license and development revenue, which
could reduce profit margins and result in losses and a decrease in market
share. No assurances can be given as to
38
<PAGE>
the ability of the Company to compete favorably with the internal development
capabilities of its current and prospective OEM customers or with other third-
party vendors, and the inability to do so would have a material adverse effect
on the Company's business, financial condition and results of operations.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company's success is heavily dependent upon its proprietary technology.
To protect its proprietary rights, the Company relies on a combination of
copyright, trade secret and trademark laws and nondisclosure and other
contractual restrictions. The Company has no patents or patent applications
pending. As part of its confidentiality procedures, the Company generally
enters into nondisclosure agreements with its employees, consultants, OEMs and
strategic partners and limits access to and distribution of its designs,
software and other proprietary information. Despite these efforts, the Company
may be unable to effectively protect its proprietary rights and, in any event,
enforcement of the Company's proprietary rights may be expensive. The
Company's source code also is protected as a trade secret. However, the
Company from time to time licenses portions of its source code and designs to
OEMs and also places such source code and designs in escrow to be released to
OEMs in certain circumstances, which subjects the Company to the risk of
unauthorized use or misappropriation despite the contractual terms restricting
disclosure. In addition, it may be possible for unauthorized third parties to
copy the Company's products or to reverse engineer or obtain and use the
Company's proprietary information. Further, the laws of some foreign countries
do not protect the Company's proprietary rights to the same extent as do the
laws of the United States. There can be no assurance that the Company's means
of protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.
As the number of patents, copyrights, trademarks and other intellectual
property rights in the Company's industry increases, products based on the
Company's technology increasingly may become the subject of infringement
claims. The Company has in the past received communications from third parties
asserting that the Company's trademarks or products infringe the proprietary
rights of third parties or seeking indemnification against such infringement.
The Company is generally required to agree to indemnify its OEMs from third
party claims asserting such infringement. There can be no assurance that third
parties will not assert infringement claims against the Company or its OEMs in
the future. Any such claims, regardless of merit, could be time consuming,
result in costly litigation, cause product shipment delays or require the
Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company, or at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the Company may initiate claims or litigation against third parties
for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Litigation to determine the
validity of any claims, whether or not such litigation is determined in favor
of the Company, could result in significant expense to the Company and divert
the efforts of the Company's technical and management personnel from daily
operations. In addition, the Company may lack sufficient resources to initiate
a meritorious claim. In the event of an adverse ruling in any litigation
regarding intellectual property, the Company may be required to pay
substantial damages, discontinue the use and sale of infringing products,
expend significant resources to develop non-infringing technology or obtain
licenses to infringing or substituted technology. The failure of the Company
to develop, or license on acceptable terms, a substitute technology could have
a material adverse affect on the Company's business, financial condition and
results of operations.
MANUFACTURING AND OPERATIONS
The Company manufactures its JetFax branded products for distribution to the
corporate segment of the MFP market. The Company generally outsources
materials from suppliers and performs final assembly and testing at its main
facility in Menlo Park, California. As of March 1, 1997, the Company's
manufacturing and operations department consisted of 24 employees. See "Risk
Factors--Dependence on Single Manufacturing Facility; Risks Related to
Potential Disruption."
39
<PAGE>
The JetFax M5 is the Company's current branded MFP. The major components of
the JetFax M5 are the print engine, the scanner, the user interface and the
multifunction embedded system technology and modem electronics, all of which
are outsourced. The JetFax embedded system and modem assemblies are built to
specification by an external printer circuit board assembler. Final product
assembly at the Company's headquarters consists of integrating the components
on a progressive assembly line. Each JetFax M5 is tested at the Company by an
internal self test for a period of not less than 24 hours, followed by a
series of functional and margin tests to help ensure reliable performance at
the customer's site. The Company's final assembly and test facilities have
recently been improved to allow for better material flow, process definition
and production efficiency.
The Company relies on various suppliers of components for its products. Many
of these components are standard and generally available from multiple
sources. However, there can be no assurance that alternative sources of such
components will be available at acceptable prices or in a timely manner. Any
shortage or interruption in the supply of any of the components used in the
Company's products, or the inability of the Company to procure these
components from alternate sources on acceptable terms, would have a material
adverse effect on the Company's business and financial condition and results
of operations. The Company generally buys components under purchase orders and
does not have long-term agreements with its suppliers. Although alternate
suppliers may be readily available for some of these components, for other
components it could take an undetermined amount of time to qualify a
replacement supplier and order and receive replacement components. The Company
does not always maintain sufficient inventory to allow it to fill customer
orders without interruption during the time that would be required to obtain
an adequate supply of single sourced components. Although the Company believes
it could develop other sources for single source components, no alternative
source currently exists and the process could take several months or longer.
Therefore, any interruption in the supply of such components could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Many of the components used in the Company's products are purchased from
suppliers located outside the United States. Foreign manufacturing facilities
are subject to risk of changes in governmental policies, imposition of tariffs
and import restrictions and other factors beyond the Company's control. There
can be no assurance that United States or foreign trading policies will not
restrict the availability of components or increase their cost. Any
significant increase in component prices or decrease in component availability
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Certain components used in the Company's products are available only from
one source. The Company is dependent on Oki America, as the supplier of major
components, including the printer engine, of the JetFax M5. Oki America is
also a competitor of the Company. The Company is also dependent on AMI to
provide unique ASICs incorporating the Company's imaging and logic circuitry,
Motorola to provide microprocessors, Pixel, to provide a specialized imaging
processor and Rockwell to provide modem chips. If Oki America, AMI, Motorola,
Pixel or Rockwell were to limit or reduce the sale of such components to the
Company, or if such suppliers were to experience financial difficulties or
other problems which prevented them from supplying the Company with the
necessary components, it would have a material adverse effect on the Company's
business, financial condition and results of operations. These sole source
providers are subject to quality and performance issues, materials shortages,
excess demand, reduction in capacity and/or other factors that may disrupt the
flow of goods to the Company or the Company's customers and thereby adversely
affect the Company's business and customer relationships. Any disruption in
the Company's sources of supply could limit or delay production or shipment of
products incorporating the Company's technology, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Manufacturing and Operations."
The Company recently installed and implemented a new management information
system and used the accounting applications of the system for the first time
in connection with the December 31, 1996 monthly accounting close. The Company
has also begun using the manufacturing applications for inventory control and
product ordering. However, further improvements in these systems are needed
and will continue to be needed in
40
<PAGE>
order to manage expected growth in revenue and assets. There is no guarantee
that the implementation of the management information system will contribute
to the Company's ability to manage its growth and, furthermore, any problems
encountered as a result of the implementation of such system, including
additional modules and features, could adversely affect the Company's
operations.
EMPLOYEES
As of March 1, 1997, the Company had 77 employees and 5 full-time equivalent
contractors. Of these persons, 25 were in research and development, 24 were in
sales and marketing, 24 were in manufacturing and operations and 9 were in
finance and administration. There is no labor union representation for any of
the Company's employees. The Company has never experienced a work stoppage,
and relations with employees are considered good. The Company hires contract
employees on an as-needed basis to meet temporary or specific needs.
PROPERTIES
The Company's headquarters and principal operations are in leased facilities
totaling approximately 38,000 square feet in Menlo Park, California, and the
lease for this facility expires in February 1998. The Company has a month-to-
month lease for approximately 2,400 square feet in Santa Barbara, California
for its software application organization. The Company believes that suitable
additional or alternative space at commercially reasonable terms will be
available in the future as required.
LITIGATION
To the Company's knowledge, there are no pending legal proceedings which are
material to the Company or its business to which it is a party or to which any
of its properties is subject.
41
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of March 1, 1997 with
respect to the executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Rudy Prince............. 39 President, Chief Executive Officer
and Chairman of the Board
Michael Crandell........ 41 Vice President of Software
John H. Harris.......... 41 Vice President of International Operations
Hansgregory C. Hartmann. 39 Vice President of Manufacturing
Allen K. Jones.......... 49 Vice President of Finance, Chief Financial Officer
and Secretary
Lon B. Radin............ 46 Vice President of Engineering and Director
Thomas B. Akin (1) (2).. 44 Director
Douglas Y. Bech (1) (2). 51 Director
Steven J. Carnevale (2). 41 Director
Chung Chiu.............. 63 Director
Shelley A. Harrison (1). 54 Director
Edward R. Prince, Jr.
(1)..................... 67 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
RUDY PRINCE co-founded the Company and has served as its President and Chief
Executive Officer and a member of the Board of Directors since August 1988.
Mr. Prince was appointed as the Chairman of the Board of Directors in October
1996. From June 1985 to February 1988, Mr. Prince was the Vice President of
Sales and Marketing at Entropic Speech, Inc., a manufacturer of
telecommunications products. Prior to that, Mr. Prince served as Sales Manager
with Digicon, Inc., a geophysical contractor ("Digicon"), from March 1980 to
June 1985. From August 1978 to March 1980, Mr. Prince served as a marketing
representative with the Data Processing Division of International Business
Machines Corporation. Mr. Prince holds a B.S. in Mechanical Engineering from
the University of Texas at Austin. Mr. Prince is the son of Edward R. Prince,
Jr., a director of the Company.
MICHAEL CRANDELL joined the Company in July 1996 as the Vice President of
Software. From January 1993 to July 1996, Mr. Crandell served as the President
of the Crandell Group, the assets of which were purchased by the Company in
July 1996. Prior to that, Mr. Crandell served as the President of Crandell
Development Corporation, a software development company from November 1984 to
December 1992. From 1981 to November 1984, Mr. Crandell worked as a Software
Engineer with Compucorp, Inc. Mr. Crandell holds a B.A. in Religious Studies
from Stanford University.
JOHN H. HARRIS joined the Company in March 1990 as the Vice President of
International Operations. From July 1987 to February 1990, Mr. Harris served
in various sales management positions with Landmark Graphics Corporation, a
supplier of graphics workstations for the oil industry, most recently as the
Regional Sales Director. From May 1981 to June 1987, Mr. Harris served as the
North American Sales Manager and Far East Sales manager for Digicon. Mr.
Harris holds a B.A. in Marketing from the University of Houston.
HANSGREGORY C. HARTMANN joined the Company in August 1995 as the Vice
President of Manufacturing. From June 1980 to August 1995, Mr. Hartmann held
various positions with Hewlett-Packard. From November 1992 to August 1995, he
was the Manager of the Channel Development and Information Services for U.S.
Channel Marketing in the Computer Products Organization of Hewlett-Packard
and, from September 1991 to
42
<PAGE>
November 1992, he was the Business Development Manager for the North American
Distribution Operation of Hewlett-Packard. From July 1985 to September 1991,
Mr. Hartmann served as the Engineering Manager for the Personal Computer
Distribution Operation of Hewlett-Packard. Mr. Hartmann holds a B.S. in
Electrical Engineering from the New Jersey Institute of Technology and a M.S.
in Manufacturing Systems Engineering from Stanford University.
ALLEN K. JONES joined the Company in May 1996 as the Vice President of
Finance, Chief Financial Officer and Secretary. From January 1976 to January
1996, Mr. Jones served in various positions with Varian Associates, Inc., a
diversified electronics company, most recently as the Vice President and
Controller from January 1995 to January 1996 and prior to that as the Vice
President and Treasurer from May 1990 to December 1994. Mr. Jones holds a B.S.
in Chemical Engineering from Cornell University and a M.B.A. from the Wharton
School of Finance at the University of Pennsylvania.
LON B. RADIN co-founded the Company and serves as the Vice President of
Engineering and a member of the Board of Directors of the Company. Dr. Radin
also served as the Chairman of the Board of Directors from August 1988 to
October 1996. From 1986 to 1988, Dr. Radin was the sole proprietor of L-Tel
Laboratories, a developer of digital fax telephone devices. From 1981 to 1986,
Dr. Radin served in various positions, most recently as the Director of
Software and Manager of Research with Time & Space Processing, Inc., a
software developer of telecommunications products for the defense industry.
Prior to that Dr. Radin served as a software services consultant for The
Systems Group, an engineering consulting firm from 1976 to 1981. Dr. Radin
holds a B.S. in Physics and Mathematics from the University of Michigan and a
Ph.D. and an M.A. in Mathematics from the University of California at
Berkeley.
THOMAS B. AKIN has served as a director of the Company since July 1996.
Since October 1995, Mr. Akin has served as a Managing General Partner of
Talkot Partners II, LLC, an investment firm. From November 1981 to February
1994, Mr. Akin served in various capacities, most recently as the Managing
Director of Western Regional Sales for Merrill Lynch & Co. Mr. Akin was on a
leave of absence from Merrill Lynch & Co. from February 1994 to April 1997.
Mr. Akin holds a B.A. in Biology from the University of California at Santa
Cruz and an M.B.A. from the University of California at Los Angeles.
DOUGLAS Y. BECH has served as a director of the Company since August 1988.
Mr. Bech was a founding partner of and, since August 1994 has served as a
Managing Director of Raintree Capital Company, LLC, a merchant banking firm.
In addition, since October 1994, Mr. Bech has been a partner of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., a law firm. From May 1993 through July 1994,
Mr. Bech was a partner of Gardere & Wynne, L.L.P., a law firm. From September
1970 to May 1993, Mr. Bech was associated with or a partner of the law firm
Andrews & Kurth L.L.P. Mr. Bech holds a B.A. in Political Science from Baylor
University and a J.D. from The University of Texas Law School. Mr. Bech is a
director of Wainoco Oil Corporation, Pride Companies, L.P. and several private
companies.
STEVEN J. CARNEVALE has served as a director of the Company since July 1996.
In July 1996, Mr. Carnevale became a General Partner in Talkot Capital, LLC,
an investment firm. From August 1992 to July 1996, Mr. Carnevale was a General
Partner of Endeavor Capital Management, an investment firm. From November 1990
to August 1992, Mr. Carnevale was the owner and CEO of Orca Industries, a
specialty computer manufacturer. Mr. Carnevale holds a B.S. in Engineering
from the University of Michigan.
CHUNG CHIU has served as a director of the Company since August 1991. Since
October 1978, Mr. Chiu has served as the Managing Director of Ailicec
International Enterprises Limited, a textile, electronics and machineries
conglomerate with operations largely in the Peoples Republic of China.
SHELLEY A. HARRISON has served as a director of the Company since February
1995. Since 1987, Dr. Harrison has been a Managing General Partner of the high
technology venture capital fund, Poly Ventures, Limited Partnership and
Chairman and Chief Executive Officer of Spacehab Inc., a developer of
pressurized laboratory and logistics modules. Dr. Harrison served as President
of Harrison Enterprises, Inc., a technology investment consulting firm, from
1982 to 1987. Prior to that Dr. Harrison served as Chairman and Chief
43
<PAGE>
Executive Officer of Symbol Technologies, Inc., a manufacturer of bar code
laser scanners from 1973 to 1982. Dr. Harrison holds a B.S. in Electrical
Engineering from New York University and a M.S. and Ph.D. in Electrophysics
from Polytechnic University. Dr. Harrison is a trustee of Polytechnic
University and is a director of Spacehab Inc., NetManage Inc. and several
private companies.
EDWARD R. PRINCE, JR. has served as a director of the Company since August
1988. Since August 1994, Mr. Prince has served as the Vice Chairman of Zydeco
Exploration, Inc. and Zydeco Energy, Inc., oil and gas exploration companies.
Prior to that from November 1970 to May 1994, Mr. Prince served in various
capacities, most recently as the Chairman and Chief Executive Officer of
Digicon. Mr. Prince holds a B.S. from the United States Military Academy at
West Point and an M.S. in Applied Mathematics from North Carolina State
College. Mr. Prince is the father of Rudy Prince, the Company's Chairman of
the Board, Chief Executive Officer and President. Mr. Prince is a director of
Geoscience Corporation and Zydeco Energy, Inc.
Currently all directors are elected annually and serve until the next annual
meeting of stockholders or until the election and qualification of their
successors. All executive officers serve at the discretion of the Board of
Directors.
COMPENSATION OF DIRECTORS
The Company's directors currently do not receive any cash compensation for
service on the Board of Directors or any committee thereof, but the non-
employee directors are reimbursed for reasonable expenses incurred in
connection with attendance at Board and committee meetings.
In March 1997, the Company adopted the 1997 Director Option Plan, pursuant
to which the Company's non-employee directors who are directors on the
effective date of this Offering will receive an option to purchase shares of
the Company's Common Stock on the effective date of the Offering and annually
thereafter and each director who becomes a director after this Offering
receives an option to purchase shares of the Company's Common Stock upon
joining as a director of the Company and annually thereafter. See "--Incentive
Stock Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the nine months ended December 31, 1996, Messrs. Akin, Bech and
Harrison and Mr. Edward R. Prince, Jr. served as the Compensation Committee of
the Company's Board of Directors. No interlocking relationship exists between
any member of the Company's Compensation Committee and any other member of the
Company's Board of Directors. Mr. Edward R. Prince, Jr. is the father of Rudy
Prince, the Company's Chairman of the Board, Chief Executive Officer and
President.
44
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
earned by the Company's Chief Executive Officer and each of the Company's
three other most highly compensated executive officers (collectively, the
"Named Executive Officers") during the nine months ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
-------------------- ------------
SECURITIES
UNDERLYING
OPTIONS/
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) SARS (#)
--------------------------- ---------- --------- ------------
<S> <C> <C> <C>
Rudy Prince.................................. $ 102,995 -- 100,000
President, Chief Executive Officer and
Chairman of the Board
Lon B. Radin................................. 92,604 -- 100,000
Vice President of Engineering
John H. Harris............................... 81,641 -- 50,000
Vice President of International Operations
Hansgregory C. Hartmann...................... 76,974 $ 5,000 60,000
Vice President of Manufacturing
</TABLE>
- --------
(1) The salaries and bonus set forth in the table are given for the fiscal
year ended December 31, 1996, which is a nine-month period. For the
twelve-month period ended December 31, 1996, the salaries earned by each
Named Executive Officer were as follows: Rudy Prince, $129,245; John H.
Harris, $105,489; Hansgregory C. Hartmann, $101,974 and Lon B. Radin,
$118,854.
45
<PAGE>
OPTION GRANTS, EXERCISES AND HOLDINGS
Option Grants. The following table sets forth certain information regarding
options granted to the Named Executive Officers during the nine months ended
December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM (4)
OPTIONS FISCAL YEAR PRICE EXPIRATION ------------------------
NAME GRANTED (#) (1) ($/SHARE)(2) DATE (3) 5%($) 10%($)
---- ----------- ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rudy Prince (5)......... 100,000 9.9% $ 0.50 10/03/06 $ 31,445 $ 79,687
Lon B. Radin (5)........ 100,000 9.9 0.50 10/03/06 31,445 79,687
John H. Harris (5)...... 50,000 5.0 0.30 04/25/06 9,433 23,906
Hansgregory C. Hartmann
(5) ................... 50,000 5.0 0.30 04/25/06 9,433 23,906
10,000 1.0 1.25 10/31/06 7,861 19,922
</TABLE>
- --------
(1) The Company granted options to employees to purchase 1,009,000 shares of
Common Stock during the nine months ended December 31, 1996.
(2) The exercise price may be paid in cash, check, promissory note or shares
of the Company's Common Stock through a cashless exercise procedure
involving same-day sale of the purchased shares or by any combination of
such methods.
(3) Options may terminate before their expiration date if the optionee's
status as an employee or consultant is terminated or upon optionees'
death.
(4) In accordance with the rules of the Securities and Exchange Commission
(the "Commission"), shown are the gains or "option spreads" that would
exist for the respective options granted. These gains are based on the
assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the option was granted over the full option term. These
assumed annual compound rates of stock price appreciation are mandated by
the rules of the Commission and do not represent the Company's estimate or
projection of future Common Stock prices.
(5) Each option vests at the rate of 1/4th of the shares subject to the option
at the end of twelve months and 1/48th of the shares subject to the option
at the end of each monthly period thereafter as long as such optionee's
employment has not terminated.
46
<PAGE>
Option Exercises and Holdings. The following table sets forth certain
information regarding options held as of December 31, 1996 by the Named
Executive Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END ($)(1)
------------------------------ -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Rudy Prince............. 0 100,000 0 $ 350,000
Lon B. Radin............ 0 100,000 0 350,000
John H. Harris.......... 0 50,000 0 185,000
Hansgregory C. Hartmann. 16,666 43,334 61,664 150,836
</TABLE>
- --------
(1) Calculated based on fair market value of the Common Stock of $4.00 per
share, less the exercise price. The fair market value of the Common Stock
was determined by the Board of Directors to be $4.00 per share on January
22, 1997, which is the first date following December 31, 1996 on which
such a determination was made by the Board of Directors.
There were no option exercises by any of the Named Executive Officers during
the nine months ended December 31, 1996.
EMPLOYMENT AGREEMENT
In July 1996, in connection with the Crandell Acquisition, the Company and
Michael Crandell entered into a two-year employment agreement whereby Mr.
Crandell serves as Vice President of Software of the Company. Pursuant to such
agreement, Mr. Crandell receives a salary of $110,000 annually and was granted
an option to purchase 187,500 shares of Common Stock at $0.30 per share under
the Company's 1995 Plan. One-fourth of the shares covered by this option vest
on July 31, 1997, and the balance vest at the rate of 1/48th per month. Mr.
Crandell's employment can be terminated if there is any material breach or
default by the Crandell Group of any term or condition of the Crandell Asset
Purchase Agreement or any material breach by the Company of certain of the
material covenants set forth in such agreement. The employment agreement
contains a five-year non-compete provision.
INCENTIVE STOCK PLANS
1989 Stock Option Plan. The Company's 1989 Stock Option Plan (the "1989
Plan") was adopted by the Board of Directors in May 1989 and amended in May
1990 and July 1991 and approved by the Company's stockholders in August 1990
and August 1991. A total of 300,000 shares of Common Stock were reserved for
issuance under the 1989 Plan. By its terms the 1989 Plan terminated in May
1992. As of March 1, 1997, 164,599 shares had been issued upon the exercise of
stock options granted under the 1989 Plan and 63,910 shares were subject to
outstanding options. Options granted under the 1989 Plan generally vest over a
four year period of time with 1/4 of the shares subject to the option vesting
one year after the vesting commencement date and 1/48th of the shares subject
to the option vesting monthly thereafter, and must be exercised within five
years of the date of grant.
1995 Stock Plan. The Company's 1995 Stock Plan (the "1995 Plan") was adopted
by the Board of Directors in December 1995 and amended in September 1996 and
approved by the Company's stockholders in October 1996. The 1995 Plan was
further amended in February 1997 and March 1997 by the Board of Directors and
such amendments are subject to stockholder approval. A total of 3,400,000
shares of Common Stock have been reserved for issuance under the 1995 Plan. As
of March 1, 1997, no shares had been issued upon the exercise of stock options
granted under the 1995 Plan, 1,015,850 shares were subject to outstanding
options and 2,384,850 shares remained available for future grant. No stock
purchase rights are outstanding under the 1995
47
<PAGE>
Plan. The 1995 Plan is presently administered by a committee of at least two
members of the Board of Directors, and such committee may consist of the
entire Board. Following this Offering, the committee administering the 1995
Plan must consist of at least two outside directors. Under the 1995 Plan,
options and stock purchase rights may be granted to officers and employees,
including directors who are employees or consultants. Only employees may
receive "incentive stock options," which are intended to qualify for certain
favorable tax treatment. The exercise price of incentive stock options under
the 1995 Plan must at least equal the fair market value of the Common Stock on
the date of grant. The exercise price of options granted to a ten-percent
stockholder must be at least 110% of the fair market value on the date of
grant and would be non-statutory stock options. Options granted under the 1995
Plan generally vest over a four year period, with 1/4 of the shares subject to
the option vesting one year after the vesting commencement date and 1/48th of
the shares subject to the option vesting monthly thereafter. Options granted
under the 1995 Plan must be exercised within ten years of the date of grant
(five years in the case of an incentive stock option granted to a ten-percent
stockholder).
Stock purchase rights may be granted alone or in tandem with options under
the 1995 Plan and a purchaser shall have not more than 120 days in which to
accept the offer. The purchase price of a stock purchase right shall be no
less than 85% of fair market value on the date of grant (100% of fair market
value in the case of stock purchase rights granted to a ten-percent
stockholder). In the event of a proposed dissolution or liquidation of the
Company or a merger in which the successor corporation does not agree to
assume the options or substitute equivalent options then the Board shall give
optionees and purchasers at least 15 days prior notice of the proposed action.
To the extent such options or stock purchase rights have not been exercised
the options and stock purchase rights will terminate immediately prior to the
consummation of such proposed action. The Board may amend or modify the 1995
Plan at any time. The 1995 Plan will terminate in December 2005, unless
terminated sooner by the Board.
1997 Director Option Plan. The Company's 1997 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in March 1997 and is
subject to stockholder approval. A total of 270,000 shares of Common Stock
have been authorized for issuance under the Director Plan. Each nonemployee
director who is a director on the date of this Prospectus and each director
who becomes a director after the date of this Prospectus will automatically be
granted a nonqualified option to purchase 20,000 shares of Common Stock on the
date on which such person first becomes a director (an "Initial Grant") and
5,000 shares of Common Stock on the date of the annual meeting of stockholders
each year thereafter (an "Annual Grant"). The exercise price of each of these
options will be equal to the fair market value of the Common Stock on the date
of grant. One-fourth of each Initial Grant will vest on each year over a four-
year period and the Annual Grants will vest in full on the four year
anniversary of the date of grant. All such options will expire ten years from
the date of grant unless terminated sooner pursuant to the provisions of the
Director Plan. The Director Plan will terminate in March 2007 unless
terminated earlier in accordance with the provisions of the Director Plan.
1997 Employee Stock Purchase Plan. The Company's 1997 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
February 1997 and is subject to stockholder approval. A total of 500,000
shares of Common Stock have been authorized for issuance under the Purchase
Plan. No shares have been issued under the Purchase Plan. The Purchase Plan,
which is intended to qualify under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), will be administered by the Board of Directors
of the Company or by a committee appointed by the Board of Directors. Under
the Purchase Plan, the Company will withhold a specified percentage (not to
exceed 10%) of each salary payment to participating employees over certain
offering periods. Any employee who is currently employed for at least 20 hours
per week and for at least five consecutive months in a calendar year, either
by the Company or by a majority-owned subsidiary of the Company, will be
eligible to participate in the Purchase Plan. As of March 1, 1997,
approximately 58 employees met the Purchase Plan's eligibility requirements.
Unless the Board of Directors or its committee determines otherwise, each
offering period will run for twelve months and will be divided into two
consecutive purchase periods of approximately six months. The first offering
period and the first purchase period will commence on the date of this
Prospectus and continue until December 31, 1997. New twelve-month offering
periods will commence every six months thereafter. In the event of a change in
control of the Company,
48
<PAGE>
including a merger or sale of substantially all of the Company's assets, each
option under the Purchase Plan may be assumed by any successor corporation, or
the offering periods then in progress may be shortened and all options
automatically exercised. The price at which Common Stock will be purchased
under the Purchase Plan is equal to 85% of the fair market value of the Common
Stock on the first day of the applicable offering period or the last day of
the applicable purchase period, whichever is lower. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the
Company. The maximum number of shares that a participant may purchase on the
last day of any purchase period is determined by dividing the payroll
deductions accumulated during the purchase period by the purchase price.
However, no person may purchase shares under the Purchase Plan to the extent
such person would own 5% or more of the total combined value or voting power
of all classes of the capital stock of the Company or of any of its
subsidiaries, or to the extent that such person's rights to purchase stock
under all employee stock purchase plans would accrue at a rate that exceeds
$25,000 worth of stock for any calendar year.
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions.
In addition, the Bylaws of the Company provide that the Company is required to
indemnify its officers and directors under certain circumstances, including
those circumstances in which indemnification would otherwise be discretionary,
and the Company is required to advance expenses to its officers and directors
as incurred in connection with proceedings against them for which they may be
indemnified. The Company has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors
or officers (other than liabilities arising from willful misconduct of a
culpable nature), to advance expenses incurred as a result of any proceeding
against them as to which they could be indemnified and to obtain directors'
and officers' insurance if available on reasonable terms. At present, the
Company is not aware of any pending or threatened litigation or proceeding
involving a director, officer, employee or agent of the Company in which
indemnification would be required or permitted. The Company believes that its
charter provisions and indemnification agreements are necessary to attract and
retain qualified persons as directors and officers.
49
<PAGE>
CERTAIN TRANSACTIONS
In March 1997, the Company entered into an agreement with Rudy Prince,
President, Chief Executive Officer and Chairman of the Board of the Company,
and Lon B. Radin, Vice President of Engineering and a director of the Company,
granting each of them piggy-back registration rights with respect to the
shares of the Company's Common Stock held by them.
In connection with the Crandell Acquisition in July 1996, the Company
acquired substantially all of the assets of the Crandell Group in exchange for
a cash payment of $250,000, a non-interest bearing promissory note of the
Company in the amount of $250,000 payable in July 1997 and an agreement to
make certain ongoing royalty payments to the Crandell Group. Payment of the
promissory note and the ongoing royalty payments were secured pursuant to the
terms of a Security Agreement. In addition, the Company entered into
employment agreements with Michael Crandell and Larry Crandell, the principals
of the Crandell Group. The Company also issued options to purchase an
aggregate of 280,000 shares of the Company's Common Stock to certain former
employees of the Crandell Group who were hired by the Company, including
187,500 shares to Michael Crandell and 62,500 shares to Larry Crandell, at an
exercise price of $0.30 per share (the estimated fair market value of the
Company's Common Stock at the grant date), subject to vesting over 4 year
periods (except for a 2 year vesting period as to Larry Crandell). In December
1996, the Company and the Crandell Group entered into an amendment agreement
(the "Amendment Agreement") providing that the obligation of the Company to
make certain ongoing royalty payments would terminate upon the Company's
initial public offering in exchange for a single lump sum payment provided
such offering occurs prior to July 31, 1998. Pursuant to the Amendment
Agreement, the Company issued warrants, exercisable at $1.75 per share (the
estimated fair market value of the Company's Common Stock at the grant date),
to Michael Crandell and to Larry Crandell to purchase 75,000 shares and 25,000
shares of the Company's Common Stock, respectively, such warrants exercisable
upon the effectiveness of the Company's initial public offering. Michael
Crandell is the Company's Vice President of Software.
In March 1996, pursuant to a Series F Convertible Preferred Stock Purchase
Agreement, the Company issued an aggregate of 3,445,690 shares of its Series F
Convertible Preferred Stock for aggregate consideration of $9.5 million at a
purchase price of $2.75 per share to a group of investors, including Talkot
Partners II, LLC ("Talkot Partners") (1,534,545 shares), Poly Ventures II,
L.P. (371,905 shares) and Douglas Y. Bech (10,000 shares). Thomas B. Akin, a
director of the Company, is a Managing Partner of Talkot Partners, a principal
stockholder of the Company. Shelley A. Harrison, a director of the Company, is
a Managing General Partner of Poly Ventures, Limited Partnership the manager
of Poly Ventures II, L.P., and Mr. Bech is a director of the Company.
As of March 1996, the Company issued options, exercisable at $1.72 per
share, to Steven J. Carnevale to purchase 260,265 shares of the Company's
Common Stock and to Thomas B. Akin to purchase 33,472 shares of the Company's
Common Stock, pursuant to the terms of the Company's letter agreement of
December 15, 1993 with Endeavor Capital Management ("Endeavor"), as amended.
Such options, along with a cash finders fee of $459,535, were paid for
services rendered with respect to the Company's Series F Convertible Preferred
Stock financing. From December 1993 until December 1996, Endeavor received
$124,000 for financial consulting services performed for the Company. Mr.
Carnevale, a director of the Company, was a General Partner of Endeavor. Mr.
Akin is a director of the Company.
In March 1996, in order to comply with certain provisions of California law,
the Company made a recision and repurchase offer to all employees and
consultants granted options under the Company's 1989 Stock Plan from and after
May 5, 1992. Such recision and repurchase offer provided that those who
accepted such offer were to receive $0.04 for each option and $0.20 (plus
interest at 7% per annum) for each share rescinded and repurchased. None of
the Company's employees or consultants accepted the rescission and repurchase
offer.
Pursuant to a promissory note dated March 1, 1992, the Company owed Lon B.
Radin, Vice President of Engineering and a director of the Company, the
principal amount of $50,140 for the transfer of certain technology from a
company of which Mr. Radin was a principal. An aggregate of $66,289 in
principal and accrued interest was paid in full by the Company in May 1996.
50
<PAGE>
In December 1994, pursuant to an Inkjet License and Supply Agreement (the
"Inkjet Agreement"), the Company granted certain licenses and sublicenses to
Ailicec (B.V.I.) Limited, an affiliate of Ailicec International Enterprises
Limited ("Ailicec International"), with respect to certain technology
developed by the Company and by Xerox Corporation in connection with an inkjet
product and agreed to supply Ailicec (B.V.I.) Limited with such products and
related components and consumables. Ailicec (B.V.I.) Limited purchased
products, components and consumables from the Company under the Inkjet
Agreement in an aggregate amount of approximately $503,000 during the
Company's fiscal years ended March 31, 1995 and March 31, 1996, and the nine
months ended December 31, 1996. Ailicec International is a principal
stockholder of the Company. Chung Chiu, a director of the Company, is the
Managing Director of Ailicec International.
In August 1994, January 1995 and October 1995, pursuant to a Note Purchase
Agreement, a Security Agreement and an Intercreditor Agreement, the Company
issued its 10% senior secured notes in an aggregate principal amount of $3.0
million (the "Bridge Notes") and warrants to purchase an aggregate of 675,156
shares of Common Stock at $2.15 per share (the "Bridge Warrants") to a group
of investors, including Thomas and Karen Akin ($500,000 in Bridge Notes and
106,511 shares of Bridge Warrants), Poly Ventures II, L.P. ($500,000 in Bridge
Notes and 141,860 shares of Bridge Warrants) and Curtis J. Pabst ($100,000 in
Bridge Notes and 19,069 shares of Bridge Warrants). If not previously
exercised, the Bridge Warrants will automatically net exercise upon the
closing of the Offering. Mr. Akin, a director of the Company, is a Managing
Partner of Talkot Partners, Shelley A. Harrison, a director of the Company, is
a Managing General Partner of Poly Ventures, Limited Partnership, the manager
of Poly Ventures II, L.P., and Mr. Pabst is a Managing Partner of Talkot
Partners. All of the Bridge Notes have been either converted into the
Company's Series F Convertible Preferred Stock or repaid by the Company.
In August 1994, the Company entered into a Purchase and Debt Restructuring
Agreement (the "Restructuring Agreement"), a Security Agreement and an
Intercreditor Agreement with Ailicec International. Ailicec International is a
principal stockholder of the Company. Chung Chiu, a director of the Company,
is the Managing Director of Ailicec International. Under the Restructuring
Agreement, in exchange for the conversion of debt of the Company in the
aggregate principal amount of $2.6 million, the Company issued Ailicec
International 344,350 shares of the Company's Series P Redeemable Preferred
Stock. In addition, a warrant to purchase 388,500 shares of the Company's
Series E Convertible Preferred Stock (the "Series E Warrant") was issued to
Ailicec International pursuant to the Restructuring Agreement. The Series E
Warrant has an exercise price of $2.75 per share and expires on October 4,
1999. The Company's Series P Redeemable Preferred Stock bears 6% cumulative
dividends, may be converted into the Company's Common Stock, at the option of
the holder, upon the closing of the Company's initial public offering at a
rate equal to 75% of the value of a share of Common Stock in such public
offering and, unless so converted, is to be redeemed by the Company (at the
original purchase price plus accrued but unpaid dividends) upon the closing of
such offering. Such Series P Redeemable Preferred Stock will be redeemed by
the Company upon the closing of this Offering for an aggregate amount of
approximately $2.7 million.
In October 1991, pursuant to a Manufacturing Agreement (the "Manufacturing
Agreement"), the Company granted Ailicec International a right of first
refusal with respect to the manufacture and sale of products to the Company
through October 1998, with any payments due Ailicec International subject to a
security agreement. The Company purchased products from Ailicec International
under the Manufacturing Agreement in an aggregate amount of $913,000 during
the Company's fiscal year ended March 31, 1995 and none during the fiscal year
ended March 31, 1996 and the nine months ended December 31, 1996. In February
1997, the Manufacturing Agreement was amended to terminate upon the closing of
the Offering. Ailicec International is a principal stockholder of the Company.
Chung Chiu, a director of the Company, is the Managing Director of Ailicec
International.
The Company has entered into indemnification agreements with its directors
and executive officers. The Company has also entered into certain stock
purchase and subscription agreements with the Selling Stockholders pursuant to
which the Company will indemnify the Selling Stockholders for certain
liabilities and costs incurred in connection with this Offering and the
Selling Stockholders will indemnify the Company and its officers and directors
for certain liabilities incurred in connection with this Offering.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to the Company with respect
to the beneficial ownership of the Company's Common Stock as of March 1, 1997
and as adjusted to reflect the sale of Common Stock offered hereby, for (i)
each person who is known by the Company to own beneficially more than 5% of
the Common Stock, (ii) each of the Company's directors, (iii) each of the
Selling Stockholders, (iv) each Named Executive Officer and (v) all directors
and executive officers as a group.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO SHARES OWNED AFTER
OFFERING (1) TO BE OFFERING (1)
----------------- SOLD IN -----------------
NAME AND ADDRESS (2) NUMBER PERCENT OFFERING NUMBER PERCENT
- -------------------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Thomas B. Akin (3)................. 2,248,213 28.2% -- 2,248,213 21.0%
c/o Talkot Partners II, LLC
2400 Bridgeway, Suite 200
Sausalito, CA 94965
Talkot Partners II, LLC (4)........ 2,125,592 26.8 -- 2,125,592 19.9
2400 Bridgeway, Suite 200
Sausalito, CA 94965
Ailicec International Enterprises
Ltd. (5).......................... 918,732 11.0 -- 918,732 8.3
2nd Floor Kaiser Estate Phase 1 41
Man Yue Street
Hunghom, Kowloon Hong Kong
Chung Chiu (6)..................... 928,732 11.1 -- 928,732 8.4
c/o Ailicec International
Enterprises Ltd.
2nd Floor Kaiser Estate Phase 141
Man Yue Street
Hunghom, Kowloon Hong Kong
Poly Ventures II, Limited
Partnership (7)................... 492,474 6.2 125,000 367,474 3.4
c/o Polytechnic University Office
901 Route 110
Farmingdale, NY 11735
Shelley A. Harrison (8)............ 502,474 6.3 125,000 377,474 3.5
c/o Polytechnic University Office
901 Route 110
Farmingdale, NY 11735
Rudy Prince (9).................... 392,500 4.9 50,000 342,500 3.2
Steven J. Carnevale (10)........... 334,038 4.1 -- 334,038 3.0
Lon B. Radin (11).................. 225,000 2.8 25,000 200,000 1.9
John H. Harris (12)................ 135,833 1.7 15,000 120,833 1.1
Douglas Y. Bech (13)............... 110,407 1.4 20,000 90,407 *
Edward R. Prince, Jr. (14)......... 98,833 1.2 7,500 91,333 *
Hansgregory C. Hartmann (15)....... 42,833 * -- 42,833 *
All directors and executive
officers as a group,
(12 persons) (16)................. 5,138,862 58.2 247,500 4,896,362 42.3
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO SHARES OWNED AFTER
OFFERING (1) TO BE OFFERING (1)
--------------- SOLD IN ---------------
NAME AND ADDRESS (2) NUMBER PERCENT OFFERING NUMBER PERCENT
- -------------------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
OTHER SELLING STOCKHOLDERS
Prism Partners (17)................... 378,451 4.8% 95,853 282,184 2.6%
Granite Capital LP (18)............... 206,556 2.6 52,467 154,014 1.4
Virginia Snyder....................... 200,000 2.5 25,000 175,000 1.6
Strome Family Living Trust (19)....... 145,212 1.8 36,870 108,275 1.0
Marshall Oman Exploration Inc......... 100,000 1.3 26,202 74,564 *
Alan M. Craft......................... 96,000 1.2 20,961 75,650 *
WSB Trust 10/12/82 FBO
Grandchildren (20)................... 90,043 1.1 23,097 67,138 *
Leo R. Schlinkert..................... 88,851 1.1 23,281 66,250 *
Antaeus Enterprises Inc............... 78,950 1.0 20,192 58,868 *
Other Selling Stockholders each owning
less than 1% of the Common Stock
before the Offering (47 parties)..... 752,963 9.5 183,577 569,386 5.3
</TABLE>
- --------
* Less than 1%.
(1) Percentage ownership is based on (i) before the Offering, 7,935,148
shares of Common Stock outstanding as of December 31, 1996 (reflects the
conversion of each of the outstanding shares of convertible preferred
stock, except the Series P Redeemable Preferred Stock, upon the closing
of the offering, the issuance of 501,685 shares upon the automatic net
exercise in full of certain warrants upon the closing of the offering the
issuance of 143,886 shares upon the conversion of cumulative unpaid
dividends on the Series F Convertible Preferred Stock upon the closing of
the Offering) plus any shares issuable pursuant to the options held by
the person or group in question which may be exercised within 60 days of
March 1, 1997; and (ii) after the Offering, an additional 2,750,000
shares of Common Stock to be issued by the Company in the Offering.
(2) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table
have sole voting and investment power with respect to all shares of
Common Stock.
(3) Includes options and warrants to purchase an aggregate of 43,472 shares
of Common Stock exercisable within sixty days of March 1, 1997 and
includes 2,122,063 shares of Common Stock held by Talkot Partners II,
LLC. Mr. Akin is a Managing General Partner of Talkot Partners II, LLC
and disclaims beneficial ownership of these shares except as to the
pecuniary interest that he will derive from these shares.
(4) Mr. Akin is a Managing General Partner of Talkot Partners II, LLC and
disclaims beneficial ownership of these shares except as to the pecuniary
interest he will derive from these shares.
(5) Excludes 344,350 shares of Series P Redeemable Preferred Stock to be
redeemed at the Closing and includes a warrant to purchase 388,500 shares
of Common Stock.
(6) Includes an option to purchase 10,000 shares of Common Stock exercisable
within sixty days of March 1, 1997 and also includes a warrant to
purchase 388,500 shares of Common Stock and 530,232 shares of Common
Stock held by Ailicec International Enterprises, Ltd. Mr. Chiu is the
Managing Director of Ailicec International Enterprises, Ltd. and
disclaims beneficial ownership of these shares.
(7) Dr. Harrison is a Managing General Partner of Poly Ventures, Limited
Partnership, the manager of Poly Ventures II, L. P. Dr. Harrison
disclaims beneficial ownership of these shares except as to the pecuniary
interest he will derive from these shares.
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<PAGE>
(8) Includes an option to purchase 10,000 shares of Common Stock exercisable
within sixty days of March 1, 1997 and 492,777 shares of Common Stock
held by Poly Ventures II, Limited Partnership. Dr. Harrison is a Managing
General Partner of Poly Ventures, Limited Partnership, the manager of
Poly Ventures II, L. P. Dr. Harrison disclaims beneficial ownership of
these shares except as to the pecuniary interest he will derive from
these shares.
(9) Includes options to purchase 25,000 shares of Common Stock exercisable
within sixty days of March 1, 1997.
(10) Includes options and warrants to purchase an aggregate of 270,265 shares
of Common Stock exercisable within sixty days of March 1, 1997 and
includes 30,440 shares of Common Stock held by Mr. Carnevale's wife.
(11) Includes options to purchase 25,000 shares of Common Stock exercisable
within sixty days of March 1, 1997.
(12) Includes options to purchase 12,500 shares of Common Stock exercisable
within sixty days of March 1, 1997.
(13) Includes options to purchase 10,000 shares of Common Stock exercisable
within sixty days of March 1, 1997.
(14) Includes options to purchase 10,000 shares of Common Stock exercisable
within sixty days of March 1, 1997.
(15) Includes options to purchase 20,833 shares of Common Stock exercisable
within sixty days of March 1, 1997.
(16) Includes options and warrants in the aggregate of 1,008,832 shares of
Common Stock exercisable within sixty days of March 1, 1997.
(17) Jerald Weintraub is the Managing General Partner of Prism Partners.
(18) Walter F. Harrison III is the General Partner of Granite Capital LP.
(19) Mark Strome is the trustee of the Strome Family Living Trust.
(20) Sarah Beinecke Richardson, Joseph M. Santarella and William McIlwanie
Thompson, Jr. are the trustees of the WSB Trust 10/12/82 FBO
Grandchildren.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
At the closing of the Offering, the authorized capital stock of the Company
will consist of 35,000,000 shares of Common Stock, $0.01 par value, and
5,000,000 shares of Preferred Stock, $0.01 par value, after giving effect to
the amendment of the Company's Certificate of Incorporation authorizing an
increase in the authorized number of shares of Common Stock to 35,000,000 and
a decrease in the authorized number of shares of Preferred Stock to 5,000,000,
and deleting references to Series A, Series B, Series C, Series D, Series E,
Series F Convertible Preferred Stock and Series P Redeemable Preferred Stock
following the conversion, or, with respect to the Series P Redeemable
Preferred Stock, the redemption, of such Preferred Stock (including the
automatic net exercise in full of certain warrants to purchase shares of
Common Stock upon the closing of the Offering and the conversion of cumulative
unpaid dividends on the Series F Convertible Preferred Stock upon the closing
of the Offering).
COMMON STOCK
As of March 1, 1997, there were 7,939,148 shares of Common Stock outstanding
(after giving effect to (i) the conversion, or, with respect to the Series P
Redeemable Preferred Stock, the redemption, of all Preferred Stock, (ii) the
issuance of shares of Common Stock upon the automatic net exercise in full of
certain warrants and (iii) the conversion of cumulative unpaid dividends on
the Series F Convertible Preferred Stock) held of record by 140 stockholders.
Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
liquidation rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are fully paid and non-
assessable, and the shares of Common Stock to be outstanding upon closing of
the Offering will be fully paid and non-assessable.
PREFERRED STOCK
As of the closing of the Offering, 5,000,000 shares of Preferred Stock will
be authorized and no shares will be outstanding. The Board of Directors has
the authority to issue up to 5,000,000 shares of Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
granted to or imposed upon any unissued shares of Preferred Stock and to fix
the number of shares constituting any series and the designations of such
series, without any further vote or action by the stockholders. Although it
presently has no intention to do so, the Board of Directors, without
stockholder approval, can issue Preferred Stock with voting and conversion
rights which could adversely affect the voting power of the holders of Common
Stock. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 7,370,549 shares of Common Stock (the "Registrable
Securities") or their transferees are entitled to certain rights with respect
to the registration of such shares under the Securities Act. These rights are
provided under the terms of the respective Preferred Stock Purchase Agreements
and Subscription and Stock Purchase Agreements, the Series E Preferred Stock
Purchase Agreement, the Series F Preferred Stock Purchase Agreement, the Note
Purchase Agreement, Warrants and a Registration Rights Agreement. Upon
consummation of the Offering and subject to certain limitations in the
applicable agreements, holders of 5,820,904 shares of Registrable Securities
may request registration under the Securities Act of all or part of their
Registrable Securities, six months after the effective date of the Offering.
If the Company registers any of its Common Stock either for its own account or
for the account of other security holders, the holders of 6,417,215 Shares of
Registrable Securities are entitled to include their shares of Common Stock in
the registration, subject to the ability of the underwriters to limit the
number of shares included in the offering. All registration expenses must
55
<PAGE>
be borne by the Company and all selling expenses relating to Registrable
Securities must be borne by the holders of the securities being registered. In
addition, certain holders of Registrable Securities may request registration
under the Securities Act of all or part of their Registrable Securities on
Form S-3 when use of such form becomes available to the Company.
DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION AND BYLAWS
Certain provisions of Delaware law and the Company's Restated Certificate of
Incorporation and Bylaws could make more difficult the acquisition of the
Company by means of a tender offer, a proxy contest or otherwise and the
removal of incumbent officers and directors. These provisions are expected to
discourage certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of the
Company to first negotiate with the Company. The Company believes that the
benefits of increased protection of the Company's potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure the Company outweigh the disadvantages of discouraging
such proposals because, among other things, negotiation of such proposals
could result in an improvement of their terms.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder unless (with certain exceptions) the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns
(or within three years prior, did own) 15% or more of the corporation's voting
stock. The Company has waived the right to "elect out" of application of
Section 203.
The Company's Restated Certificate of Incorporation also provides that if at
any time the Company shall have a class of stock registered pursuant to the
Securities Exchange Act of 1934, as amended, for so long as such class is so
registered, stockholder action can be taken only at an annual or special
meeting of stockholders and may not be taken by written consent. The Bylaws
provide that special meetings of stockholders can be called only the Chairman
of the Board, the President or the Board of Directors. Stockholders are not
permitted to call a special meeting or to require that the Board of Directors
call a special meeting of stockholders. Moreover, the business permitted to be
conducted at any special meeting of stockholders is limited to the business
brought before the meeting by the Chairman of the Board, the President or the
Board of Directors. The Bylaws set forth an advance notice procedure with
regard to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors and with regard to business
to be brought before an annual meeting of stockholders of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
10,685,148 shares of Common Stock, assuming no exercise of options or warrants
after December 31, 1996. Of these shares, the 3,500,000 shares offered hereby
(4,025,000 shares if the Underwriters' over-allotment option is exercised in
full) will be freely tradeable without restriction or further registration
under the Securities Act, unless purchased by "affiliates" of the Company as
that term is defined in Rule 144 under the Securities Act ("Rule 144")
described below. The remaining 7,185,148 shares of Common Stock outstanding
upon closing of the Offering are "restricted securities" as that term is
defined in Rule 144. Of the remaining 7,185,148 shares, 7,033,944 shares are
subject to lock-up agreements (described below).
Upon completion of the Offering, no shares will become eligible for
immediate sale pursuant to Rule 144(k) and, beginning 90 days after
commencement of the Offering, 7,111,148 shares will become eligible for sale
pursuant to Rule 144 or Rule 701 under the Securities Act ("Rule 701"). Upon
expiration of the lock-up agreements, an aggregate of 2,362,293 shares will
become immediately eligible for sale without restriction pursuant to Rule
144(k) or Rule 701 (described below), and approximately 4,748,855 additional
shares will be eligible for sale subject to the timing, volume, and manner of
sale restrictions of Rule 144. The 74,000 remaining shares held by existing
stockholders will become eligible for sale at various times over a period of
less than one year. In addition, 1,327,188 additional shares of Common Stock
subject to outstanding warrants and vested stock options could also be sold,
subject in some cases to compliance with certain volume limitations as
described below.
In general, under Rule 144, as recently amended, a person (or persons whose
shares are aggregated) who has beneficially owned shares for at least one year
(including the holding period of any prior owner except an affiliate from whom
such shares were purchased) is entitled to sell in "brokers' transactions" or
to market makers, within any three-month period commencing 90 days after the
date of this Prospectus, a number of shares that does not exceed the greater
of (i) one percent of the number of shares of Common Stock then outstanding
(approximately 106,854 shares immediately after the completion of the
Offering) or (ii) generally, the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the required filing of a Form
144 with respect to such sale. Sales under Rule 144 are generally subject to
the availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years (including the holding
period of any prior owner other than an affiliate from whom such shares were
purchased), is entitled to sell such shares without having to comply with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144. Under Rule 701, persons who purchase shares upon exercise of options
granted prior to the effective date of the Offering are entitled to sell such
shares 90 days after the effective date of the Offering in reliance on Rule
144, without having to comply with the holding period requirements of Rule 144
and, in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice provisions of Rule 144.
Pursuant to the lock-up agreements, all of the Company's officers and
directors and certain stockholders, including the Selling Stockholders, owning
upon completion of the Offering, in the aggregate, 7,033,944 shares of Common
Stock, have executed agreements pursuant to which each has agreed that they
will not, for a period of 180 days from the date of this Prospectus, directly
or indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, pledge, contract of sale, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital
stock of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock, or other capital stock of the
Company without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters. In addition, certain other
stockholders of the Company holding an aggregate of 101,266 shares are subject
to 90 day lock-up agreements with the Company and stockholders holding an
aggregate of 49,938 shares are subject to 180 day lock-up agreements with the
Company. Further, holders of outstanding warrants and vested stock options
for, in the aggregate, an additional 1,327,188 shares of Common Stock are
subject to 180 day lock-up agreements with the Company and/or Prudential
57
<PAGE>
Securities Incorporated. The Company has agreed that it will not, for a period
of 180 days from the date of this Prospectus, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or other capital stock of the
Company or any securities convertible into, or exercisable or exchangeable
for, any shares of Common Stock, or other capital stock of the Company without
the prior written consent of Prudential Securities Incorporated, on behalf of
the Underwriters, except that such agreement does not prevent the Company from
granting additional options under the 1995 Plan or the Director Plan or from
issuing shares under the Purchase Plan. Prudential Securities Incorporated may
in its sole discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements.
Approximately 180 days after the date of this Prospectus, the Company
intends to file a Registration Statement on Form S-8 covering an aggregate of
approximately 4,237,910 shares of Common Stock (including the 1,030,785 shares
subject to outstanding options as of March 1, 1997) that have been reserved
for issuance under its stock option and stock purchase plans, thus permitting
the resale of such shares in the public market without restriction under the
Securities Act.
The holders of an aggregate of 7,370,549 shares of Common Stock (including
shares issuable upon exercise of outstanding warrants) or their transferees
are entitled to certain rights with respect to the registration of such shares
under the Securities Act. See "Description of Capital Stock--Registration
Rights of Certain Holders."
Prior to the Offering, there has not been any public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public
market could adversely affect the prevailing market prices and impair the
Company's ability to raise capital through the sale of equity securities.
58
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated and Cowen & Company are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock set forth opposite
their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated.................................
Cowen & Company....................................................
---------
Total........................................................... 3,500,000
=========
</TABLE>
The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all of the shares of Common Stock
offered hereby if any are purchased.
The Underwriters, through their Representatives, have advised the Company
and the Selling Stockholders that they propose to offer the Common Stock
initially at the initial public offering price set forth on the cover page of
this Prospectus; that the Underwriters may reallow to selected dealers a
concession of $ per share; and that such dealers may re-allow a concession
of $ per share to certain other dealers. After the initial public
offering, the offering price and the concessions may be changed by the
Representatives.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase, up to 525,000 additional shares
of Common Stock at the initial public offering price, less underwriting
discounts and commissions, as set forth on the cover page of this Prospectus.
The Underwriters may exercise such option solely for the purpose of covering
over-allotments incurred in the sale of the shares of Common Stock offered
hereby. To the extent such option to purchase is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to
3,500,000.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
The Representatives have informed the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
The Company, its officers and directors, the Selling Stockholders and
certain other beneficial owners of the Company's Common Stock and holders of
warrants or options to purchase Common Stock have agreed not to, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital
stock or any securities convertible into or exercisable or exchangeable, for,
any shares of Common Stock or other capital stock of the Company, for a period
of 180 days after the date of this Prospectus without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters.
Prudential Securities Incorporated may in its sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-
up agreements.
59
<PAGE>
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price will be
determined through negotiations between the Company and the Representatives.
Among the factors to be considered in making such determination will be the
prevailing market conditions, the Company's financial and operating history
and condition, its prospects and the prospects for its industry in general,
the management of the Company and the market prices of securities for
companies in businesses similar to that of the Company.
In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Common
Stock. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of
the Underwriters by selling more Common Stock in connection with the Offering
then they are committed to purchase from the Company and the Selling
Stockholders, and in such case may purchase Common Stock in the open market
following the closing of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 525,000 shares of Common Stock, by exercising the
Underwriters' over-allotment option referred to above. In addition, Prudential
Securities Incorporated, on behalf of the Underwriters, may impose "penalty
bids" under contractual arrangements with the Underwriters whereby it may
reclaim from an Underwriter (or dealer participating in the Offering) for the
account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the Offering but subsequently purchased
for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Common Stock at a level above that which might otherwise prevail
in the open market. None of the transactions described in this paragraph is
required, and, if they are undertaken, they may be discontinued at any time.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by General Counsel Associates LLP,
Mountain View, California. Clifford S. Robbins, a partner of General Counsel
Associates LLP, owns 10,000 shares of the Common Stock of the Company. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriters by Orrick, Herrington & Sutcliffe LLP, San Francisco, California.
EXPERTS
The financial statements of JetFax, Inc. as of March 31, 1996 and December
31, 1996 and for the years ended March 31, 1995 and March 31, 1996 and for the
nine months ended December 31, 1996, appearing in this Prospectus and the
related financial statement schedule appearing elsewhere in this Registration
Statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the Registration
Statement, and are included in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
60
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedule thereto. For further
information with respect to the Company and such Common Stock, reference is
made to the Registration Statement and to the exhibits and schedule filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W. Washington, D.C. 20549, upon payment of
certain fees prescribed by the Commission. The Commission maintains a World
Wide Website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of the website is http://www.sec.gov.
61
<PAGE>
JETFAX, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. F-2
Balance Sheets as of March 31, 1996 and December 31, 1996................ F-3
Statements of Operations for the Years Ended March 31, 1995 and 1996 and
for the Nine Months Ended December 31, 1995 (unaudited) and 1996........ F-4
Statements of Stockholders' Equity (Deficiency) for the Years Ended March
31, 1995 and 1996 and for the Nine Months Ended December 31, 1996....... F-5
Statements of Cash Flows for the Years Ended March 31, 1995 and 1996 and
for the Nine Months Ended December 31, 1995 (unaudited) and 1996........ F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
JetFax, Inc.:
We have audited the accompanying balance sheets of JetFax, Inc. as of March
31, 1996 and as of December 31, 1996, and the related statements of
operations, stockholders' equity (deficiency) and cash flows for the years
ended March 31, 1995 and 1996 and for the nine-month period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of JetFax, Inc. at March 31, 1996 and
December 31, 1996, and the results of its operations and its cash flows for
the years ended March 31, 1995 and 1996 and for the nine-month period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
San Jose, California
February 7, 1997
(March 18, 1997 as to Note 15)
F-2
<PAGE>
JETFAX, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996
--------- ------------ ------------
UNAUDITED
(NOTE 1)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 3,452 $ 106 $ 106
Trade receivables, net of allowances of:
March 31, 1996, $310; December 31, 1996,
$396..................................... 1,919 2,434 2,434
Receivable from the sale of the Series F
Preferred Stock.......................... 650 -- --
Inventories............................... 3,387 2,339 2,339
Prepaid expenses.......................... 12 61 61
------- ------- -------
Total current assets................... 9,420 4,940 4,940
Property--net.............................. 174 615 615
Other assets............................... 25 566 566
------- ------- -------
Total assets............................... $ 9,619 $ 6,121 $ 6,121
======= ======= =======
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 4,169 $ 1,857 $ 1,857
Accrued liabilities....................... 1,410 619 619
Line of credit............................ -- 200 200
Current portion of long-term note payable. -- 302 302
Related party notes payable and advances--
current portion.......................... 61 -- --
------- ------- -------
Total current liabilities.............. 5,640 2,978 2,978
------- ------- -------
Long-term note payable less current
portion................................... -- 198 198
Redeemable preferred stock, $0.01 par
value; 500,000 shares authorized, none
pro forma; shares outstanding: March 31,
1996, none (344,350 shares issuable);
December 31, 1996, 344,350 shares;
December 31, 1996 pro forma unaudited
344,350 shares (liquidation preference of
$2,726)................................... 2,610 2,726 2,726
Stockholders' equity:
Convertible preferred stock, $0.01 par
value; 9,000,000 shares authorized,
5,000,000 shares pro forma unaudited;
shares outstanding: March 31, 1996 and
December 31, 1996, 6,293,978; December
31, 1996 pro forma, none (liquidation
preference of $14,170)................... 63 63 --
Common stock, $0.01 par value; 13,500,000
shares authorized, 35,000,000 shares
pro forma unaudited; shares outstanding:
March 31, 1996, 954,474; December 31,
1996, 995,599; December 31, 1996 pro
forma unaudited 7,935,148................ 9 10 79
Additional paid-in capital................ 13,160 13,880 13,874
Accumulated deficit....................... (11,863) (13,734) (13,734)
------- ------- -------
Total stockholders' equity............. 1,369 219 219
------- ------- -------
Total liabilities, redeemable preferred
stock and stockholders' equity............ $ 9,619 $ 6,121 $ 6,121
======= ======= =======
</TABLE>
See notes to financial statements.
F-3
<PAGE>
JETFAX, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
----------------- --------------------
1995 1996 1995 1996
------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Product............................. $ 6,413 $ 11,143 $ 7,336 $ 10,205
Development fees.................... 1,200 699 466 1,416
Software and technology license
fees............................... 139 1,345 667 1,241
------- -------- ------- --------
Total revenues................... 7,752 13,187 8,469 12,862
------- -------- ------- --------
Costs and expenses:
Cost of product revenues............ 5,249 11,102 7,793 8,495
Research and development............ 1,118 1,249 919 1,709
Selling and marketing............... 1,325 2,710 1,745 2,785
General and administrative.......... 746 750 500 823
------- -------- ------- --------
Total costs and expenses......... 8,438 15,811 10,957 13,812
------- -------- ------- --------
Loss from operations................. (686) (2,624) (2,488) (950)
Other income (expense):
Interest expense.................... (70) (287) (200) (9)
Interest income..................... 2 14 7 31
Other income (expense).............. -- 3 1 (9)
------- -------- ------- --------
(68) (270) (192) 13
Loss before extraordinary item and
income taxes........................ (754) (2,894) (2,680) (937)
Provision for income taxes........... -- 35 35 105
------- -------- ------- --------
Loss before extraordinary item....... (754) (2,929) (2,715) (1,042)
Extraordinary item--gain on exchange
of stockholder debt and receivables
for notes payable................... 349 -- -- --
------- -------- ------- --------
Net loss............................. $ (405) $ (2,929) $(2,715) $ (1,042)
======= ======== ======= ========
Pro forma net loss per share......... $ (0.14)
========
Common and common equivalent shares
used in computing pro forma net loss
per share .......................... 8,453
========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
JETFAX, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- -------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, April 1, 1994. 2,848,288 $ 29 867,105 $ 9 $ 3,936 $ (8,432) $ (4,458)
Exercise of common stock
options................ -- -- 31,609 -- 4 -- 4
Net loss................ -- -- -- -- -- (405) (405)
--------- ---- ------- ---- -------- --------- --------
Balances, March 31,
1995................... 2,848,288 29 898,714 9 3,940 (8,837) (4,859)
Exercise of common stock
options................ -- -- 55,760 -- 5 -- 5
Issuance of Series F
convertible preferred
stock for cash of
$7,547 and conversion
of debt of $1,929, net
of issuance costs of
$675................... 3,445,690 34 -- -- 8,766 -- 8,800
Additional paid in
capital from conversion
of debt into Series P
redeemable preferred
stock, net of issuance
costs of $13........... -- -- -- -- 379 -- 379
Cumulative dividends on
Series F convertible
($70) and Series P
redeemable ($27)
preferred stock........ -- -- -- -- 70 (97) (27)
Net loss................ -- -- -- -- -- (2,929) (2,929)
--------- ---- ------- ---- -------- --------- --------
Balances, March 31,
1996................... 6,293,978 63 954,474 9 13,160 (11,863) 1,369
Exercise of common stock
options................ -- -- 41,125 1 7 -- 8
Cumulative dividends on
Series F convertible
($713) and Series P
redeemable ($116)
preferred stock........ -- -- -- -- 713 (829) (116)
Net loss................ -- -- -- -- -- (1,042) (1,042)
--------- ---- ------- ---- -------- --------- --------
Balances, December 31,
1996................... 6,293,978 $ 63 995,599 $ 10 $ 13,880 $ (13,734) $ 219
========= ==== ======= ==== ======== ========= ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
JETFAX, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
--------------- -------------------
1995 1996 1995 1996
------ ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................... $ (405) $(2,929) $(2,715) $(1,042)
Adjustments to reconcile net loss to
net cash used for operating
activities:
Depreciation and amortization.......... 115 250 136 143
Provision for (reversal of) inventory
reserves and purchase commitment...... -- 760 760 (280)
Extraordinary gain on debt
restructuring......................... (349) -- -- --
Changes in assets and liabilities:
Trade receivables..................... (1,082) (392) 163 (515)
Inventories........................... (644) (1,912) (1,671) 1,048
Prepaid expenses...................... -- (12) (4) (49)
Accounts payable...................... 1,822 1,771 2,718 (2,312)
Accrued liabilities................... (400) 53 (49) (511)
------ ------- ------- -------
Net cash used for operating
activities......................... (943) (2,411) (463) (3,518)
------ ------- ------- -------
Cash flows from investing activities:
Purchase of property................... (217) (154) (85) (515)
Increase in other assets............... (1) (10) (174) (55)
Acquisition of Crandell Group.......... -- -- -- (305)
------ ------- ------- -------
Net cash used for investing
activities......................... (218) (164) (259) (875)
------ ------- ------- -------
Cash flows from financing activities:
Proceeds from sale of common stock..... 4 5 5 8
Repayment of notes payable............. (5) (1,362) -- --
Repayment of related party notes
payable............................... (609) (70) -- (61)
Line of credit borrowings, net......... -- -- -- 200
Equipment term note borrowings......... -- -- -- 250
Proceeds from issuance of notes
payable............................... 1,990 1,010 800 --
Proceeds from Series F preferred
stock--net............................ -- 6,222 -- --
Restricted investments................. (100) 100 100 --
------ ------- ------- -------
Net cash provided by financing
activities......................... 1,280 5,905 905 1,047
------ ------- ------- -------
Increase (decrease) in cash and cash
equivalents............................ 119 3,330 183 (3,346)
Cash and cash equivalents, beginning of
year................................... 3 122 122 3,452
------ ------- ------- -------
Cash and cash equivalents, end of year.. $ 122 $ 3,452 $ 305 $ 106
====== ======= ======= =======
Supplemental cash flow information:
Interest paid.......................... $ 37 $ 211 $ 202 $ 9
====== ======= ======= =======
Taxes paid--foreign withholding........ $ -- $ 35 $ 35 $ 105
====== ======= ======= =======
Supplemental noncash investing and
financial information:
Accounts receivable--stockholder,
offset against accounts payable--
stockholder........................... $1,141 $ 75
====== =======
Restructuring of accounts payable--
stockholder, to long-term debt--
stockholder........................... $2,505
======
Restructuring of advances from
stockholder, to long-term debt--
stockholder........................... $1,730
======
Conversion of note payable to
stockholder, to Series P redeemable
preferred stock issuable.............. $ 675 $ 2,287
====== =======
Conversion of convertible notes payable
into Series F convertible preferred
stock................................. $ 1,929
=======
Receivable--Series F convertible
preferred stock....................... $ 650
=======
Cumulative dividends on Series F
convertible and Series P redeemable
preferred stock....................... $ 97 $ 9 $ 829
======= ======= =======
Acquisition of Crandell Group (Note 3):
Fair value of assets acquired
(includes intangibles of $540 and
property of $15)...................... $ 555
Cash paid.............................. (305)
-------
Note payable to seller................. $ 250
=======
</TABLE>
See notes to financial statements.
F-6
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
1.NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
JetFax, Inc. (the Company) was incorporated in Delaware in August 1988 and
since that time has engaged in the development, manufacture and sale of its
branded multifunction products (MFPs) and entered into agreements with a
number of manufacturers (OEMs) of MFPs for the customization and integration
of the Company's embedded system technology and desktop software in several
OEM products.
FISCAL YEAR END
Effective December 31, 1996, the Company changed its fiscal year end from
March 31 to a 52-53 week reporting year ending on the first Saturday on or
after December 31. The 40-week period from April 1, 1996 to January 4, 1997 is
referred to herein as the nine months ended December 31, 1996. For
presentation purposes, the Company refers to its reporting year ended January
4, 1997 as ending on December 31, 1996.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Such
estimates include the level of the allowance for potentially uncollectible
accounts receivable, reserves for inventories, accrued losses on purchase
commitments, accrued OEM licensing revenues, product development revenues
recognized on the percentage-of-completion basis, accrued warranty costs, and
a valuation allowance for net deferred tax assets.
The Company sells and licenses its products and technology primarily to end
users (through independent dealers) and OEMs in the United States, Canada,
Asia and Europe. In addition, the Company performs development services for
certain of its OEMs. The Company performs ongoing credit evaluations of its
customers' financial condition and limits its exposure to losses from bad
debts by limiting the amount of credit extended whenever deemed necessary and
generally does not require collateral.
The Company operates in a very dynamic industry. The Company believes that
changes in any of the following areas could have a negative impact on the
Company's future financial position and results of operation: the timing of
introductions of new products or product enhancements by the Company, its OEMs
and their competitors; initiation or termination of arrangements between the
Company and its existing and potential significant OEM customers or
distributors or dealers; the size and timing of and fluctuations in end user
demand for the Company's branded products and OEM products incorporating the
Company's technology; inventories of the Company's branded products or
products incorporating the Company's technology carried by the Company, its
distributors and dealers, its OEMs or the OEMs' distributors that exceed
current or projected end user demand; the phase-out or early termination of
the Company's branded products or OEM products incorporating the Company's
technology; the amount and timing of development agreements, one-time software
licensing transactions and recurring license fees; non-performance by the
Company, its supplier or its OEM customers pursuant to their plans and
agreements; seasonal trends; competition and pricing; customer order deferrals
and cancellations in anticipation of new products or product enhancements;
industry and technology developments; changes in the Company's operating
expenses; software and hardware defects; product delays or product quality
problems; currency fluctuations; and general economic conditions.
F-7
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
The Company recognized net losses of approximately $405,000, $2.9 million
and $1.0 million for the fiscal years ended March 31, 1995 and 1996, and the
nine months ended December 31, 1996, respectively. The Company's historical
losses and $926,000 of preferred stock cumulative dividends have resulted in
an accumulated deficit of approximately $13.7 million at December 31, 1996.
Management plans to enhance the Company's cash flows from operations by
obtaining license and development fees from OEMs, and increasing its product
sales; however, no assurance can be given that the Company will be successful
in such efforts.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist of cash equivalents and accounts receivable. Cash is
primarily on deposit at a financial institution. Credit risk with respect to
the trade receivables is spread over a number of geographically diverse
customers, who make up the Company's customer base. At December 31, 1996, one
customer accounted for 12% of total accounts receivable.
CASH EQUIVALENTS
Cash equivalents are highly liquid debt instruments acquired with an
original maturity of three months or less. The recorded carrying amounts of
the Company's cash and cash equivalents approximate their fair market value.
ACCOUNTS RECEIVABLE
Accounts receivable includes unbilled amounts of $364,000 relating to
development revenues at December 31, 1996 (see "Revenue Recognition" below).
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
The Company's products typically experience short life cycles, and the Company
estimates the market value of its inventory based on the anticipated selling
prices adjusted for completion and selling costs. Should the Company
experience a substantial unanticipated decline in the selling price of its
products and/or demand thereof, a material valuation adjustment and
corresponding charge to operations could result. In addition, the Company uses
subcontractors for the manufacture of certain of its products and/or
components and occasionally enters into purchase commitments for such
purchases. Consequently, the Company evaluates its exposure relative to such
contracts and the estimated selling prices of the related products, adjusted
for completion and selling costs, and accrues for losses, if anticipated (see
Note 6).
PROPERTY
Property is stated at cost or, for items under capital lease, at the present
value of future minimum lease payments at the lease inception. Depreciation
and amortization are computed using the straight-line method over estimated
useful lives of one to five years or the lease term, whichever is appropriate.
INCOME TAXES
The Company accounts for income taxes under an asset and liability approach.
Deferred tax liabilities are recognized for future taxable amounts and
deferred tax assets are recognized for future deductions net of a valuation
allowance to reduce deferred tax assets to amounts that are more likely than
not to be realized.
REVENUE RECOGNITION
Revenues from product sales are generally recognized upon shipment.
Estimated future warranty costs are accrued at the time of the sale.
F-8
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
The Company enters into development agreements with OEM customers for which
it receives development fees with certain payments contingent upon attaining
contract milestones. The Company generally retains ownership of the product
technology developed under the agreements; however, some agreements limit the
Company's ability to sell its products incorporating the technology. The
agreements typically provide for license and royalty payments to the Company
based on the OEM customers' subsequent use of the technology in their
products.
Revenues from product development agreements is recognized using the
percentage of completion method. Estimates are reviewed and revised
periodically throughout the lives of the contracts. Any revisions are recorded
in the accounting period in which the revisions are made. Royalties are
recognized as earned, and include OEM product licensing revenues which are
primarily determined based on the number of OEM units sold. Such revenues are
initially recorded based on an estimate of such number of units and are
adjusted upon the receipt of actual unit sales data from OEMs in the
accounting period in which the information is received.
RESEARCH AND DEVELOPMENT
Research and development costs include costs and expenses associated with
the design and development of new products. To the extent that such costs
include the development of computer software, the Company follows the working
model approach to determine technological feasibility of the software product.
Costs incurred subsequent to establishing technological feasibility have been
immaterial and, accordingly, all software development costs have been included
in research and development expense for the periods presented herein.
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the intrinsic
value method in accordance with APB No. 25, Accounting for Stock Issued to
Employees.
PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share is based on the reported net loss for the nine
months ended December 31, 1996, adjusted for cumulative dividends of $116,000
on Series P Redeemable Preferred Stock, to arrive at pro forma net loss
applicable to common stock. Pro forma net loss per share is computed using the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares include (i) convertible preferred
stock, except Series P Redeemable Preferred Stock, (using the "if converted"
method) and (ii) stock options and warrants (using the treasury stock method).
Common equivalent shares are excluded from the computation if there is a net
loss as their effect is anti-dilutive, except that, pursuant to the Securities
and Exchange Commission's Staff Accounting Bulletins and staff policy, such
computations include all common and common equivalent shares issued within the
12 months preceding the initial filing date as if they were outstanding for
all periods presented. In addition, all outstanding preferred stock and
cumulative dividends that convert into common stock in connection with the
proposed offering are included in the computation as common equivalent shares
even when the effect is anti-dilutive.
UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited interim financial information for the nine months ended
December 31, 1995 has been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited information includes
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of this interim information.
F-9
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
UNAUDITED PRO FORMA INFORMATION
Upon the closing of the initial public offering as contemplated by this
Prospectus (i) each of the outstanding shares of Series A through F
convertible preferred stock will convert into one share of common stock, (ii)
501,685 shares of common stock (assuming a public offering price of $9.00 per
share) will be issued upon the net exercise of outstanding warrants to
purchase 675,156 shares of common stock (see Note 10), (iii) 143,886 shares of
common stock will be issued upon the conversion of cumulative dividends on
Series F convertible preferred stock (see Note 10) and (iv) the authorized
number of shares of preferred stock and common stock will be 5,000,000 and
35,000,000, respectively (see Note 15). The unaudited pro forma information
included in the accompanying balance sheet gives effect to such conversions,
issuances and authorizations.
RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share."
SFAS 128 replaces the presentation of primary earnings per share (EPS) with a
presentation of basic EPS. Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. SFAS 128 also requires,
among other things, dual presentation of basic EPS and diluted EPS on the face
of the income statement for all entities with complex capital structures. The
Company has not yet evaluated the impact of SFAS 128 on its determination of
its future EPS.
2.SIGNIFICANT TRANSACTIONS
In August 1994, the Company entered into an agreement with a preferred
stockholder, who was also a supplier, which provided, among other things, that
the Company's receivable from the stockholder of $1,141,141 be applied to
reduce the amount due to the stockholder of $5,376,437. With respect to the
remainder due to the stockholder:
. $667,000 was converted to a note which was repaid during the fiscal
years ended March 31, 1996 and 1995. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructurings," the note was recorded at
the amount of the future principal and interest payments of $684,164.
. $2,582,621 was converted to a 6% note with interest payable annually
with the principal due in five years. In accordance with SFAS No. 15,
the note was recorded at the amount of the future principal and interest
payments of $3,357,407. Upon the receipt of $400,000 of bridge
financing, which occurred in fiscal 1995, $675,000 of the note was
required to be converted into 90,000 shares of a new class of redeemable
preferred stock (Series P) at a conversion rate of $7.50 per share (see
Note 10). Accordingly, the note was reduced by $830,250 (including
$155,250 of related future interest recognized as additional
extraordinary gain). In March 1996, additional equity financing was
raised and, pursuant to the terms of the note, $1,907,621 of the face
value of the note was required to be converted into 254,350 shares of
redeemable preferred stock (Series P) at a conversion rate of $7.50 per
share. Accordingly, the note was reduced by its recorded amount of
$2,286,948 (including $379,327 of related future interest recognized as
additional paid in capital).
In accordance with SFAS No. 15, the above restructuring resulted in an
extraordinary gain of $348,975 in the year ended March 31, 1995. In addition,
a warrant to purchase 388,500 shares of Series E Preferred Stock at a purchase
price of $2.75 per share was issued to the stockholder. The warrant is
exercisable for five years. The estimated fair value of these warrants is
immaterial and, accordingly, no amount has been recorded in the financial
statements for their issuance.
F-10
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
3. BUSINESS COMBINATION
In July 1996, the Company acquired the assets of the Crandell Group, Inc.
(the Crandell Group), a company in the business of developing and marketing
software products, including certain products used in fax applications, some
of which have previously been licensed by and used in JetFax products. The two
principals of the Crandell Group (the Principals) have also entered into two
year employment agreements with JetFax. The primary terms of the acquisition,
which has been accounted for as a purchase transaction, are as follows:
. The Company paid $250,000 upon the closing, issued a non-interest
bearing promissory note for $250,000 that is due July 1997 and incurred
$55,000 of related acquisition costs for a total purchase price of
$555,000. $540,000 of the purchase price was allocated to proprietary
software, licensing contracts and covenants not to compete, and is being
amortized over five years. Accumulated amortization at December 31, 1996
is $54,302. The remaining $15,000 of the purchase price represents the
fair value of computer equipment and furniture acquired and has been
included in fixed assets.
. The Company is obligated to make monthly royalty payments to the
Crandell Group equal to 25% and 33% of revenues generated by sales of
products incorporating the acquired software technology (as defined
contractually) in the first and second twelve month periods after the
closing, respectively. These payments are contingent upon the continued
employment of the former majority shareholder/employee by the Company.
Accordingly, the Company has recorded $228,000 of such payments through
December 31, 1996 as compensation within research and development
expense.
. An amendment to the purchase agreement provides that upon an initial
public offering of the Company's stock (IPO) prior to July 31, 1998, the
Company's obligation to make further royalty payments in excess of those
already earned as of the end of the month prior to the month of the IPO,
will terminate. However, the Company will be obligated to make a payment
of $1,250,000 to the Principals within 60 days after the end of the
month in which the IPO takes place. If the IPO occurs after April 30,
1997, the $1,250,000 payment will be reduced by royalty amounts earned
by the Principals subsequent to April 30, 1997 and the $250,000 note
payable. The amount of the payment to the Crandell Group pursuant to
this provision (excluding the $250,000 note payable), if any, will be
accrued as compensation within research and development expense at the
time of the IPO.
The amendment to the purchase agreement also provides that the Principals
receive warrants to acquire a total of 100,000 shares of the Company's common
stock at an exercise price of $1.75 per share, the fair market value at the
time of the grant. These warrants will become exercisable only in the event of
an IPO prior to July 31, 1998. In addition, should the $1,250,000 payment be
reduced to zero pursuant to the provisions referred to above, the number of
the warrants that will be exercisable in the event of an IPO prior to July 31,
1998 will be decreased based on a formula that is designed to reduce the total
value of these warrants by the amount of the total payments paid to the
Principals under the terms of this agreement in excess of $1,250,000. As all
of the terms of these warrants will not be fixed until an IPO occurs, they are
accounted for as a variable equity award to employees for which increases in
the fair value of the Company's common stock subject to the warrants result in
additional compensation expense.
The results of operations for the Crandell Group prior to its acquisition by
the Company are not material and, accordingly, pro forma information is not
disclosed.
F-11
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
4.INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Materials and supplies............................... $ 2,851 $ 1,276
Work-in-process...................................... 307 235
Finished goods....................................... 229 828
------- -------
Total................................................ $ 3,387 $ 2,339
======= =======
</TABLE>
5.PROPERTY
Property consists of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Furniture and fixtures................................ $ 568 $ 570
Manufacturing tools and tooling....................... 209 187
Software.............................................. -- 341
Leasehold improvements................................ 56 56
----- -----
Total................................................. 833 1,154
Accumulated depreciation and amortization............. (659) (539)
----- -----
Property-net.......................................... $ 174 $ 615
===== =====
</TABLE>
6.ACCRUED LIABILITIES
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Compensation and related benefits..................... $ 340 $ 220
Product warranty...................................... 147 140
Estimated loss on purchase commitment................. 649 --
Other................................................. 274 259
------- ------
Total................................................. $ 1,410 $ 619
======= ======
</TABLE>
During the year ended March 31, 1996, the Company recorded an estimated loss
of $649,000 (charged to cost of product revenues) on a firm purchase
commitment with a supplier representing the estimated difference between the
product cost and the estimated selling price, adjusted for completion and
selling costs. In September 1996, the Company recorded a $280,000 recovery to
cost of product revenues of such amount based on the result of a negotiated
settlement.
F-12
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
7.LINE OF CREDIT AND NOTES PAYABLE
Line of credit and notes payable consist of the following at December 31,
1996 (in thousands):
<TABLE>
<S> <C>
Line of credit........................................................ $ 200
=====
Equipment term loan................................................... $ 250
Note payable.......................................................... 250
-----
Total notes payable................................................. 500
Current portion....................................................... (302)
-----
Long-term portion..................................................... $ 198
=====
</TABLE>
The Company has a line of credit agreement under which it may borrow up to
$1,500,000 at the bank's prime rate (8.25% at January 4, 1997) plus 1%.
Borrowings are limited to 75% on eligible domestic receivables, and secured by
all assets of the Company and are subordinate to shareholder notes and lien
positions. At December 31, 1996 outstanding borrowings under this line were
$200,000. The line expires in August 1997.
The Company has $250,000 outstanding at December 31, 1996 under a $250,000
equipment term loan that expires in August 2000 and bears interest at the
bank's prime rate (8.25% at January 4, 1997) plus 1.50%. Interest is payable
in monthly installments during the six month draw period and principle
payments are to be amortized over 36 months plus interest payments. Borrowings
are secured by all assets of the Company and are subordinate to stockholder
notes and lien positions.
The line of credit and equipment term loan contain certain covenants which,
among other things, require the Company to maintain tangible net worth (as
defined) of $2,500,000, quarterly net income, a quick ratio of 0.8 to 1.0, a
maximum debt to net worth ratio (as defined) of 2.0 to 1.0 (1.5 to 1.0 after
December 31, 1996) and certain minimum liquidity and debt service coverage. In
addition, the agreement prohibits the payment of cash dividends. At December
31, 1996, the Company was not in compliance with the quarterly net income
covenant and subsequently received a waiver of this covenant through June 30,
1997 from the lender (see Note 15).
The Company has $250,000 outstanding at December 31, 1996 as part of the
payment associated with the acquisition of the Crandell Group. The note
expires July 31, 1997.
Future minimum payments for the notes payable are: 1997, $302,000; 1998,
$68,000; 1999, $75,000; and 2000, $55,000.
8.LEASE COMMITMENTS
The Company leases its primary facility under an operating lease expiring
through February 1998. Rent expense is recognized on a straight-line basis
over the term of the lease. The lease agreement requires the Company to pay
property taxes and maintenance costs. For the years ended March 31, 1995 and
1996 and the nine months ended December 31, 1996, rent expense was $147,500,
$149,900 and $146,122, respectively. Future minimum annual rental payments for
facilities leases are: 1997, $167,000 and 1998, $13,000.
F-13
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
9.REDEEMABLE PREFERRED STOCK
Pursuant to its August 1994 agreement with a preferred stockholder (see Note
2), the Company has 344,350 shares of Series P Redeemable Preferred Stock
(Series P) outstanding at December 31, 1996. As discussed in Note 2, 90,000
shares and 344,350 shares of the Series P were issuable at March 31, 1995 and
1996, respectively. The Company received stockholder approval for the Series P
during October 1995 and completed the issuance of the shares during March
1996.
The Series P is entitled to cumulative dividends of 6% per year and may be
redeemed by the Company anytime prior to an initial public offering (IPO) or
certain changes in control. At the time of an IPO or such change in control,
the Company is required to redeem the outstanding Series P plus cumulative
dividends up to the greater of 15% of the IPO or such change in control
proceeds, or $1,125,000; unless the stockholder elects to convert all or any
part of the Series P into common stock. Such conversion would occur at a
conversion price equal to 75% of the then fair value of the common stock.
Accordingly, the Company has recorded cumulative dividends of $27,000 and
$116,000 in the year ended March 31, 1996 and the nine months ended December
31, 1996, respectively (for an aggregate of $143,000 at December 31, 1996).
The Series P has voting rights based on the number of shares outstanding and
JetFax is required to use 10% of its net income, if any, in excess of
$1,000,000 in any fiscal year to redeem the Series P.
The Company has received notice from the Series P stockholder that it does
not intend to exercise its conversion rights and, accordingly, the Company
will be required to redeem the Series P from the proceeds of the offering
contemplated by the Prospectus.
10.STOCKHOLDERS' EQUITY
At December 31, 1996, the Company has reserved or otherwise committed to
issue shares of common stock as follows (see Note 15):
<TABLE>
<S> <C>
Conversion of convertible preferred stock outstanding............. 6,293,978
Issuance under stock option plan.................................. 1,467,910
Exercise of common stock warrants................................. 675,156
Other stock options............................................... 401,999
Conversion of Series E Preferred Stock issuable upon exercise of
warrants (Note 2)................................................ 388,500
Conversion of redeemable preferred stock (Note 9)................. 344,350
Conversion of cumulative dividends on Series F Preferred Stock.... 115,833
Crandell common stock warrants (Note 3)........................... 100,000
---------
Total............................................................. 9,787,726
=========
</TABLE>
CONVERTIBLE PREFERRED STOCK
In March 1996, certain convertible note holders and other investors
purchased 3,445,690 shares of Series F Preferred Stock in exchange for the
cancellation of convertible notes payable totaling $1,929,000 (including
$59,000 of related interest) and cash of $7,547,000 (of which $650,000
receivable at March 31, 1996 was collected in April 1996). Warrants to
purchase 675,156 shares of common stock at $2.15 per share were issued to the
convertible note holders. Such warrants are exercisable and expire from
January 2000 through February 2001. The warrants are net exercised
automatically upon the closing of an initial public offering of the Company's
common stock meeting specified criteria. The net exercise is a cashless
exercise whereby the number of shares received is equal to the difference
between the number of shares under the warrant and the number of
F-14
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
shares equal to the aggregate exercise price of the warrant divided by the
initial public offering price per share, net of underwriting commissions. In
connection with the Series F Preferred Stock financing, the Company issued the
investment banker an option to purchase 401,999 shares of common stock at
$1.72 per share. The option is exercisable and expires in March 2004. The
estimated fair values of the above warrants and option are immaterial and,
accordingly, no amounts have been recorded in the financial statements.
Convertible preferred stock at December 31, 1996 consists of:
<TABLE>
<CAPTION>
LIQUIDATION
DESIGNATED OUTSTANDING PREFERENCE
---------- ----------- -----------
<S> <C> <C> <C>
Series A..................................... 1,000,000 750,996 $ 563,247
Series B..................................... 1,000,000 533,974 533,974
Series C..................................... 600,000 564,834 706,043
Series D..................................... 100,000 67,890 109,982
Series E..................................... 2,500,000 930,594 2,000,777
Series F..................................... 3,500,000 3,445,690 10,256,419
--------- --------- -----------
Total........................................ 8,700,000 6,293,978 $14,170,442
========= ========= ===========
</TABLE>
Significant terms of the convertible preferred stock are as follows:
. Each share is convertible into one share of common stock (subject to
adjustments for events of dilution) and has the same voting rights as
common stock. Shares will automatically be converted upon a public
offering of common stock meeting specified criteria.
. A majority of each of the issued and outstanding Series A and F
convertible preferred stock has the right to elect two directors,
respectively. A majority of the issued and outstanding Series E
Preferred Stock and certain affiliates of Poly Ventures II L.P. each
have a right to elect one director, respectively.
. Dividends are at the discretion of the Board of Directors and are
noncumulative for Series A through E preferred stock. Series F Preferred
Stock is entitled to a 10% annual, cumulative dividend when declared by
the Board, in preference to all other preferred and common stock.
Dividends on Series F have preference over cumulative dividends on
Series P Redeemable Preferred Stock. No dividends have been declared. In
the event the Series F Preferred Stock is converted into common stock as
a result of a public offering or other event requiring conversion prior
to March 1998, any cumulative and unpaid dividends thereon shall be
converted into shares of common stock. The conversion price is equal to
75% of the value of the common stock on the closing of the event
requiring the conversion of the Series F Preferred Stock. The Company
has recorded cumulative dividends of $70,000 and $713,000 in the fiscal
year ended March 31, 1996 and the nine months ended December 31, 1996,
respectively (for an aggregate of $783,000 at December 31, 1996).
. Shares may be redeemed at the option of the Board of Directors and with
the affirmative vote of 66.67% of the outstanding preferred
stockholders, for $1.13 per share of Series A, $1.50 per share of Series
B and Series C, $1.62 per share of Series D, and $2.15 per share of
Series E, plus all accrued but unpaid dividends.
STOCK OPTION PLAN
Under the Company's stock option plan, options may be granted to purchase a
total of 1,400,000 shares of common stock at fair market value as determined
by the Board of Directors at the date of grant (see Note 15). At December 31,
1996, 433,125 shares remain available for further option grants under the plan
(see Note 15). Terms for exercising options are determined by the Board of
Directors and options expire at the earlier of ten years and one month or such
shorter terms as may be provided in each stock option agreement.
F-15
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
Stock option activity and balances are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE PRICE
OF SHARES PER SHARE
--------- --------------
<S> <C> <C>
Balances, April 1, 1994............................... 169,000 $0.14
Granted............................................... 82,519 0.20
Canceled.............................................. (38,000) 0.16
Exercised............................................. (31,609) 0.13
---------
Balances, March 31, 1995.............................. 181,910 $0.16
Granted............................................... 31,000 0.20
Canceled.............................................. (27,500) 0.20
Exercised............................................. (55,760) 0.10
---------
Balances, March 31, 1996.............................. 129,650 $0.19
Granted............................................... 1,009,000 0.55
Canceled.............................................. (62,740) 0.27
Exercised............................................. (41,125) 0.20
---------
Balances, December 31, 1996........................... 1,034,785 $0.54
=========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------ -----------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
PRICES 1996 LIFE PRICE 1996 PRICE
-------- -------------- --------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$0.20 - $0.30 617,285 8.67 $0.29 94,507 $0.24
0.50 235,500 9.75 0.50 -- --
1.25 - 1.75 182,000 9.86 1.42 -- --
- ------------- --------- ---- ----- ------ -----
$0.20 - $1.75 1,034,785 9.13 $0.54 94,507 $0.24
============= ========= ==== ===== ====== =====
</TABLE>
The Company uses the intrinsic value method specified by Accounting
Principles Board Opinion No. 25 to calculate compensation expense associated
with issuing stock options and, accordingly, has recorded no such expense
through December 31, 1996 as such issuances have been at the fair value of the
Company's common stock at the date of grant.
Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation, (SFAS 123) requires the disclosure of pro forma net income
and earnings per share had the Company adopted the fair value method as of the
beginning of the year ended March 31, 1996. Under SFAS 123, the fair value of
stock-based awards to employees is calculated through the use of option
pricing models, even though such models were developed to estimate the fair
value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option
awards. These models also require subjective assumptions, including future
stock price volatility and expected time to exercise, which greatly affect the
calculated values. The Company's calculations were made using the Black-
Scholes option pricing model with the following weighted average assumptions:
expected life, 12 months following vesting; no stock volatility; risk free
interest rates, 6.29% for options granted during the nine months ended
December 31, 1996 and 6.02% for options granted during the year ended March
31, 1996; and no dividends during the expected term. The Company's
calculations are based on a multiple option valuation approach and forfeitures
are recognized as they
F-16
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
occur. If the computed fair values for the fiscal year ended March 31, 1996
and for the nine months ended December 31, 1996 awards had been amortized to
expense over the vesting period of the awards, pro forma net loss would not
change for the year ended March 31, 1996 and would have been $1,055,000 ($0.14
per share) for the nine months ended December 31, 1996. However, the impact of
outstanding non-vested stock options granted prior to April 1, 1995 has been
excluded from the pro forma calculation; accordingly, the pro forma
adjustments for the nine months ended December 31, 1996 and for the year ended
March 31, 1996 are not indicative of future period pro forma adjustments, when
the calculation will apply to all applicable stock options.
11.INCOME TAXES
No federal and state income taxes were provided for the years ended March
31, 1995 and 1996 and the nine months ended December 31, 1996 due to the
Company's net losses. Foreign withholding taxes of approximately $35,000 and
$105,000 were paid during the year ended March 31, 1996 and the nine months
ended December 31, 1996, respectively. The Company's effective tax rate
differs from the federal statutory rate as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED MARCH 31, ENDED
--------------------- DECEMBER 31,
1995 1996 1996
---------- ----------- ------------
<S> <C> <C> <C>
Taxes computed at federal statutory rate
of 35%................................... $ (264) $ (1,013) $(365)
Change in valuation allowance............. 264 1,103 365
Foreign withholding taxes................. -- 35 105
--------- ----------- ------
Total provision........................... $ -- $ 35 $ 105
========= =========== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, as well as operating
loss and tax credit carryforwards. Significant components of the Company's net
deferred income tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------
1995 1996 1996
------- ------- --------
<S> <C> <C> <C>
Deferred tax asset:
Net operating loss carryforwards.......... $ 2,430 $ 2,290 $ 3,989
Tax credit carryforwards.......... 240 207 264
Accruals and reserves not currently deductible 187 1,837 609
------- ------- -------
Total deferred tax assets.................. $ 2,857 $ 4,334 $ 4,862
Valuation allowance...... (2,857) (4,334) (4,862)
------- ------- -------
$ -- $ -- $ --
======= ======= =======
</TABLE>
As a result of the Company's history of operating losses, management
believes that the recognition of the deferred tax asset is considered less
likely than not. Accordingly, the Company has recorded a valuation allowance
of approximately $4.9 million against its net deferred tax assets.
F-17
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
At December 31, 1996, net operating loss carryforwards of approximately
$11.1 million and $6.3 million were available to offset future Federal and
state taxable income, respectively and research and development tax credits of
$108,000 and $156,000 were available to offset future Federal and state income
taxes, respectively. Current Federal and California tax law includes certain
provisions limiting the annual use of net operating loss carryforwards in the
event of certain defined changes in stock ownership. The annual use of the
Company's net operating loss carryforwards could be limited according to these
provisions. Management believes such limitation will not result in the loss of
carryforward benefits during the carryforward period; however, use of loss
carryforwards is dependent upon the Company's ability to achieve
profitability. These carryforwards expire from 2003 through 2011.
12.EMPLOYEE BENEFIT PLAN
The Company has a 401(k) tax deferred savings plan for all eligible
employees. Participants may contribute a percentage of their compensation,
which may be limited by the plan administrator or applicable tax laws. The
Company may make discretionary matching contributions. Such matching
contributions were immaterial for the years ended March 31, 1995 and 1996 and
the nine months ended December 31, 1996.
13.CUSTOMER AND GEOGRAPHIC INFORMATION
One customer accounted for 21% of total revenues for the nine months ended
December 31, 1996, one customer accounted for 13% and two customers accounted
for 11% each of total revenues for the year ended March 31, 1996 and one
customer accounted for 17% of total revenues for the year ended March 31,
1995. The following is a summary of revenues by geographic region (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
1996 1996
---------- -----------------
<S> <C> <C>
United States................................... $ 8,031 $ 9,466
Europe.......................................... 3,885 1,808
Asia............................................ 839 1,311
Other........................................... 432 277
------- -------
Total........................................... $13,187 $12,862
======= =======
</TABLE>
International revenues, principally from Europe, were $1,683,000 for the
year ended March 31, 1995.
14. RELATED PARTY TRANSACTIONS
Related party transactions and balances not otherwise disclosed herein were
as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
--------- DECEMBER 31,
1995 1996 1996
---- ---- ------------
<S> <C> <C> <C>
Sales to related party................................ $215 $225 $ 63
Purchases from related party.......................... 913 -- --
Accounts payable...................................... 85 14 --
6% note payable to an officer of the Company.......... 61 61 --
</TABLE>
The Company has also granted a stockholder a nonexclusive royalty free
license to utilize certain of its intellectual property.
F-18
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
YEARS ENDED MARCH 31, 1995 AND 1996 AND NINE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
15.SUBSEQUENT EVENTS
On February 19, 1997, the Board of Directors adopted the following
resolutions which are subject to stockholder approval:
. The 1997 Employee Stock Purchase Plan and reserved 500,000 shares of
common stock for sale to employees at 85% of the lower of fair market
value of the common stock at the beginning of the six-month offering
period or the end of each six-month purchase period.
. An increase in the number of shares of common stock reserved for the
grant of options by 2,000,000 shares to 3,400,000 shares.
. An amendment to the Company's Certificate of Incorporation to be
effective upon the closing of the Company's anticipated initial public
offering of its common stock authorizing a class of preferred stock
consisting of 5,000,000 shares and authorizing an increase in the
authorized number of shares of common stock to 35,000,000.
On March 11, 1997, the Company received a waiver of the quarterly net income
covenant in its bank line of credit through June 30, 1997.
On March 18, 1997, the Board of Directors approved, subject to stockholder
approval, the 1997 Director Option Plan and reserved 270,000 shares of common
stock for grants of options to nonemployee directors to purchase common stock
of fair market value as of the grant date.
F-19
<PAGE>
[LEFT SIDE OF PAGE:]
FAMILY OF AWARD WINNING PRODUCTS
[Pictures of the awards mentioned in the body text.]
JETFAX M5
PICK OF THE YEAR
BUYER'S LABORATORY (1996)
- -------------------------
JETFAX M5/M5 SST
EDITOR'S CHOICE '96
PREMIUM LASER FAX
BETTER BUYS FOR BUSINESS (1996)
- -------------------------------
JETFAX M5
TOP RATED "SEHR GUT" AWARD
FACTS MAGAZINE (1996)
- ---------------------
JETFAX M5
WIN 100 AWARD/HARDWARE
WINDOWS MAGAZINE (1996)
- -----------------------
JETFAX 4
TOP RATED "SEHR GUT" AWARD
FACTS MAGAZINE (1996)
- ---------------------
JETFAX 8000-D
PICK OF THE YEAR
BUYER'S LABORATORY (1993)
- -------------------------
JETFAX 8000-D
AWARD OF MERIT
BYTE MAGAZINE (1992)
- --------------------
[RIGHT SIDE OF PAGE:]
[JETFAX LOGO]
[Picture of JetFax M5]
JETFAX M5
JetFax's most recent product, JetFax M5
---------
is a high-volume multifunction product
with plain paper print, fax, copy
and scan capabilities.
The JetFax M5 also enables simultaneous sending
- -------------
and receiving of faxes with its two-line upgrade
or faster transmission with a 33.6 Kbps modem upgrade.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
The Company............................................................... 16
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Selected Financial Data................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 30
Management................................................................ 42
Certain Transactions...................................................... 50
Principal and Selling Stockholders........................................ 52
Description of Capital Stock.............................................. 55
Shares Eligible for Future Sale........................................... 57
Underwriting.............................................................. 59
Legal Matters............................................................. 60
Experts................................................................... 60
Additional Information.................................................... 61
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,500,000 Shares
[LOGO OF JETFAX]
Common Stock
---------------
PROSPECTUS
---------------
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
MAY , 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
Common Stock being registered. All amounts are estimates, except the SEC
registration fee and the NASD filing fee, and are payable by the Company.
<TABLE>
<S> <C>
SEC registration fee................................................. $ 12,197
NASD filing fee...................................................... 4,525
Nasdaq National Market listing fee................................... 44,205
Printing and engraving costs......................................... 150,000
Legal fees and expenses.............................................. 300,000
Accounting fees and expenses......................................... 175,000
Blue Sky fees and expenses........................................... 25,000
Transfer Agent and Registrar fees.................................... 3,500
Miscellaneous expenses............................................... 85,573
---------
Total.............................................................. $ 800,000
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933 (the "Securities Act").
Article XII of the Registrant's Restated Certificate of Incorporation (Exhibit
3.15 hereto) and Article VI of the Registrant's Amended and Restated Bylaws
(Exhibit 3.17 hereto) provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. In addition, the Registrant has entered into
Indemnification Agreements (Exhibit 10.1 hereto) with its officers and
directors. Reference is also made to Section 10 of the Underwriting Agreement
contained in Exhibit 1.1 hereto, which provides for the indemnification of
officers, directors and controlling persons of the Registrant against certain
liabilities. Stock purchase and subscription agreements containing
registration rights provisions (Exhibits 10.8 to 10.25, 10.28 and 10.29
hereto) entered into by the Registrant and certain holders (the "Holders") of
its Common Stock (including certain of the Selling Stockholders), provide for
cross-indemnification of the Holders and the Registrant, its officers and
directors for certain liabilities arising under the Securities Act or
otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since March 1, 1994, the Registrant has issued and sold the following
unregistered securities:
1. Since March 1994, the Registrant issued options to purchase an aggregate
of 1,122,019 shares of its Common Stock under the Registrant's 1989
Stock Option Plan and 1995 Stock Plan, 129,494 shares of which have been
exercised at a purchase price of $0.20 per share.
2. Between August 1994 and August 1995, the Registrant issued an aggregate
of $2,999,999 of its 10% senior secured notes (the "Bridge Notes") and
warrants to purchase an aggregate of 675,156 shares of Common Stock at
an exercise price of $2.15 per share (the "Bridge Warrants") to Thomas
and Karen Akin, Abdulwahab Al-Qatami, Kenneth Alpart, Antaeus
Enterprises, Inc., William Beinecke, Paul W. Cargoes, Cook Investors
Limited Partnership, John and Patricia Cook, Paul Distefano, Draper
Associates Limited Partnership, Polly C. Draper, Rebecca Draper, Timothy
Draper, David Evans, Jeffrey S. Gilmore, Dorothy G. Gorman, Granite
Capital, L.P., Laurence M. Haar, James Herrell, Lambert Family Trust,
Paul G. Lego, Fred and Nancy Lovell, Robert G. Lundgren, Dalton W.
Martin,
II-1
<PAGE>
Charles C. McLeod, Jr., Janet Orttung-Morrow Family Trust, Evelyn
Morrow, Newman Family 1990 Revocable Trust u/a dated 5/30/90, Robert L.
Newman and Jan Newman, Trustees, Curtis J. Pabst, Katherine Pennell,
Scott P. Peters, Poly Ventures II, Limited Partnership, John P.
Rosenthal, Saratoga Springs Co., Ltd., Dennis M. Schaney, Shartsis,
Friese and Ginsburg, Irwin W. Silverburg, Strome Family Trust and
Traslader SA.
3. In October 1994, the Registrant issued 90,000 shares of its Series P
Redeemable Preferred Stock to Ailicec International Enterprises Limited
at a purchase price of $7.50 per share pursuant to the conversion of
$675,000 in debt.
4. In December 1994, the Registrant issued a warrant to purchase 388,500
shares of its Series E Convertible Preferred Stock to Ailicec
International Enterprises Limited at an exercise price of $2.75 per
share.
5. In March 1996, the Registrant issued an aggregate of 3,445,690 shares of
its Series F Convertible Preferred Stock at a purchase price of $2.75
per share for an aggregate consideration of $9,475,647.50 which
consisted of conversion of Bridge Notes and interest thereon in the
amount of $1,928,768.50 and cash in the aggregate amount of $7,546,879
to Abdulwahab Al-Qatami, Kenneth Alpart, Antaeus Enterprises, Inc.,
Douglas Y. Bech, William Beinecke, Craig Bere, Cook Investors Limited
Partnership, John and Patricia Cook, Draper Associates, L.P., Polly C.
Draper, David A. Evans, Kevin Flaherty, Jeffrey S. Gilmore, Dorothy G.
Gorman, Granite Capital, L.P., Jean Guex-Crosier, Laurence M. Haar,
Lawrence B. and Rebekah Helzel Living Trust, James G. Herrell, David
Kirshman, Lambert Family Trust, Paul G. Lego, Dalton W. Martin, Marwit
Capital Company, L.P., Janet Orttung-Morrow Family Trust, Newman Family
1990 Revocable Trust u/a dated 5/30/90, Robert L. Newman and Jan Newman,
Trustees, Katherine Pennell, Poly Ventures II, Limited Partnership,
Mindy Printz-Kopelson, Prism Partners I, Rebecca S. Draper Living Trust,
Lawrence H. Rose, John P. Rosenthal, Martin Rosman, Saratoga Springs
Co., Ltd., Irwin W. Silverberg, Strome Family Trust, Jeffrey and Janis
Susskind, Trustees FBO The Susskind Family Trust U/A/D 10/27/93, Victor
Szanto MD, Talkot Partners II, LLC, Timothy Draper Living Trust,
Traslader SA and Michael D. Waresh.
6. In March 1996, the Registrant issued 254,350 shares of its Series P
Redeemable Preferred Stock to Ailicec International Enterprises Limited
at a purchase price of $7.50 per share pursuant to the conversion of
$1,907,621 of debt.
7. As of March 1996, the Registrant granted options to purchase an
aggregate of 401,999 shares of its Common Stock to Steven J. Carnevale,
certain affiliates of Endeavor Capital Management and Thomas B. Akin
with an exercise price of $1.72 price per share as a finders fee with
respect to the Series F Convertible Preferred Stock financing.
8. In July 1996, the Registrant issued a promissory note in the amount of
$250,000 to the Crandell Group, Inc. as part of the payment for the
acquisition of substantially all of the assets of the Crandell Group,
Inc.
9. In December 1996, the Registrant issued warrants to purchase an
aggregate of 100,000 shares of its Common Stock to Michael Crandell and
Larry Crandell at a purchase price of $1.75 per share.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section
3(b) of the Securities Act, as transactions by an issuer not involving a
public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each such transaction represented their intention
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and instruments issued in such transactions.
All recipients had adequate access, through their relationships with the
Company, to information about the Registrant.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Underwriting Agreement (draft of March 20, 1997).
3.1 Certificate of Incorporation of Registrant filed on August 3, 1988, as
currently in effect.
3.2 Certificate of Amendment of Certificate of Incorporation, as filed on
October 31, 1990.
3.3 Certificate of Amendment of Certificate Incorporation, as filed on
August 13, 1991.
3.4 Certificate of Amendment of Certificate of Incorporation, filed on
February 12, 1996.
3.5 Certificate of Amendment of Certificate of Incorporation filed on
February 12, 1996.
3.6 Certificate of Amendment of Certificate of Incorporation filed on
November 4, 1996.
3.7 Amended Certificate of Designation of Series A Preferred Stock, as
currently in effect.
3.8 Certificate of Designation of Series B Preferred Stock, as currently in
effect.
3.9 Certificate of Designation of Series C Preferred Stock, as currently in
effect.
3.10 Certificate of Designation of Series D Preferred Stock, as currently in
effect.
3.11 Certificate of Designation of Series E Preferred Stock, as currently in
effect.
3.12 Amended Certificate of Designation of Series E Preferred Stock, as
currently in effect.
3.13 Certificate of Designation of Series P Preferred Stock, as currently in
effect.
3.14 Certificate of Designation of Series F Preferred Stock, as currently in
effect.
3.15 Form of Restated Certificate of Incorporation of Registrant to be filed
upon the closing of the Offering made under this Registration Statement.
3.16 Amended and Restated Bylaws of Registrant, as currently in effect.
3.17 Form of Amended and Restated Bylaws to be adopted effective as of the
closing of the Offering made under this Registration Statement.
4.1* Specimen Common Stock Certificate.
5.1* Opinion of General Counsel Associates LLP.
10.1 Form of Indemnification Agreement between Registrant and each of its
directors and officers.
10.2 1989 Stock Option Plan and forms of Stock Option Agreements thereunder.
10.3 1995 Stock Plan, as amended and restated, and form of Stock Option
Agreement thereunder.
10.4 1997 Director Stock Option Plan and form of Stock Option Agreement
thereunder.
10.5 1997 Employee Stock Purchase Plan and forms of agreements thereunder.
10.6 Lease Agreement dated December 1, 1992 between Registrant and Lincoln
Menlo Phase I Associates Limited for Menlo Park, California office.
10.7 Lease dated December 18, 1991 between Crandell Development Corporation
and Robert S. Grant for Santa Barbara, California office.
10.8 Registration Rights Agreement dated March 5, 1997 by and among the
Registrant and Rudy Prince, Lon B. Radin and Virginia Snyder.
10.9 Stock and Warrant Purchase Agreement dated as of August 31, 1988 by and
among Registrant and purchasers of 299,995 shares of Series A Preferred,
as amended February 1994.
10.10 Preferred Stock Purchase Agreement dated as of December 16, 1988 by and
among Registrant and purchasers of 336,000 shares of Series A Preferred,
as amended February 1994.
10.11 Preferred Stock Purchase Agreement dated as of June 22, 1989 by and
between Registrant and David A. Brewer.
10.12 Form of Subscription and Stock Purchase Agreement dated January 1991 by
and between Registrant and certain purchasers of Series A Preferred
Stock.
10.13 Form of Subscription and Stock Purchase Agreement dated July 1989 by and
between Registrant and certain purchasers of shares of Series B
Preferred Stock.
10.14 Form of Subscription and Stock Purchase Agreement dated December 1989 by
and between Registrant and certain purchasers of shares of Series B
Preferred Stock.
10.15 Form of Subscription and Stock Purchase Agreement dated August/September
1990 by and between Registrant and certain purchasers of shares of
Series C Preferred Stock.
10.16 Subscription and Stock Purchase Agreement for the purchase of shares of
Series C Preferred Stock dated September 6, 1990 by and between
Registrant and Draper Associates Polaris Fund.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.17 Subscription and Stock Purchase Agreement dated September 7, 1990 by
and between Registrant and Adlar Turnkey Manufacturing Corporation.
10.18 Form of Subscription and Stock Purchase Agreement for shares of Series
D and Series E Preferred Stock and Warrants dated July 1991 by and
between Registrant and certain purchasers of shares of Series D and
Series E Preferred Stock.
10.19 Series E Preferred Stock Purchase Agreement dated August 18, 1991, as
amended as of January 30, 1996, by and between Registrant and Ailicec
California Corporation.
10.20 Series F Preferred Stock Purchase Agreement dated as of March 5, 1996
by and between Registrant and purchasers of Series F Preferred Stock.
10.21 Purchase and Debt Restructuring Agreement dated as of August 3, 1994
by and between Registrant and Ailicec International Enterprises
Limited.
10.22 Note Purchase Agreement dated August 3, 1994 by and between Registrant
and certain purchasers of notes and warrants for the purchase of
Common Stock.
10.23 Warrant to Purchase Stock dated December 31, 1994 by and between
Registrant and Ailicec International Enterprises Limited.
10.24 Common Stock Purchase Warrant dated December 16, 1996, and an
amendment thereto dated February 13, 1997, by and between Registrant
and Michael Crandell.
10.25 Common Stock Purchase Warrant dated December 16, 1996, and an
amendment thereto dated February 13, 1997, by and between Registrant
and Larry Crandell.
10.26 Asset Purchase Agreement dated July 31, 1996, as amended December 16,
1996, by and between Registrant and the Crandell Group, Inc.
10.27*+ Development Agreement dated September 25, 1991 and amended as of
February 12, 1997 by and between Registrant and Ailicec International
Enterprises Limited.
10.28 Common Stock Purchase Option dated as of March 29, 1996 by and between
Registrant and Steven J. Carnevale.
10.29 Common Stock Purchase Option dated as of March 29, 1996 by and between
Registrant and Thomas B. Aikin.
10.30 Promissory Note to Lon B. Radin dated March 1, 1992 from Registrant.
10.31*+ Development and Supply Agreement dated June 30, 1995 by and between
Registrant and Samsung Electronics Corporation.
10.32*+ Software License Agreement dated September 30, 1996 by and between
Registrant and Oki Data Corporation.
10.33*+ Supply and License Agreement dated November 1, 1996 by and between
Registrant and Pixel Magic, Inc.
10.34*+ Facsimile Product Development Agreement dated June 9, 1994 by and
between Registrant and Xerox Corporation.
10.35*+ Facsimile Product Development Agreement dated November 23, 1994 by and
between Registrant and Xerox Corporation.
10.36*+ Master Development, Purchase and Distribution License Agreement dated
effective as of January 31, 1997 by and between Registrant and
Hewlett-Packard Company.
10.37 Employment Agreement dated July 31, 1996 between Registrant and
Michael Crandell.
10.38 Security Agreement dated July 31, 1996 by and between Registrant and
the Crandell Group, Inc.
10.39*+ OEM Purchase Agreement dated February 22, 1995, as amended February
21, 1997, by and between Registrant and Oki America, Inc.
10.40 Loan and Security Agreement dated August 23, 1996 by and between
Registrant and Cupertino National Bank & Trust and the amendment
thereto dated March 11, 1997.
10.41 Form of Dealer Agreement.
11.1 Calculation of loss per share.
23.1 Independent Auditors' Consent and Report on Schedule (see page S-1).
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested.
II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts (see page S-2)
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Menlo Park, State of
California, on the 21st day of March, 1997.
JetFax, Inc.
/s/ Edward R. Prince, III
By___________________________________
EDWARD R. PRINCE, III, PRESIDENT,
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Edward R. Prince, III, Allen K. Jones, Clifford
S. Robbins and Susan J. Skaer and each of them, his attorneys-in-fact, each
with the power of substitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents or any of
them, or his, or her or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURES TITLE DATE
/s/ Edward R. Prince, III President, Chief March 21, 1997
- ------------------------------------- Executive Officer
(EDWARD R. PRINCE, III) and Chairman of the
Board (Principal
Executive Officer)
/s/ Allen K. Jones Vice President of March 21, 1997
- ------------------------------------- Finance, Chief
(ALLEN K. JONES) Financial Officer,
and Secretary
(Principal
Financial and
Accounting Officer)
/s/ Thomas B. Akin Director March 21, 1997
- -------------------------------------
(THOMAS B. AKIN)
/s/ Douglas Y. Bech Director March 21, 1997
- -------------------------------------
(DOUGLAS Y. BECH)
/s/ Steven J. Carnevale Director March 21, 1997
- -------------------------------------
(STEVEN J. CARNEVALE)
/s/ Chung Chiu Director March 21, 1997
- -------------------------------------
(CHUNG CHIU)
/s/ Shelley Harrison Director March 21, 1997
- -------------------------------------
(SHELLEY HARRISON)
/s/ Edward R. Prince, Jr. Director March 21, 1997
- -------------------------------------
(EDWARD R. PRINCE, JR.)
/s/ Lon B. Radin Director March 21, 1997
- -------------------------------------
(LON B. RADIN)
II-6
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
JetFax, Inc.:
We consent to the use in this Registration Statement of JetFax, Inc. on Form
S-1 of our report dated February 7, 1997 (March 18, 1997 as to Note 15),
appearing in the Prospectus, which is a part of this Registration Statement,
and to the references to us under the headings "Selected Financial Data" and
"Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of JetFax, Inc., listed
in Item 16(b). This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
Deloitte & Touche LLP
San Jose, California
March 21, 1997
S-1
<PAGE>
SCHEDULE II
JETFAX, INC.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COST AND DEDUCTION/ END OF
PERIOD EXPENSES WRITE-OFF PERIOD
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1995:
Accounts receivable allowance.. $252 $(119) $ (8) $125
YEAR ENDED MARCH 31, 1996:
Accounts receivable allowance.. 125 187 (2) 310
Accrued loss on inventory
purchase commitment........... -- 760 (111) 649
NINE MONTHS ENDED DECEMBER 31,
1996:
Accounts receivable allowance.. 310 106 (20) 396
Accrued loss on inventory
purchase commitment........... 649 (280) (369) --
</TABLE>
S-2
<PAGE>
EXHIBIT 1.1
OHS DRAFT 3/20/97
JETFAX, INC.
3,500,000 Shares/1/
Common Stock
UNDERWRITING AGREEMENT
----------------------
May ___, 1997
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Dear Sirs:
JetFax, Inc., a Delaware corporation (the "Company"), the selling
securityholders named in Schedule 2 hereto (the "Selling Securityholders") and
Edward R. Prince, III, Chairman, President and Chief Executive Officer of the
Company (the "Founding Stockholder"), hereby confirm their agreement with the
several underwriters named in Schedule 1 hereto (the "Underwriters"), for whom
you have been duly authorized to act as representatives (in such capacities, the
"Representatives"), as set forth below. If you are the only Underwriters, all
references herein to the Representatives shall be deemed to be to the
Underwriters.
1. Securities. Subject to the terms and conditions herein
----------
contained, the Company proposes to issue and sell and the Selling
Securityholders propose to sell to the several Underwriters an aggregate of
2,750,000 shares and 750,000 shares, respectively (the "Firm Securities"), of
the Company's Common Stock, par value $.01 per share ("Common Stock"). The
Company also proposes to issue and sell to the several Underwriters not more
than 525,000 additional shares of Common Stock if requested by the
Representatives as provided in Section 4 of this Agreement. Any and all shares
of Common Stock to be purchased by the Underwriters pursuant to such option are
referred to
- ---------
/1/ Plus an option to purchase from the Company up to 525,000 additional shares
to cover over-allotments.
<PAGE>
herein as the "Option Securities", and the Firm Securities and any
Option Securities are collectively referred to herein as the "Securities".
2. Representations and Warranties of the Company and the Founding
--------------------------------------------------------------
Stockholder. The Company and the Founding Stockholder represent and warrant to,
- ------------
and agree with, jointly and severally, each of the several Underwriters that:
(a) A registration statement on Form S-1 (File No.
333-_________) with respect to the Securities, including a prospectus subject to
completion, has been filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), and one or more amendments to such registration statement may have been
so filed. After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Securities, that shall identify the
Preliminary Prospectus (as hereinafter defined) that it supplements containing
such information as is required or permitted by Rules 434, 430A and 424(b) under
the Act or (B) if the Company does not rely on Rule 434 under the Act, a
prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in such
registration statement), with such changes or insertions as are required by Rule
430A under the Act or permitted by Rule 424(b) under the Act, and in the case of
either clause (i)(A) or (i)(B) of this sentence as have been provided to and
approved by the Representatives prior to the execution of this Agreement, or
(ii) if such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Representatives prior to the
execution of this Agreement. The Company may also file a related registration
statement with the Commission pursuant to Rule 462(b) under the Act for the
purpose of registering certain additional Securities, which registration shall
be effective upon filing with the Commission. As used in this Agreement, the
term "Original Registration Statement" means the registration statement
initially filed relating to the Securities, as amended at the time when it was
or is declared effective, including all financial schedules and exhibits thereto
and including any information omitted therefrom pursuant to Rule 430A under the
Act and included in the Prospectus (as hereinafter defined); the term "Rule
462(b) Registration Statement" means any registration statement filed with the
Commission pursuant to Rule 462(b) under the Act (including the Registration
Statement and any Preliminary Prospectus or Prospectus incorporated therein at
the time such Registration Statement becomes effective); the term "Registration
Statement" includes both the Original Registration Statement and any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective); the term "Prospectus" means:
A. if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements;
2
<PAGE>
B. if the Company does not rely on Rule 434 under the Act, the prospectus
first filed with the Commission pursuant to Rule 424(b) under the Act;
or
C. if the Company does not rely on Rule 434 under the Act and if no
prospectus is required to be filed pursuant to Rule 424(b) under the
Act, the prospectus included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference herein to the "date" of a Prospectus
that includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or
suspending use of any Preliminary Prospectus. When any Preliminary Prospectus
was filed with the Commission it (i) contained all statements required to be
stated therein in accordance with, and complied in all material respects with
the requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. When the Registration Statement or any amendment thereto was or is
declared effective, it (i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the Prospectus or
any Term Sheet that is a part thereof or any amendment or supplement to the
Prospectus is filed with the Commission pursuant to Rule 424(b) (or, if the
Prospectus or part thereof or such amendment or supplement is not required to be
so filed, when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is declared effective) and
on the Firm Closing Date and any Option Closing Date (both as hereinafter
defined), the Prospectus, as amended or supplemented at any such time, (i)
contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing provisions of this paragraph (b) do not
apply to statements or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein.
(c) If the Company has elected to rely on Rule 462(b) and the
Rule 462(b) Registration Statement has not been declared effective (i) the
Company has filed a Rule 462(b) Registration Statement in compliance with and
that is effective upon filing pursuant to Rule 462(b) and has received
confirmation of its receipt and (ii) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection with
the filing of the Rule 462(b) Registration Statement, in compliance with Rule
111 promulgated under the Act or the Commission has received payment of such
filing fee.
3
<PAGE>
(d) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to transact business as foreign corporations
and is in good standing under the laws of all other jurisdictions where the
ownership or leasing of its property or the conduct of its business requires
such qualification, except where the failure to be so qualified, taken as a
whole, does not amount to a material liability or disability to the Company.
(e) The Company has full corporate power to own or lease its
property and conduct its business as described in the Registration Statement and
the Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus; and the Company has full corporate power to enter into
this Agreement and to carry out all the terms and provisions hereof to be
carried out by it.
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus. All of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. The Firm Securities and the Option Securities
have been duly authorized and at the Firm Closing Date or the related Option
Closing Date (as the case may be), after payment therefor in accordance
herewith, will be validly issued, fully paid and nonassessable. No holders of
outstanding shares of capital stock of the Company are entitled as such to any
preemptive or other rights to subscribe for any of the Securities, and no holder
of securities of the Company has any right which has not been fully exercised or
waived (either expressly or through the expiration of applicable notice periods)
to require the Company to register the offer or sale of any securities owned by
such holder under the Act in the public offering contemplated by this Agreement.
(g) The capital stock of the Company conforms to the description
thereof contained in the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus.
(h) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no outstanding (A) securities or obligations of the Company convertible into
or exchangeable for any capital stock of the Company, (B) warrants, rights or
options to subscribe for or purchase from the Company any such capital stock or
any such convertible or exchangeable securities or obligations or (C)
obligations of the Company to issue any shares of capital stock, any such
convertible or exchangeable securities or obligations, or any such warrants,
rights or options.
(i) The financial statements and schedule of the Company
included in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) fairly present the
financial position of the Company and the results of operations and changes in
financial condition as of the dates and periods therein specified. Such
financial statements and schedule have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise noted therein). The selected financial
data set forth under the caption "Selected Financial Data" in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly
4
<PAGE>
present, on the basis stated in the Prospectus (or such Preliminary Prospectus),
the information included therein.
(j) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and delivered their report with respect to the audited
financial statements and schedule included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), are independent public accountants as required by the
Act and the applicable rules and regulations thereunder.
(k) The execution and delivery of this Agreement have been duly
authorized by the Company and this Agreement has been duly executed and
delivered by the Company, and is the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to
limitations imposed by bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium, or other laws relating to or affecting the
rights of creditors generally and subject to general principles of equity.
(l) No legal or governmental proceedings are pending to which
the Company is a party or to which the property of the Company is subject that
are required to be described in the Registration Statement or the Prospectus and
are not described therein (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), and no such proceedings have been threatened
against the Company or with respect to any of its property; and no contract or
other document is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described therein (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) or filed as required.
(m) The issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the compliance by the
Company with the other provisions of this Agreement and the consummation of the
other transactions herein contemplated do not (i) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained, such as may be required under
state securities or blue sky laws and, if the registration statement filed with
respect to the Securities (as amended) is not effective under the Act as of the
time of execution hereof, such as may be required (and shall be obtained as
provided in this Agreement) under the Act or (ii) conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other agreement
or instrument to which the Company is a party or by which the Company or any of
its property is bound, or the charter documents or by-laws of the Company, or
any statute or any judgment, decree, order, rule or regulation of any court or
other governmental authority or any arbitrator applicable to the Company.
(n) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus, the Company has not
sustained any material loss or interference with its business or property from
fire, flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental proceeding and
there has not been any material adverse change, or any development involving a
prospective material adverse change,
5
<PAGE>
in the condition (financial or otherwise), management, business prospects, net
worth or results of operations of the Company, except in each case as described
in or contemplated by the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus.
(o) The Company has not, directly or indirectly, (i) taken any
action designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) since the filing of the Registration Statement (A) sold, bid
for, purchased, or paid anyone any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company (except for
the sale of Securities by the Selling Securityholders under this Agreement).
(p) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), (i) the Company
has not incurred any material liability or obligation, direct or contingent, nor
entered into any material transaction not in the ordinary course of business;
(ii) the Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind on its
capital stock; and (iii) there has not been any material change in the capital
stock, short-term debt or long-term debt of the Company, except in each case as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(q) The Company has good and marketable title in fee simple to
all items of real property and marketable title to all personal property owned
by it, in each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not interfere
with the use made or proposed to be made of such property by the Company, and
any real property and buildings held under lease by the Company are held under
valid, subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made or proposed to be made of such
property and buildings by the Company, in each case except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(r) No labor dispute with the employees of the Company exists
or is threatened or imminent that could result in a material adverse change in
the condition (financial or otherwise), business prospects, net worth or results
of operations of the Company, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(s) The Company owns or possesses, or can acquire on reasonable
terms, all material patents, patent applications, trademarks, service marks,
trade names, licenses, copyrights and proprietary or other confidential
information currently employed by it in connection with its business, and the
Company has not received any notice of infringement of or conflict with asserted
rights of any third party with respect to any of the foregoing which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a material adverse change in the
6
<PAGE>
condition (financial or otherwise), business prospects, net worth or results of
operations of the Company, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(t) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; the Company has not been
refused any insurance coverage sought or applied for; and the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company, except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(u) The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and the Company has not received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
material adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(v) The Company will conduct its operations in a manner that
will not subject it to registration as an investment company under the
Investment Company Act of 1940, as amended, and this transaction will not cause
the Company to become an investment company subject to registration under such
Act.
(w) The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a material
adverse effect on the Company) and has paid all taxes required to be paid by it
and any other assessment, fine or penalty levied against it, to the extent that
any of the foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(x) The Company is not in violation of any federal or state
law or regulation relating to occupational safety and health or to the storage,
handling or transportation of hazardous or toxic materials and the Company has
received all permits, licenses or other approvals required of it under
applicable federal and state occupational safety and health and environmental
laws and regulations to conduct its business, and the Company is in compliance
with all terms and conditions of any such permit, license or approval, except
any such violation of law or regulation, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals which would not, singly or in the
aggregate, result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of
7
<PAGE>
operations of the Company, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(y) Each certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters shall be deemed
to be a representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
(z) The Company does not own any shares of stock or any other
equity securities of any corporation or have any equity interest in any firm,
partnership, association or other entity, except as described in or contemplated
by the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(aa) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(bb) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which the
Company is a party or by which the Company or its property is bound or may be
affected in any material adverse respect with regard to the property, business
or operations of the Company.
(cc) The Company has not distributed and, prior to the later
of (i) the Firm Closing Date and (ii) the completion of the distribution of the
Securities, will not distribute any offering material in connection with the
offering and sale of the Securities other than the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or other materials, if any, permitted by the Act.
(dd) The Company has complied with all provisions of Section
517.075, Florida Statutes and all regulations promulgated thereunder relating to
doing business with the Government of Cuba or with any person or any affiliate
located in Cuba and is in compliance with all provisions of the U.S. Cuban
Liberty and Democratic Solidarity (LIBERTAD) Act of 1996.
(ee) None of the Company or any director, officer, agent,
employee or other person acting on behalf of the Company has (i) used, or
authorized the use of, any corporate or other funds for unlawful payments,
contributions, gifts or entertainment, (ii) made unlawful expenditures relating
to political activity to government officials or others, or (iii) established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), except where
doing so would not in the aggregate have a material adverse effect on the
Company. None of the Company or any director, officer, agent, employee or
8
<PAGE>
other person acting on behalf of the Company has accepted or received any
unlawful contributions, payments, gifts or expenditures.
(ff) Except where such failures to comply or violations would
not in the aggregate have a material adverse effect on the Company, (i) the
Company has complied with the Immigration Reform and Control Act of 1986 and all
regulations promulgated thereunder ("IRCA") with respect to the completion and
maintenance of Forms I-9, Employment Verification Forms, for all of its current
employees and reverification of the employment status of any and all employees
whose employment authorization documents indicated a limited period of
employment authorization; (ii) with respect to all former employees who left the
Company's employment within three years prior to the date hereof, the Company
has complied with IRCA with respect to the maintenance of Forms I-9 for at lease
three years or for one year beyond the date of termination, whichever is later;
(iii) the Company has had no immigration violations and has employed only
individuals authorized to work in the United States and has never been the
subject of any inspection or investigation relating to its compliance with or
violation of IRCA; and (iv) the Company has not been warned, fined or otherwise
penalized by reason or any failure to comply with IRCA, and no such proceeding
is pending or threatened.
(gg) The Company's written agreement with Hewlett-Packard
Company filed as Exhibit 10.36 to the Registration Statement (the "Hewlett-
Packard Agreement") is a legal, valid and binding obligation of the Company and,
to the Company's knowledge, Hewlett-Packard Company ("Hewlett-Packard"), is
enforceable in accordance with its terms against the Company and, to the
Company's knowledge, Hewlett-Packard (subject to limitations imposed by
bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance,
moratorium, or other laws relating to or affecting the rights of creditors
generally and subject to general principles of equity), and neither the Company
nor, to the Company's knowledge, Hewlett-Packard is now in violation or breach
of, or in default with respect to, any material provision thereof.
(hh) The statements contained in each Preliminary Prospectus
and in the Prospectus, and any supplements or amendments thereto, relating to
Hewlett-Packard and the Company's relationship with Hewlett-Packard have not
included any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. Representations and Warranties of the Selling Securityholders.
-------------------------------------------------------------
Each Selling Securityholder represents and warrants to, and agrees with, each of
the several Underwriters that:
(a) Such Selling Securityholder has full power to enter into
this Agreement and to sell, assign, transfer and deliver to the Underwriters the
Securities to be sold by such Selling Securityholder hereunder in accordance
with the terms of this Agreement, and this Agreement has been duly executed and
delivered by such Selling Securityholder.
(b) Such Selling Securityholder has duly executed and delivered
a power of attorney and custody agreement (with respect to such Selling
Securityholder, the "Power-of-Attorney" and the "Custody Agreement",
respectively), each in the form heretofore
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<PAGE>
delivered to the Representatives, appointing Edward R. Prince, III or Allen K.
Jones as such Selling Securityholder's attorney-in-fact (the "Attorney-in-Fact")
with authority to execute, deliver and perform this Agreement on behalf of such
Selling Securityholder and appointing American Stock Transfer & Trust Company as
custodian thereunder (the "Custodian"). Certificates in negotiable form,
endorsed in blank or accompanied by blank stock powers duly executed, with
signatures appropriately guaranteed, representing the Securities to be sold by
such Selling Securityholder hereunder have been deposited with the Custodian
pursuant to the Custody Agreement for the purpose of delivery pursuant to this
Agreement. Such Selling Securityholder has full power to enter into the Custody
Agreement and the Power-of-Attorney and to perform its obligations under the
Custody Agreement. The Custody Agreement and the Power-of-Attorney have been
duly executed and delivered by such Selling Securityholder and, assuming due
authorization, execution and delivery by the Custodian, are the legal, valid,
binding and enforceable instruments of such Selling Securityholder. Such Selling
Securityholder agrees that each of the Securities represented by the
certificates on deposit with the Custodian is subject to the interests of the
Underwriters hereunder, that the arrangements made for such custody, the
appointment of the Attorney-in-Fact and the right, power and authority of the
Attorney-in-Fact to execute and deliver this Agreement, to agree on the price at
which the Securities (including such Selling Securityholder's Securities) are to
be sold to the Underwriters, and to carry out the terms of this Agreement, are
to that extent irrevocable and that the obligations of such Selling
Securityholder hereunder shall not be terminated, except as provided in this
Agreement or the Custody Agreement, by any act of such Selling Securityholder,
by operation of law or otherwise, whether in the case of any individual Selling
Securityholder by the death or incapacity of such Selling Securityholder, in the
case of a trust or estate by the death of the trustee or trustees or the
executor or executors or the termination of such trust or estate, or in the case
of a corporate or partnership Selling Securityholder by its liquidation or
dissolution or by the occurrence of any other event. If any individual Selling
Securityholder, trustee or executor should die or become incapacitated or any
such trust should be terminated, or if any corporate or partnership Selling
Securityholder shall liquidate or dissolve, or if any other event should occur,
before the delivery of such Securities hereunder, the certificates for such
Securities deposited with the Custodian shall be delivered by the Custodian in
accordance with the respective terms and conditions of this Agreement as if such
death, incapacity, termination, liquidation or dissolution or other event had
not occurred, regardless of whether or not the Custodian or the Attorney-in-Fact
shall have received notice thereof.
(c) Such Selling Securityholder is the lawful owner of the
Securities to be sold by such Selling Securityholder hereunder and upon sale and
delivery of, and payment for, such Securities, as provided herein, such Selling
Securityholder will convey good and marketable title to such Securities, free
and clear of any security interests, liens, encumbrances, equities, claims or
other defects.
(d) Such Selling Securityholder has not, directly or
indirectly, (i) taken any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase any
other securities
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<PAGE>
of the Company (except for the sale of Securities by the Selling Securityholders
under this Agreement).
(e) Such Selling Securityholder has not distributed and, prior
to the later of (i) the Firm Closing Date and (ii) the completion of the
distribution of the Securities, will not distribute any offering material in
connection with the offering and sale of the Securities other than the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or other materials, if
any, permitted by the Act.
(f) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Internal Revenue Code of 1986, as
amended, with respect to the transactions herein contemplated, each Selling
Securityholder agrees to deliver to you prior to or on the Firm Closing Date, as
hereinafter defined, a properly completed and executed United States Treasury
Department Form W-8 or W-9 (or other applicable form of statement specified by
Treasury Department regulations in lieu thereof).
(g) The sale by such Selling Securityholder of Securities
pursuant hereto is not prompted by any adverse information concerning the
Company that is not set forth in the Registration Statement or the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(h) The sale of the Securities to the Underwriters by such
Selling Securityholder pursuant to this Agreement, the compliance by such
Selling Securityholder with the other provisions of this Agreement and the
Custody Agreement and the consummation of the other transactions herein
contemplated do not (i) require the consent, approval, authorization,
registration or qualification of or with any governmental authority, except such
as have been obtained, such as may be required under state securities or blue
sky laws and, if the registration statement filed with respect to the Securities
(as amended) is not effective under the Act as of the time of execution hereof,
such as may be required (and shall be obtained as provided in this Agreement)
under the Act, or (ii) conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which such
Selling Securityholder is a party or by which such Selling Securityholder or any
of such Selling Securityholder's properties are bound, or any statute or any
judgment, decree, order, rule or regulation of any court or other governmental
authority or any arbitrator applicable to such Selling Securityholder.
(i) To the extent that any statements or omissions are made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Selling Securityholder specifically
for use therein, such Preliminary Prospectus did, and the Registration Statement
and the Prospectus and any amendments or supplements thereto, when they become
effective or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act and the respective rules
and regulations of the Commission thereunder and will not 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 the light of the
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<PAGE>
circumstances under which they are made, not misleading. Such Selling
Securityholder has reviewed the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and the Registration
Statement, and the information regarding such Selling Securityholder set forth
therein under the caption "Principal and Selling Stockholders" is complete and
accurate.
(j) If such Selling Securityholder is a director of the
Company, such Selling Securityholder has reviewed the Registration Statement,
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto and such Preliminary Prospectus did, and the Registration Statement and
the Prospectus and any amendments or supplements thereto, when they become
effective or are filed with the Commission, as the case may be, will not 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
the light of the circumstances under which they are made, not misleading.
4. Purchase, Sale and Delivery of the Securities.
---------------------------------------------
(a) On the basis of the representations, warranties, agreements
and covenants herein contained and subject to the terms and conditions herein
set forth, the Company and each of the Selling Securityholders, severally and
not jointly, agree to issue and sell to each of the Underwriters, and each of
the Underwriters, severally and not jointly, agrees to purchase from the
Company, at a purchase price of $________ per share, the number of Firm
Securities set forth opposite the name of such Underwriter in Schedule 1 hereto.
One or more certificates in definitive form for the Firm Securities that the
several Underwriters have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Representatives
request upon notice to the Company at least 48 hours prior to the Firm Closing
Date, shall be delivered by or on behalf of the Company and the Selling
Securityholders to the Representatives for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by wire transfer in same-day funds (the "Wired Funds")
to the respective accounts of the Company and the Selling Securityholders. Such
delivery of and payment for the Firm Securities shall be made at the offices of
General Counsel Associates LLP, 1891 Landings Drive, Mountain View, California
94043 at 9:30 A.M., New York time, on May ___, 1997, or at such other place,
time or date as the Representatives and the Company and the Selling
Securityholders may agree upon or as the Representatives may determine pursuant
to Section 11 hereof, such time and date of delivery against payment being
herein referred to as the "Firm Closing Date". The Company and the Selling
Securityholders will make such certificate or certificates for the Firm
Securities available for checking and packaging by the Representatives at the
offices in New York, New York of the Company's transfer agent or registrar or of
Prudential Securities Incorporated at least 24 hours prior to the Firm Closing
Date.
(b) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Securities as contemplated
by the Prospectus, the Company hereby grants to the several Underwriters an
option to purchase, severally and not jointly, the Option Securities. The
purchase price to be paid for any Option Securities shall be the same price per
share as the price per share for the Firm Securities set forth above in
paragraph (a) of this Section 4. The option granted hereby may be exercised as
to all or any part of the Option Securities from time to time within thirty days
after the date of the Prospectus (or, if such thirtieth day shall be a Saturday
or
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<PAGE>
Sunday or a holiday, on the next business day thereafter when the New York Stock
Exchange is open for trading). The Underwriters shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such option. The Representatives may from time to time exercise the option
granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the Company setting forth the aggregate number of Option Securities
as to which the several Underwriters are then exercising the option and the date
and time for delivery of and payment for such Option Securities. Any such date
of delivery shall be determined by the Representatives but shall not be earlier
than two business days or later than five business days after such exercise of
the option and, in any event, shall not be earlier than the Firm Closing Date.
The time and date set forth in such notice, or such other time on such other
date as the Representatives and Company may agree upon or as the Representatives
may determine pursuant to Section 11 hereof, is herein called the "Option
Closing Date" with respect to such Option Securities. Upon exercise of the
option as provided herein, the Company shall become obligated to sell to each of
the several Underwriters, and, subject to the terms and conditions herein set
forth, each of the Underwriters (severally and not jointly) shall become
obligated to purchase from the Company, the same percentage of the total number
of the Option Securities as to which the several Underwriters are then
exercising the option as such Underwriter is obligated to purchase of the
aggregate number of Firm Securities, as adjusted by the Representatives in such
manner as they deem advisable to avoid fractional shares. If the option is
exercised as to all or any portion of the Option Securities, one or more
certificates in definitive form for such Option Securities, and payment
therefor, shall be delivered on the related Option Closing Date in the manner,
and upon the terms and conditions, set forth in paragraph (a) of this Section 4,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph (b), to refer to such Option
Securities and Option Closing Date, respectively.
(c) The Company and the Selling Securityholders hereby
acknowledge that the wire transfer by or on behalf of the Underwriters of the
purchase price for any Securities does not constitute closing of a purchase and
sale of the Securities. Only execution and delivery of a receipt for Securities
by the Underwriters indicates completion of the closing of a purchase of the
Securities from the Company and/or the Selling Securityholders. Furthermore, in
the event that the Underwriters wire funds to the Company and/or the Selling
Securityholders prior to the completion of the closing of a purchase of
Securities, the Company and/or the Selling Securityholders hereby acknowledge
that until the Underwriters execute and deliver a receipt for the Securities, by
facsimile or otherwise, the Company and/or the Selling Securityholders will not
be entitled to the Wired Funds and shall return the Wired Funds to the
Underwriters as soon as practicable (by wire transfer of same-day funds) upon
demand. In the event that the closing of a purchase of Securities is not
completed and the Wired Funds are not returned by the Company and/or the Selling
Securityholders to the Underwriters on the same day the Wired Funds were
received by the Company and/or the Selling Securityholders, the Company and/or
the Selling Securityholders agree to pay to the Underwriters in respect of each
day the Wired Funds are not returned by it, in same-day funds, interest on the
amount of such Wired Funds in an amount representing the Underwriters' cost of
financing as reasonably determined by Prudential Securities Incorporated.
(d) It is understood that either of you, individually and not
as one of the Representatives, may (but shall not be obligated to) make payment
on behalf of any Underwriter or
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<PAGE>
Underwriters for any of the Securities to be purchased by such Underwriter or
Underwriters. No such payment shall relieve such Underwriter or Underwriters
from any of its or their obligations hereunder.
5. Offering by the Underwriters. Upon your authorization of the
----------------------------
release of the Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus.
6. Covenants of the Company. The Company covenants and agrees with
------------------------
each of the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto to become effective as promptly as
possible. If required, the Company will file the Prospectus or any Term Sheet
that constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. During any time when a prospectus relating to the
Securities is required to be delivered under the Act, the Company (i) will
comply with all requirements imposed upon it by the Act and the rules and
regulations of the Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented, and
(ii) will not file with the Commission the prospectus, Term Sheet or the
amendment referred to in the second sentence of Section 2(a) hereof, any
amendment or supplement to such Prospectus, Term Sheet or any amendment to the
Registration Statement or any Rule 462(b) Registration Statement of which the
Representatives previously have been advised and furnished with a copy for a
reasonable period of time prior to the proposed filing and as to which filing
the Representatives shall not have given their consent. The Company will prepare
and file with the Commission, in accordance with the rules and regulations of
the Commission, promptly upon request by the Representatives or counsel for the
Underwriters, any amendments to the Registration Statement or amendments or
supplements to the Prospectus that may be necessary or advisable in connection
with the distribution of the Securities by the several Underwriters, and will
use its best efforts to cause any such amendment to the Registration Statement
to be declared effective by the Commission as promptly as possible. The Company
will advise the Representatives, promptly after receiving notice thereof, of the
time when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed and will provide evidence satisfactory to the Representatives of each
such filing or effectiveness.
(b) The Company will advise the Representatives, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Original
Registration Statement or any Rule 462(b) Registration Statement or any
amendment thereto or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
(ii) the suspension of the qualification of the Securities for offering or sale
in any jurisdiction, (iii) the institution, threatening or contemplation of any
proceeding for any such purpose or (iv) any request made by the Commission for
amending the Original Registration Statement or any Rule 462(b) Registration
Statement, for amending or supplementing the Prospectus or for additional
information. The Company will use its
14
<PAGE>
best efforts to prevent the issuance of any such stop order and, if any such
stop order is issued, to obtain the withdrawal thereof as promptly as possible.
(c) The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws of such
jurisdictions as the Representatives may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities, provided, however, that in connection therewith
-------- -------
the Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.
(d) If, at any time prior to the later of (i) the final date
when a prospectus relating to the Securities is required to be delivered under
the Act or (ii) the Option Closing Date, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary at
any time to amend or supplement the Prospectus to comply with the Act or the
rules or regulations of the Commission thereunder, the Company will promptly
notify the Representatives thereof and, subject to Section 6(a) hereof, will
prepare and file with the Commission, at the Company's expense, an amendment to
the Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) The Company will, without charge, provide (i) to the
Representatives and to counsel for the Underwriters a conformed copy of the
registration statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto) or any Rule 462(b)
Registration Statement, certified by the Secretary or an Assistant Secretary of
the Company to be true and complete copies thereof as filed with the Commission
by electronic transmission, (ii) to each other Underwriter, a conformed copy of
such registration statement or any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii) so long as a
prospectus relating to the Securities is required to be delivered under the Act,
as many copies of each Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto as the Representatives may reasonably request; without
limiting the application of clause (iii) of this sentence, the Company, not
later than (A) 6:00 P.M., New York City time, on the date of determination of
the public offering price, if such determination occurred at or prior to 10:00
A.M., New York City time, on such date or (B) 2:00 P.M., New York City time, on
the business day following the date of determination of the public offering
price, if such determination occurred after 10:00 A.M., New York City time, on
such date, will deliver to the Underwriters, without charge, as many copies of
the Prospectus and any amendment or supplement thereto as the Representatives
may reasonably request for purposes of confirming orders that are expected to
settle on the Firm Closing Date. The Company will provide or cause
to be provided to each of the Representatives, and to each Underwriter that so
requests in writing, a copy of each report on Form SR filed by the Company as
required by Rule 463 under the Act.
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<PAGE>
(f) The Company, as soon as practicable, will make generally
available to its securityholders and to the Representatives an earnings
statement of the Company that satisfies the provisions of Section 11(a) of the
Act and Rule 158 thereunder.
(g) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will not, directly or indirectly, without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, (i) offer, sell, offer to sell, contract to sell, pledge, grant
any option to purchase or otherwise sell or dispose (or announce any offer,
sale, offer of sale, contract of sale, pledge, grant of any option to purchase
or other sale or disposition) of any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common Stock for
a period of 180 days after the date hereof, except (A) pursuant to this
Agreement, (B) pursuant to outstanding options disclosed in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus),
(C) grants of options under the Company's 1995 Stock Plan or 1997 Director
Option Plan provided that such options are not exercisable prior to the
expiration of such 180 day period, (D) sales of Common Stock pursuant to the
Company's 1997 Employee Stock Purchase Plan and (E) pursuant to the terms of
convertible securities of the Company outstanding on the date hereof or (ii)
release any portion of the securities subject to lock-up agreements with the
Company described in the Registration Statement from the lock-up provisions of
such agreements.
(i) The Company will not, directly or indirectly, (i) take any
action designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) (A) sell, bid for, purchase, or pay anyone any compensation
for soliciting purchases of, the Securities or (B) pay or agree to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company (except for the sale of Securities by the Selling Securityholders
under this Agreement).
(j) The Company will obtain the agreements described in Section
9(h) hereof prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the
Registration Statement becomes effective or the period prior to the Option
Closing Date, any rumor, publication or event relating to or affecting the
Company shall occur as a result of which in your opinion the market price of the
Common Stock has been or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates a supplement to or
amendment of the Prospectus), the Company will, after notice from you advising
the Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of, and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(l) If the Company elects to rely on Rule 462(b), the Company
shall both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with Rule
111 promulgated under the Act by the earlier of (i)
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<PAGE>
10:00 P.M. Eastern time on the date of this Agreement and (ii) the time
confirmations are sent or given, as specified by Rule 462(b)(2).
(m) The Company will cause the Securities to be duly included
for quotation on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") prior to the commencement of the offering of the Securities. The
Company will ensure that the Securities remain included for quotation on the
Nasdaq National Market following the Firm Closing Date.
7. Covenants of the Selling Securityholders. Each of the Selling
----------------------------------------
Securityholders covenants and agrees with each of the Underwriters that:
(a) Each Selling Securityholder will not, directly or
indirectly, without the prior written consent of Prudential Securities
Incorporated, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any Securities legally or beneficially owned by
such Selling Securityholder or any securities convertible into, or exchangeable
or exercisable for, Securities for a period of 180 days after the date hereof.
(b) Each Selling Securityholder will not, directly or
indirectly, (i) take any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (ii) (A) sell, bid for,
purchase, or pay anyone any compensation for soliciting purchases of, the
Securities or (B) pay or agree to pay to any person any compensation for
soliciting another to purchase any other securities of the Company (except for
the sale of Securities by the Selling Securityholders under this Agreement).
8. Expenses.
--------
(a) The Company and the Selling Securityholders will pay all
costs and expenses incident to the performance of their respective obligations
under this Agreement, whether or not the transactions contemplated herein are
consummated or this Agreement is terminated pursuant to Section 13 hereof,
including all costs and expenses incident to (i) the printing or other
production of documents with respect to the transactions, including any costs of
printing the registration statement originally filed with respect to the
Securities and any amendment thereto, any Rule 462(b) Registration Statement,
any Preliminary Prospectus and the Prospectus and any amendment or supplement
thereto, this Agreement and any blue sky memoranda, (ii) all arrangements
relating to the delivery to the Underwriters of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company or the Selling
Securityholders, (iv) preparation, issuance and delivery to the Underwriters of
any certificates evidencing the Securities, including transfer agent's and
registrar's fees, (v) the qualification of the Securities under state securities
and blue sky laws, including filing fees and fees and disbursements of counsel
for the Underwriters relating thereto, (vi) the filing fees of the Commission
and the National Association of Securities Dealers, Inc. (the "NASD") relating
to the Securities, (vii) any quotation of the Securities on the Nasdaq National
Market, (viii) any meetings with prospective investors in the Securities (other
than as shall have been specifically approved by the Representatives
17
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to be paid for by the Underwriters) and (ix) advertising by, or pursuant to the
direction of, the Company relating to the offering of the Securities (other than
as shall have been specifically approved by the Representatives to be paid for
by the Underwriters). If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 9 hereof is not satisfied, because this Agreement is terminated
pursuant to Section 13 hereof or because of any failure, refusal or inability on
the part of the Company to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including counsel fees and
disbursements) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities. The Company shall not in any event
be liable to any of the Underwriters for the loss of anticipated profits from
the transactions covered by this Agreement.
9. Conditions of the Underwriters' Obligations. The obligations of
-------------------------------------------
the several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company, the Founding Stockholder and each
of the other Selling Securityholders contained herein as of the date hereof and
as of the Firm Closing Date, as if made on and as of the Firm Closing Date, to
the accuracy of the statements of the Company's officers made pursuant to the
provisions hereof, to the performance by the Company and each of the Selling
Securityholders of their covenants and agreements hereunder and to the following
additional conditions:
(a) If the Original Registration Statement or any amendment
thereto filed prior to the Firm Closing Date has not been declared effective as
of the time of execution hereof, the Original Registration Statement or such
amendment and, if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have been declared effective not later than
the earlier of (i) 11:00 A.M., New York time, on the date on which the amendment
to the Original Registration Statement or to the Registration Statement, as the
case may be, containing information regarding the initial public offering price
of the Securities has been filed with the Commission and (ii) the time
confirmations are sent or given as specified by Rule 462(b)(2) or with respect
to the Original Registration Statement, or such later time and date as shall
have been consented to by the Representatives; if required, the Prospectus or
any Term Sheet that constitutes a part thereof and any amendment or supplement
thereto shall have been filed with the Commission in the manner and within the
time period required by Rules 434 and 424(b) under the Act; no stop order
suspending the effectiveness of the Registration Statement or any amendment
thereto shall have been issued, and no proceedings for that purpose shall have
been instituted or threatened or, to the knowledge of the Company or the
Representatives, shall be contemplated by the Commission; and the Company shall
have complied with any request of the Commission for additional information (to
be included in the Registration Statement or the Prospectus or otherwise).
(b) The Representatives shall have received an opinion, dated
the Firm Closing Date, of General Counsel Associates LLP, counsel for the
Company and the Selling Securityholders, to the effect that:
18
<PAGE>
(i) the Company has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to transact business as
foreign corporations and is in good standing under the laws of all other
jurisdictions where the ownership or leasing of its property or the conduct
of its business requires such qualification, except where the failure,
taken as a whole, to be so qualified does not amount to a material
liability or disability to the Company;
(ii) the Company has the corporate power to own or lease
its property and conduct its business as described in the Registration
Statement and the Prospectus, and the Company has the corporate power to
enter into this Agreement and to carry out all the terms and provisions
hereof to be carried out by it;
(iii) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued shares of
capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, have been issued in compliance with
all applicable federal and state securities laws and were, to such
counsel's knowledge, not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities;
the Firm Securities have been duly authorized by all necessary corporate
action of the Company and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be validly issued, fully paid
and nonassessable; the Securities have been duly included for trading on
the Nasdaq National Market; no holders of outstanding shares of capital
stock of the Company are entitled as such to any preemptive or, to such
counsel's knowledge, other rights to subscribe for any of the Securities;
and, except for the Securities being sold by the Selling Securityholders,
no holders of securities of the Company are entitled to have such
securities registered under the Registration Statement;
(iv) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide a
fair summary of such provisions; and the statements set forth under the
headings "Business--Litigation," "Management" and "Certain Transactions" in
the Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, provide a fair
summary of such legal matters, documents and proceedings;
(v) the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company;
(vi) (A) to such counsel's knowledge, no legal or governmental
proceedings are pending to which the Company is a party or to which the
property of the Company is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein,
and, to the best knowledge of such counsel, no such proceedings have been
threatened against the Company or with respect to any of its property and
(B) to such counsel's knowledge, no contract or other document is required
to be described in the Registration
19
<PAGE>
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein or filed as required;
(vii) the issuance, offering and sale of the Securities to
the Underwriters by the Company pursuant to this Agreement, the compliance
by the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (A) to
such counsel's knowledge, require the consent, approval, authorization,
registration or qualification of or with any governmental authority, except
such as have been obtained and such as may be required under state
securities or blue sky laws, (B) to such counsel's knowledge, conflict with
or result in a breach or violation of any of the material terms and
provisions of, or constitute a material default under, any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which
the Company is a party or by which the Company or its property is bound, or
any statute or any judgment, decree, order, rule or regulation of any court
or other governmental authority or any arbitrator known to such counsel and
applicable to the Company or (C) conflict with or result in a breach or
violation of the charter documents or by-laws of the Company;
(viii) the Registration Statement is effective under the Act; any
required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and 424(b) has been made in the manner
and within the time period required by Rules 434 and 424(b); and no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued, and no proceedings for that purpose have
been instituted or threatened or, to the best knowledge of such counsel,
are contemplated by the Commission;
(ix) the Registration Statement originally filed with respect to the
Securities and each amendment thereto, any Rule 462(b) Registration
Statement and the Prospectus (in each case, other than the financial
statements and other financial information contained therein, as to which
such counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the rules and
regulations of the Commission thereunder;
(x) if the Company elects to rely on Rule 434, the Prospectus is not
"materially different", as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including
such information that is permitted to be omitted pursuant to Rule 430A);
(xi) to such counsel's knowledge, the Company does not own
any shares of stock or any other equity securities of any corporation or
have any equity interest in any firm, partnership, association or other
entity, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus);
(xii) to such counsel's knowledge, no material default
exists, and no event has occurred which, with notice or lapse of time or
both, would constitute a material default in the due performance and
observance of any material term, covenant or condition of any material
indenture, mortgage, deed of trust, lease or other agreement or instrument
to which the Company is a
20
<PAGE>
party or by which the Company or any of its property is bound or may be
affected in any material adverse respect with regard to the property,
business or operations of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus); and
Such counsel shall also state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Representatives, underwriters' counsel and the independent certified public
accountants of the Company, at such conferences the contents of the Registration
Statement and Prospectus and related matters were discussed, and although they
have not verified the accuracy or completeness of the statements contained in
the Registration Statement or the Prospectus, nothing has come to the attention
of such counsel which caused them to believe that the Registration Statement, as
of its effective date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus, as of its
date or the date of such opinion, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Representatives shall have received an opinion,
dated the Firm Closing Date, of ____________________________, special counsel
for the Company, to the effect that to such counsel's knowledge, the Company
owns or possesses, or can acquire on reasonable terms, all material patents,
patent applications, trademarks, service marks, trade names, licenses,
copyrights and proprietary or other confidential information currently employed
by it in connection with its business, and the Company has not received any
notice of infringement of or conflict with asserted rights of any third party
with respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
material adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus);
(d) The Selling Securityholders shall have furnished to
the Representatives the opinion of General Counsel Associates LLP, counsel to
the Company and the Selling Securityholders, dated the Firm Closing Date, to the
effect that:
(i) each such Selling Securityholder has full corporate power to
enter into this Agreement, the Custody Agreement and the Power-of-Attorney
and to sell, transfer and deliver the Securities being sold by such Selling
Securityholder hereunder in the manner provided in this Agreement and to
perform its obligations under the Custody Agreement; the execution and
delivery of this Agreement, the Custody Agreement and the Power-of-Attorney
have been duly
21
<PAGE>
authorized by all necessary action of each Selling Securityholder; this
Agreement, the Custody Agreement and the Power-of-Attorney have been duly
executed and delivered by each Selling Securityholder; assuming due
authorization, execution and delivery by the Custodian, the Custody
Agreement and the Power-of-Attorney are the legal, valid, binding and
enforceable instruments of each such Selling Securityholder, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law);
(ii) the delivery by each Selling Securityholder to the several
Underwriters of certificates for the Securities being sold hereunder by
such Selling Securityholder against payment therefor as provided herein,
will convey good and marketable title to such Securities to the several
Underwriters who purchased such shares in good faith and without notice of
any such security interest, lien, encumbrance, equity, claim, other defect
or any other adverse claim within the meaning of the Uniform Commercial
Code;
(iii) the sale of the Securities to the Underwriters by each Selling
Securityholder pursuant to this Agreement, the compliance by each Selling
Securityholder with the other provisions of this Agreement, the Custody
Agreement and the Power-of-Attorney and the consummation of the other
transactions herein contemplated do not (i) to such counsel's knowledge,
require the consent, approval, authorization, registration or qualification
of or with any governmental authority, except such as have been obtained
and such as may be required under state securities or blue sky laws, or
(ii) to such counsel's knowledge, conflict with or result in a material
breach or violation of any of the material terms and provisions of, or
constitute a material default under any material indenture, mortgage, deed
of trust, lease or other agreement or instrument, known to such counsel, to
which such Selling Securityholder is a party or by which such Selling
Securityholder or any of such Selling Securityholder's properties are
bound, or any statute or any judgment, decree, order, rule or regulation,
known to such counsel, of any court or other governmental authority or any
arbitrator applicable to such Selling Securityholder.
In rendering such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of the Selling
Securityholders and public officials.
References to the Registration Statement and the Prospectus in this
paragraph (c) shall include any amendment or supplement thereto at the date of
such opinion.
(e) The Representatives shall have received an opinion,
dated the Firm Closing Date, of Orrick, Herrington & Sutcliffe LLP, counsel for
the Underwriters, with respect to the issuance and sale of the Firm Securities,
the Registration Statement and the Prospectus, and such other related matters as
the Representatives may reasonably require, and the Company shall have furnished
to such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
22
<PAGE>
(f) The Representatives shall have received from Deloitte
& Touche LLP a letter or letters dated, respectively, the date hereof and the
Firm Closing Date, in form and substance satisfactory to the Representatives, to
the effect that:
(i) they are independent accountants with respect to the Company
within the meaning of the Act and the applicable rules and regulations
thereunder;
(ii) in their opinion, the audited financial statements and schedule
examined by them and included in the Registration Statement and the
Prospectus comply in form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iii) on the basis of a reading of the latest available interim
unaudited financial statements of the Company, a reading of the unaudited
amounts for total revenues, loss from operations and net loss for the three
months ended March 31, 1996 and 1997, net loss per share for the three
months ended March 31, 1997 and of the unaudited financial statements of
the Company for the periods from which such amounts are derived, carrying
out certain specified procedures (which do not constitute an examination
made in accordance with generally accepted auditing standards) that would
not necessarily reveal matters of significance with respect to the comments
set forth in this paragraph (iii), a reading of the minute books of the
stockholders, the board of directors and any committees thereof of the
Company, and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements of the Company
included in the Registration Statement and the Prospectus do not
comply in form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations thereunder or are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in
the Registration Statement and the Prospectus;
(B) the unaudited amounts for total revenues, loss from
operations and total and per share amounts of net income included in
the Registration Statement and the Prospectus do not loss with the
amounts set forth in any unaudited financial statements for those same
periods or are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of
the corresponding amounts in the audited financial statements included
in the Registration Statement and the Prospectus; and
(C) at a specific date not more than five business days
prior to the date of such letter, there were any changes in the
capital stock or any increase in long-term debt of the Company or any
decreases in net current assets or stockholders' equity of the
Company, in each case compared with amounts shown on the January 4,
1997 balance sheet included in the Registration Statement and the
Prospectus, or for the
23
<PAGE>
period from January 5, 1997 to such specified date there were any
decreases, as compared with the comparable period of the prior fiscal
quarter, in total revenues, or increase in loss before extraordinary
item and income taxes or total or per share amounts of net loss of the
Company, except in all instances for changes, decreases or increases
set forth in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and are included in the Registration Statement and the
Prospectus under the captions "Summary Financial Information,"
"Capitalization," "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and in
Exhibit 11.1 to the Registration Statement, and have compared such amounts,
percentages and financial information with such records of the Company and
with information derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Securities as contemplated by the Registration Statement, as amended as of the
date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (e) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(g) The Representatives shall have received a
certificate, dated the Firm Closing Date, of the principal executive officer and
the principal financial or accounting officer of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
the Company has performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Firm
Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and no proceedings for
that purpose have been instituted
24
<PAGE>
or threatened or, to the best of the Company's knowledge, are contemplated
by the Commission; and
(iii) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or interference with its business or property
from fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse
change, or any development involving a prospective material adverse change,
in the condition (financial or otherwise), management, business prospects,
net worth or results of operations of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment
or supplement thereto).
(h) The Representatives shall have received a certificate
from each Selling Securityholder, signed by or on behalf of such Selling
Securityholder, dated the Firm Closing Date, to the effect that:
(i) the representations and warranties of such Selling
Securityholder in this Agreement are true and correct as if made on and as
of the Firm Closing Date;
(ii) to the extent that any statements or omissions are made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such Selling Securityholder
specifically for use therein, the Registration Statement, as amended as of
the Firm Closing Date, does not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein not misleading, and the Prospectus, as amended or supplemented as
of the Firm Closing Date, does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and
(iii) such Selling Securityholder has performed all covenants and
agreements on its part to be performed or satisfied at or prior to the Firm
Closing Date.
(i) The Representatives shall have received from all of
the Company's officers and directors and certain stockholders, including the
Selling Stockholders, owning upon completion of the Offering, in the aggregate,
7,033,944 shares of Common Stock, an agreement to the effect that such person
will not, directly or indirectly, without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of an option to purchase or other sale or disposition) of
any shares of Common Stock or any securities convertible into, or exchangeable
or exercisable for, shares of Common Stock for a period of 180 days after the
date of this Agreement.
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<PAGE>
(j) On or before the Firm Closing Date, the
Representatives and counsel for the Underwriters shall have received such
further certificates, documents or other information as they may have reasonably
requested from the Company.
(k) Prior to the commencement of the offering of the
Securities, the Securities shall have been included for trading on the Nasdaq
National Market.
All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and
pay for any Option Securities shall be subject, in their discretion, to each of
the foregoing conditions to purchase the Firm Securities, except that all
references to the Firm Securities and the Firm Closing Date shall be deemed to
refer to such Option Securities and the related Option Closing Date,
respectively.
10. Indemnification and Contribution.
---------------------------------
(a) The Company and each Selling Securityholder
(including the Founding Stockholder) agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company or such Selling Securityholder in Sections 2 or 3 of this
Agreement;
(ii) any untrue statement or alleged untrue statement of any material
fact contained in (A) the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or such Selling Securityholder
or based upon written information furnished by or on behalf of the Company
or such Selling Securityholder filed in any jurisdiction in order to
qualify the Securities under the securities or blue sky laws thereof or
filed with the Commission or any securities association or securities
exchange (each an "Application");
(iii) the omission or alleged omission to state in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the
statements therein not misleading; or
26
<PAGE>
(iv) any untrue statement or alleged untrue statement of any material
fact contained in any audio or visual materials used in connection with the
marketing of the Securities, including without limitation, slides, videos,
films and tape recordings,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and such
-----------------
Selling Securityholder 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 any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
Application in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein; and provided, further, that the Company or such
-----------------
Selling Securityholder will not be liable to any Underwriter or any person
controlling such Underwriter with respect to any such untrue statement or
omission made in any Preliminary Prospectus that is corrected in the Prospectus
(or any amendment or supplement thereto) if the person asserting any such loss,
claim, damage or liability purchased Securities from such Underwriter but was
not sent or given a copy of the Prospectus (as amended or supplemented) at or
prior to the written confirmation of the sale of such Securities to such person
in any case where such delivery of the Prospectus (as amended or supplemented)
is required by the Act, unless such failure to deliver the Prospectus (as
amended or supplemented) was a result of noncompliance by the Company with
Sections 6(d) or 6(e) of this Agreement. This indemnity agreement will be in
addition to any liability which the Company and such Selling Securityholder may
otherwise have. Neither the Company nor any Selling Securityholder will,
without the prior written consent of the Underwriter or Underwriters purchasing,
in the aggregate, more than fifty percent (50%) of the Securities, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any such Underwriter or any person who controls
any such Underwriter within the meaning of Section 15 of the Act or Section 20
of the Exchange Act is a party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional release
of all of the Underwriters and such controlling persons from all liability
arising out of such claim, action, suit or proceeding.
(b) Each Underwriter, severally and not jointly, will
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, each Selling Securityholder and
each person, if any, who controls the Company or such Selling Securityholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which the Company or any
such director or officer of the Company, such Selling Securityholder or any such
controlling person of the Company or such Selling Securityholder may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment thereto, any
27
<PAGE>
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives specifically for use therein and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company or any such director,
officer or controlling person or such Selling Securityholder in connection with
investigating or defending any such loss, claim, damage, liability or any action
in respect thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section 10 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 10, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section 10. 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 therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
-----------------
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 10 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Representatives in
the case of paragraph (a) of this Section 10, representing the indemnified
parties under such paragraph (a) who are parties to such action or actions) or
(ii) the indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party.
28
<PAGE>
(d) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 10 is unavailable or
insufficient, for any reason, to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party on the other from the offering of the Securities or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Securityholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Securityholders bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the parties 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, the Selling
Securityholders or the Underwriters, the parties' relative intents, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Selling Securityholders and the Underwriters
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to above
in this paragraph (d). Notwithstanding any other provision of this paragraph
(d), no Underwriter shall be obligated to make contributions hereunder that in
the aggregate exceed the total public offering price of the Securities purchased
by such Underwriter under this Agreement, less the aggregate amount of any
damages that such Underwriter has otherwise been required to pay in respect of
the same or any substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and contributions among Underwriters shall be governed by the provisions
of the Prudential Securities Incorporated Master Agreement Among Underwriters.
For purposes of this paragraph (d), each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company or any
Selling Securityholder within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, shall have the same rights to contribution as the Company
or such Selling Securityholder, as the case may be.
(e) The liability of each Selling Securityholder
(including the Founding Stockholder) under this Section 10 shall not exceed an
amount equal to the initial public offering price of the Securities sold by such
Selling Securityholder to the Underwriters.
29
<PAGE>
11. Default of Underwriters. If one or more Underwriters default in
-----------------------
their obligations to purchase Firm Securities or Option Securities hereunder and
the aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or Option
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Securities that is more than ten percent of the aggregate number of
Firm Securities or Option Securities, as the case may be, to be purchased by all
of the Underwriters at such time hereunder, and if arrangements satisfactory to
the Representatives are not made within 36 hours after such default for the
purchase by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 12 hereof. In the event of any default by one or more Underwriters
as described in this Section 11, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 4 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Securities or Option
Securities, as the case may be. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 11. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
12. Survival. The respective representations, warranties,
--------
agreements, covenants, indemnities and other statements of the Company, its
officers, the Selling Securityholders and the several Underwriters set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, any Underwriter or any controlling person referred to in Section 10
hereof or any Selling Securityholder and (ii) delivery of and payment for the
Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 8 and 10 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.
13. Termination.
-----------
(a) This Agreement may be terminated with respect to the
Firm Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company and the Selling Securityholders given
prior to the Firm Closing Date or the related Option Closing Date, respectively,
in the event that the Company or any Selling Securityholder shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior thereto or, if at or
prior to the Firm Closing Date or such Option Closing Date, respectively,
30
<PAGE>
(i) the Company shall have, in the sole judgment of the
Representatives, sustained any material loss or interference with its
business or property from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding or there shall have been any material
adverse change, or any development involving a prospective material adverse
change (including without limitation a change in management or control of
the Company), in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company, except in
each case as described in or contemplated by the Prospectus (exclusive of
any amendment or supplement thereto);
(ii) trading in the Common Stock shall have been suspended by the
Commission or the Nasdaq National Market or trading in securities generally
on the New York Stock Exchange or Nasdaq National Market shall have been
suspended or minimum or maximum prices shall have been established on such
exchange or market system;
(iii) a banking moratorium shall have been declared by New York or
United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or material
adverse change in general economic, political or financial conditions
having an effect on the U.S. financial markets that, in the sole judgment
of the Representatives, makes it impractical or inadvisable to proceed with
the public offering or the delivery of the Securities as contemplated by
the Registration Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section
13 shall be without liability of any party to any other party except as provided
in Section 12 hereof.
14. Information Supplied by Underwriters. The statements set forth
------------------------------------
in the last paragraph on the front cover page and under the heading
"Underwriting" in any Preliminary Prospectus or the Prospectus (to the extent
such statements relate to the Underwriters) constitute the only information
furnished by any Underwriter through the Representatives to the Company for the
purposes of Sections 2(b) and 10 hereof. The Underwriters confirm that such
statements (to such extent) are correct.
15. Notices. All communications hereunder shall be in writing and,
-------
if sent to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group; and if sent to the Company or to the Selling
Securityholders, shall be delivered or sent by mail, telex or facsimile
transmission and confirmed in writing to the Company at 1376 Willow Road, Menlo
Park, California 94025, Attention: President.
16. Successors. This Agreement shall inure to the benefit of and
----------
shall be binding upon the several Underwriters, the Company, the Selling
Securityholders and their respective
31
<PAGE>
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company and the Selling Securityholders contained in
Section 10 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters
contained in Section 10 of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company or any
Selling Securityholder within the meaning of Section 15 of the Act or Section 20
of the Exchange Act. No purchaser of Securities from any Underwriter shall be
deemed a successor because of such purchase.
17. Applicable Law. The validity and interpretation of this
--------------
Agreement, and the terms and conditions set forth herein, shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to any provisions relating to conflicts of laws.
18. Consent to Jurisdiction and Service of Process. All judicial
----------------------------------------------
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York, and
by execution and delivery of this Agreement, each Selling Securityholder accepts
for itself and in connection with its properties, generally and unconditionally,
the nonexclusive jurisdiction of the aforesaid courts and waives any defense of
forum non conveniens and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Each Selling Securityholder
designates and appoints Edward R. Prince, III, and such other persons as may
hereafter be selected by such Selling Securityholder irrevocably agreeing in
writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by such Selling Securityholder to be effective and binding service
in every respect. A copy of any such process so served shall be mailed by
registered mail to each Selling Securityholder at its address provided in
Section 15 hereof; provided, however, that, unless otherwise provided by
-------- -------
applicable law, any failure to mail such copy shall not affect the validity of
service of such process. If any agent appointed by such Selling Securityholder
refuses to accept service, such Selling Securityholder hereby agrees that
service of process sufficient for personal jurisdiction in any action against
such Selling Securityholder in the State of New York may be made by registered
or certified mail, return receipt requested, to such Selling Securityholder at
its address provided in Section 15 hereof, and such Selling Securityholder
hereby acknowledges that such service shall be effective and binding in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of any Underwriter to bring
proceedings against such Selling Securityholder in the courts of any other
jurisdiction.
19. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
32
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company, each of the
Selling Securityholders and each of the several Underwriters.
Very truly yours,
JETFAX, INC. THE SELLING SECURITYHOLDERS
By ________________________________ By ______________________________________
Edward R. Prince, III, [___________________],
President, Chief Executive Officer As Attorney-in-Fact acting on behalf
and Chairman of the Board of each of the Selling Securityholders
named in Schedule 2 to this Agreement
EDWARD R. PRINCE, III,
AS A FOUNDING STOCKHOLDER
___________________________________
Edward R. Prince, III
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
By PRUDENTIAL SECURITIES INCORPORATED
By _________________________________
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
33
<PAGE>
SCHEDULE 1
UNDERWRITERS
Number of Firm
Securities to
Underwriter be Purchased
- ----------- --------------
Prudential Securities Incorporated .............................
Cowen & Company.................................................
_________
Total ......................................................... 3,500,000
=========
34
<PAGE>
SCHEDULE 2
SELLING SECURITYHOLDERS
Number of Firm
Name Securities to be Sold
- ---- ---------------------
Abdulwahab Al-Qatami........................
Antaeus Enterprises, Inc....................
Sandra Basel................................
Douglas Y. Bech.............................
Beinecke Trust..............................
Craig Bere..................................
Sam Berstein................................
Paul Chargois...............................
George Charos...............................
Cook Investors Ltd Partnership..............
John & Patricia Cook........................
Alan M. Craft...............................
Tim Distefano...............................
Charles M. Edwards, III.....................
Janice P. Edwards...........................
Janice P. Edwards, Custodian for
Meghan Edwards...........................
Janice P. Edwards, Custodian for
Melanie Edwards............................
Jeffrey S. Gilmore..........................
Granite Capital LP..........................
Jean Guex-Crosier...........................
Laurence Haar...............................
John H. Harris..............................
Lawrence B. Helzel & Rebekah Helzel
Living Trust...............................
Mr. & Mrs. Peter Hendricks..................
James Herrell...............................
Colin Hulme.................................
Duane Kilgore...............................
Krieger Family Trust........................
Marilyn Krieger.............................
Lambert Family Trust........................
35
<PAGE>
Number of Firm
Name Securities to be Sold
- ---- ---------------------
Paul E. Lego................................
Paul G. Lego................................
Jennifer Levin..............................
Judy Levin..................................
Marshall Oman Exploration...................
Dalton W. Martin & Virginia W. Martin
Trust U/A/D 12/30/92.......................
Barry R. Miller.............................
Craig Minor.................................
Curtis Pabst................................
Scott Peters................................
Larry B. Phillips III.......................
Poly Ventures II, L.P.......................
Robert E. Powers............................
Edward R. Prince, Jr........................
Edward R. Prince, III.......................
Prism Partners I............................
Lon B. Radin................................
James Richardson............................
Fritz Ringling..............................
William F. Rooney & Mary Alice Rooney,
Trustees under ROONEY FAMILY
TRUST dated May 10, 1996...................
Lawrence Rose...............................
Saratoga Springs Co. Ltd....................
Leo R. Schlinkert...........................
Shartsis, Friese & Ginsburg.................
Rosamond P. Smythe..........................
Virginia Snyder.............................
Richard & Martha Stipanovic.................
Jeffrey & Janice Susskind, Trustees of
The Susskind Family Trust U/A/D 10/27/93...
Traslader SA................................
Richard D. Tucker...........................
Michael Waresh..............................
TOTAL ---------------------
[ ]
============
36
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HYBRID FAX, INC.
ARTICLE I
The name of the corporation is:
HYBRID FAX, INC.
ARTICLE II
The address of its registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle 19801. The name
of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Laws of the State of Delaware.
ARTICLE IV
The total number of shares of stock of all classes which the
corporation shall have authority to issue is 8,000,000, of which 5,000,000
shares shall be common stock, $0.01 par value per share and 3,000,000 shares
shall be preferred stock, $0.01 par value per share.
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of Article IV, to provide for the issuance
of the shares of preferred stock in series, and by filing a certificate pursuant
to the applicable law of the State of Delaware, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
<PAGE>
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall
determine;
(e) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or date
upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates,
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of payment of shares of that
series:
(h) Any other relative rights, preferences and limitation of that series.
-2-
<PAGE>
Dividends on outstanding shares of preferred stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to the
same dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the assets available for distribution to holders
of shares of preferred stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of preferred
stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect
ARTICLE V
The Board of Directors is authorized to adopt, amend or repeal the
Bylaws of the corporation. Election of directors need not be by written ballot.
ARTICLE VI
The name and mailing address of the incorporator is:
James M. Prince 4200 Texas Commerce Tower
Houston, Texas 77002
ARTICLE VII
The number of directors constituting the initial Board of Directors is
five, and the names and addresses of the persons who are to serve as directors
until the first annual meeting of the shareholders or until their successors are
elected and qualified are:
NAME ADDRESS
Edward R. Prince III 101 First Street, #462
Los Altos, California 94022
Lon B. Radin 1191 Payne
Los Altos, California 94022
David A. Brewer 130 Sky Londa Drive
Woodside, California 94062
Edward R. Prince, Jr. 11650 North Lou-Al
Houston, Texas 77024
Douglas Y. Bech 4200 Texas Commerce Tower
Houston, Texas 77002
-3-
<PAGE>
ARTICLE VIII
No director of the corporation shall be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
If the Delaware General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this paragraph by the stockholders of the corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the corporation existing at the time of such
repeal or modification.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Laws of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 2nd day of August, 1988.
/s/ James M. Prince
--------------------------------------------
James M. Prince
-4-
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
HYBRID FAX, INC.
Pursuant to the provisions of Section 242 of the General Corporation
Law of the State of Delaware, Hybrid Fax, Inc. (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, hereby certifies as follows:
FIRST: The Board of Directors of the Corporation, at a special meeting
held on May 25, 1990, adopted resolutions proposing and declaring advisable an
amendment to Article One of the Certificate of Incorporation of the Corporation
to change the name of the Corporation, and recommending the adoption of such
amendment to the stockholders of the Corporation, such amendment reading in its
entirely as follows:
RESOLVED, that Article One of the Corporation's Certificate
of Incorporation be amended to read as follows:
"The name of the corporation is: JetFax, Inc."
SECOND: Thereafter, the foregoing amendment to the Certificate of
Incorporation of the Corporation was approved and adopted by the stockholders of
the Corporation at the annual meeting of the stockholders held on August 1,
1990.
THIRD: The foregoing amendment to the Certificate of Incorporation of
the Corporation has been duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: The capital of the Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, Hybrid Fax, Inc. has caused this
Certificate to be executed in its corporate name by its President and attested
by its Assistant Secretary dated and effective as of the 30th day of October
1990.
HYBRID FAX, INC.
By:/s/ Edward R. Prince
---------------------
Edward R. Prince, III
President
/s/ James M. Prince
- -------------------
James M. Prince
Assistant Secretary
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OP INCORPORATION
JETFAX, INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation at a special
meeting held July 15, 1991 adopted a resolution proposing and declaring
advisable the following amendment to the Certificate of Incorporation, as
previously amended, of said corporation:
RESOLVED, that the Board of Directors of the Corporation deems it
advisable and hereby declares it advisable that the Corporation's
Certificate of Incorporation, as previously amended, be amended by
deleting the language contained in the first paragraph of Article IV
in its entirety and replacing said paragraph with language increasing
the total number of authorized shares of the Corporation to 16,000,000
shares of stock, of which 10,000,000 shares shall be common stock of
the Corporation, par value $0.01 and 6,000,000 shall be preferred
stock of the Corporation, par value $0.01, such amendment will read in
its entirety as follows:
"ARTICLE IV
The total number of shares of stock of all classes which the
Corporation shall have authority to issue is 16,000,000, of which
10,000,000 shares shall be common stock, $0.01 par value per share and
6,000,000 shares shall be preferred stock, $0.01 par value per share."
SECOND: Thereafter, the foregoing amendment to the Certificate of
Incorporation of the Corporation was approved and adopted by the stockholder of
the Corporation at the annual meeting of stockholders held on August 9, 1991.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 of the General Corporation Law of
the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said JETFAX, INC. has caused this certificate to be
signed by Edward R. Prince, III, its President, and attested by Lori K. Evans,
its Secretary, this 10th day of August, 1991.
ATTEST: JETFAX, INC.
By: /s/ Lori K. Evans By: /s/ Edward R. Prince III
----------------- ------------------------
Lori K. Evans, Secretary Edward R. Prince III, President
STATE OF CALIFORNIA
COUNTY OF SAN MATEO
BEFORE ME, the undersigned authority, on this date personally appeared
Edward R. Prince III, known to me to be the President of JetFax, Inc. and being
by me duly sworn, an oath acknowledged and stated that the facts contained in
the foregoing instrument are true and correct, and that he executed the same in
the capacity therein stated as an act of the Corporation.
SUBSCRIBED AND SWORN TO THIS 10TH day of August, 1991.
/s/ Sylvia S. Bardes
--------------------
Notary Public in and for the
State of California
Sylvia S. Bardes
-----------------
Printed Name of Notary
My Commission Expires 10/29/93
--------
-2-
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
JETFAX, INC.
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, JETFAX, INC., a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation at a duly convened
special meeting held on February 1, 1996 duly adopted the following resolution
proposing and declaring advisable the following amendment to the Certificate of
Incorporation, as previously amended, of the Corporation:
RESOLVED, that the Board of Directors of the Corporation deems it
advisable and hereby declares it advisable that the Corporation's
Certificate of Incorporation, as previously amended, be amended by deleting
the language contained in the first paragraph of Article IV thereof in its
entirety and replacing said paragraph with language increasing the total
number of authorized shares of the Corporation to 23,000,000 shares of
stock, of which 13,500,000 shares shall be common stock of the Corporation,
par value $.01 per share, and 9,500,000 shares shall be preferred stock of
the Corporation, par value $.01 per share, such amended paragraph to read
in its entirety as follows:
"The total number of shares of stock of all classes which the
corporation shall have authority to issue is 23,000,000, of which
13,500,000 shares shall be common stock, $.01 par value per share, and
9,500,000 shares shall be preferred stock, $.01 par value per share."
SECOND: Thereafter, the foregoing amendment to the Certificate of
Incorporation was approved and adopted by the
<PAGE>
stockholders of the Corporation by written consent in accordance with the
provisions of Section 228 of the Delaware General Corporation Law.
THIRD: Notice to the Corporation's stockholders has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law.
FOURTH: The foregoing amendment to the Certificate of Incorporation has
been duly adopted in accordance with the provisions of Section 242 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be
executed this 9th day of February, 1996.
JETFAX, INC.
By: /s/Edward R. Prince III
-----------------------
Edward R. Prince III
President
Attest: /s/Eli Morowitz
---------------
Eli Morowitz
Secretary
-2-
<PAGE>
STATE OF CALIFORNIA
COUNTY OF SAN MATEO
I, Juliet H. Tibbetts, do hereby certify that on this 9th day of
February, 1996, Edward R. Prince III personally appeared before me, who being by
me duly sworn, declared that he executed the foregoing Certificate in his
capacity as President of JetFax, Inc., and that the statements contained therein
are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 9th day of February, 1996.
/s/Juliet Tibbetts
------------------
Notary Public in and for the
State of California
Juliet Tibbetts
----------------------------
Printed Name of Notary Public
My Commission Expires:
January 19, 1999
-3-
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
(INCLUDING THE CERTIFICATES OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK, SERIES B PREFERRED STOCK,
SERIES C PREFERRED STOCK, SERIES D PREFERRED STOCK
AND SERIES E PREFERRED STOCK)
OF
JETFAX, INC.
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, JETFAX, INC., a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation at a duly convened
special meeting held on February 1, 1996 duly adopted the following resolutions
proposing and declaring advisable the following amendments to the Certificate of
Incorporation, as previously amended, (including the Certificates of
Designations, Preferences and Rights of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock) of the Corporation:
RESOLVED, that the Board of Directors of the Corporation deems it
advisable and hereby declares it advisable that each of (a) the
Corporation's Certificate of Designations, Preferences and Rights of Series
A Preferred Stock, (b) the Corporation's Certificate of Designations,
Preferences and Rights of Series B Preferred Stock, (c) the Corporation's
Certificate of Designations, Preferences and Rights of Series C Preferred
Stock, (d) the Corporation's Certificate of Designations, Preferences and
Rights of Series D Preferred Stock and (e) the Corporation's Certificate of
Designations, Preferences and Rights of Series E Preferred Stock be amended
by deleting the term "$3.00" in the first paragraph of Section 7(d) of each
such Certificate of Designations and replacing such with the term "$5.00"
and by deleting the term "$5,000,000" in the first paragraph of Section
7(d) of each
<PAGE>
such Certificate of Designations and replacing such with the term
"$8,000,000".
RESOLVED, that the Board of Directors of the Corporation deems it
advisable and hereby declares it advisable that each of (a) the
Corporation's Certificate of Designations, Preferences and Rights of Series
A Preferred Stock, (b) the Corporation's Certificate of Designations,
Preferences and Rights of Series B Preferred Stock, (c) the Corporation's
Certificate of Designations, Preferences and Rights of Series C Preferred
Stock, (d) the Corporation's Certificate of Designations, Preferences and
Rights of Series D Preferred Stock and (e) the Corporation's Certificate of
Designations, Preferences and Rights of Series E Preferred Stock be amended
by deleting Section 7(c)(i)(1) of each such Certificate of Designations and
replacing such section in its entirety in each such Certificate of
Designations with the following:
"(1) "Additional Shares of Common Stock" shall mean all shares
---------------------------------
of Common Stock issued (or, pursuant to Subsection 7(c)(iii), deemed
to be issued) by the corporation after the Original Issue Date, other
than (A) shares of Common Stock issued or issuable upon conversion of
shares of Preferred Stock; (B) shares of Common Stock, not to exceed
1,915,000 issued and outstanding at any time (subject to adjustment
for stock splits, recapitalizations and similar transactions), issued
or issuable to officers, directors, employees or consultants of the
corporation or issued pursuant to an employee or consultant stock
purchase plan or employee or director option plan or other employee
stock bonus arrangement (collectively, the "Plans") approved by the
corporation's Board of Directors; (C) shares of the corporation's
capital stock issued or issuable pursuant to those certain warrants
issued pursuant to the Note Purchase Agreement between the corporation
and certain investors dated as of August 3, 1994, as amended, as any
of such warrants may be amended from time to time, or pursuant to any
stock purchase warrants issued by the corporation in replacement of or
exchange for any such warrants; (D) shares of the corporation's
capital stock issued or issuable pursuant to those certain warrants
issued pursuant to the Purchase and Debt Restructuring Agreement
between the corporation and Ailicec International
-2-
<PAGE>
Enterprises Limited dated as of August 3, 1994, as any of such
warrants may be amended from time to time, or pursuant to any stock
purchase warrants issued by the corporation in replacement of or
exchange for any such warrants; and (E) shares of the corporation's
capital stock issued or issuable pursuant to an option to Endeavor
Capital Management pursuant to the corporation's letter agreement of
December 15, 1993 with Endeavor Capital Management as the same may be
amended."
SECOND: Thereafter, the foregoing amendments to the Certificate of
Incorporation (including the Certificates of Designations, Preferences and
Rights of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock) were approved and
adopted by the stockholders of the Corporation by written consent in accordance
with the provisions of Section 228 of the Delaware General Corporation Law.
THIRD: Notice to the Corporation's stockholders has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law.
FOURTH: The foregoing amendments have been duly adopted in accordance with
the provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be
executed this 9th day of February, 1996.
JETFAX, INC.
By: /s/Edward R. Prince III
-----------------------
Edward R. Prince III
President
Attest: /s/Eli Morowitz
---------------
Eli Morowitz
Secretary
-3-
<PAGE>
STATE OF CALIFORNIA
COUNTY OF SAN MATEO
I, Juliet H. Tibbetts, do hereby certify that on this 9th day of
February, 1996, Edward R. Prince III personally appeared before me, who being by
me duly sworn, declared that he executed the foregoing Certificate in his
capacity as President of JetFax, Inc., and that the statements contained therein
are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 9th day of February, 1996.
/s/Juliet Tibbetts
------------------
Notary Public in and for the
State of California
Juliet Tibbetts
----------------------------
Printed Name of Notary Public
My Commission Expires:
January 19, 1999
-4-
<PAGE>
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
(INCLUDING THE CERTIFICATES OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK, SERIES B PREFERRED STOCK,
SERIES C PREFERRED STOCK, SERIES D PREFERRED STOCK,
SERIES E PREFERRED STOCK AND SERIES F PREFERRED STOCK)
OF
JETFAX, INC.
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, JETFAX, INC., a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation at a duly convened
special meeting held on October 3, 1996 duly adopted the following resolution
proposing and declaring advisable the following amendments to the Certificate of
Incorporation, as previously amended, (including the Certificates of
Designations, Preferences and Rights of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock) of the Corporation:
RESOLVED, that the Board of Directors of the Corporation deems it
advisable and hereby declares it advisable that each of (a) the
Corporation's Certificate of Designations, Preferences and Rights of Series
A Preferred Stock, (b) the Corporation's Certificate of Designations,
Preferences and Rights of Series B Preferred Stock, (c) the Corporation's
Certificate of Designations, Preferences and Rights of Series C Preferred
Stock, (d) the Corporation's Certificate of Designations, Preferences and
Rights of Series D Preferred Stock and (e) the Corporation's Certificate of
Designations, Preferences and Rights of Series E Preferred Stock be amended
by deleting the term "1,915,000" in Clause (B) of Section 7(c)(i)(1) of
each such Certificate of Designations, and that the Corporation's
Certificate of Designations, Preferences and
<PAGE>
Rights of Series F Preferred Stock be amended by deleting the term
"1,915,000" in Clause (B) of Section 4(c)(i)(1) thereof, and in each case
replacing such term with the term "2,715,000".
SECOND: Thereafter, the foregoing amendments to the Certificate of
Incorporation (including the Certificates of Designations, Preferences and
Rights of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock) were approved and adopted by the stockholders of the Corporation,
including a majority of the outstanding stock of each class entitled to vote
thereon as a class, at the Corporation's duly called and held annual meeting of
stockholders in accordance with the provisions of the Delaware General
Corporation Law.
THIRD: The foregoing amendments have been duly adopted in accordance with
the provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be
executed this 4th day of November, 1996.
JETFAX, INC.
By: /s/Edward R. Prince III
-----------------------
Edward R. Prince III
President
Attest: /s/Allen K. Jones
-----------------
Allen K. Jones
Secretary
-2-
<PAGE>
STATE OF CALIFORNIA
COUNTY OF SAN MATEO
I, Juliet H. Tibbetts, do hereby certify that on this 4th day of
November, 1996, Edward R. Prince III personally appeared before me, who being by
me duly sworn, declared that he executed the foregoing Certificate in his
capacity as President of JetFax, Inc., and that the statements contained therein
are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 4th day of November, 1996.
/s/Juliet Tibbetts
------------------
Notary Public in and for the
State of California
Juliet Tibbetts
----------------------------
Printed Name of Notary Public
My Commission Expires:
January 19, 1999
-3-
<PAGE>
EXHIBIT 3.7
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A PREFERRED STOCK
OF
HYBRID FAX, INC.
Pursuant to Section 151 of the Delaware General Corporation Law
HYBRID FAX, INC., a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation"), DOES HEREBY CERTIFY that,
pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation and pursuant to Section 151 of
the Delaware General Corporation Law, said Board of Directors, at a special
meeting duly convened on December 12, 1988, duly adopted a resolution amending
and restating the Certificate of Designations, Preferences and Rights of the
Corporation's Series A Preferred Stock to provide for the issuance of additional
shares thereof out of the Corporation's authorized and unissued Preferred Stock,
$.01 par value, which resolution is and reads as follows:
"RESOLVED that, pursuant to the authority expressly granted to and vested in
the Board of Directors in the Corporation's Certificate of Incorporation and
pursuant to Section 151 of Delaware General Corporation Law, and subject to the
consent of the holders of at least a majority of Series A Preferred Stock
outstanding, pursuant to Section 8(b) of the Certificate of Designations,
Preferences and Rights of Series A Preferred Stock of the Corporation, said
Board of Directors hereby amends and restates the aforesaid Certificate of
Designations which provided for the creation, establishment and authorization of
the first series of Preferred Stock, par value $.01 per share, of the
Corporation, and authorizes an increase in the number of shares of such first
series by five hundred thousand (500,000) shares of the Corporation's authorized
and unissued Preferred Stock to a total of one million (1,000,000) shares and
reaffirms that each share of such stock of said first series shall have
identical rights and privileges in every respect and shall have the
designations, preferences, limitations and relative rights described as follows:
Section 1. Designation; Number of Shares The designation of said
-----------------------------
series of preferred stock authorized hereby shall be
<PAGE>
"Series A Preferred Stock." The maximum number of shares of Series A
Preferred Stock that may be issued shall be 1,000,000. The Stated Value of
the Series A Preferred Stock shall be $.75 per share.
Section 2. Dividends. (a) The holders of record of shares of Series A
---------
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available for the payment of
dividends, non-cumulative dividends, and no more, payable in cash to
persons who are holders of record of the Series A Preferred Stock on a
record date designated by the Board of Directors (a "Record Date"). Such
dividends with respect to any share of Series A Preferred Stock shall be
non-cumulative.
(b) So long as any of the Series A Preferred Stock remains outstanding,
no dividends shall be paid on, or declared or set apart for, the Common
Stock, unless such dividends shall have been shared on a per share basis
(as equitably adjusted for stock splits, stock dividends and similar
events) between holders of Series A Preferred Stock (as if the Series A
Preferred Stock had been converted into Common Stock) and Common Stock.
Section 3. Liquidation Preference. In the event of voluntary or
----------------------
involuntary liquidation, dissolution or winding up of the corporation, the
holders of the Series A Preferred Stock shall be entitled to receive,
after payment or provision for payment of all debts of the corporation,
but before any distribution of assets to the holders of Common Stock, an
amount equal to the Stated Value per share of such Series A Preferred
Stock plus declared but unpaid dividends thereon, if any, to the date
fixed for the liquidation, dissolution or winding up. After such payment
has been made in full to the holders of the outstanding Series A Preferred
Stock, or funds necessary for such payment have been set aside in trust
for the account of such holders and continue to be available therefor,
thereafter the holders of the Series A Preferred Stock and the holders of
Common Stock shall be entitled to share in further distributions and the
remaining assets of the corporation in the same manner as if all shares of
Series A Preferred Stock had been converted into Common Stock. If on
liquidation, dissolution or winding up, the assets of the corporation so
distributable among the holders of the Series A Preferred Stock
<PAGE>
are insufficient to permit full payment to them, such assets shall be
distributed ratably among the holders of the Series A Preferred Stock and
holders of any other series of Preferred Stock ranking pari passu with the
----------
Series A Preferred Stock in accordance with the stated values of such
shares. A consolidation or merger of the corporation, a sale or transfer
of substantially all of its assets as an entirety, or a purchase or
redemption by the corporation of its shares of any class, is not a
"voluntary or involuntary liquidation, dissolution or winding up of the
corporation" within the meaning of this paragraph.
Section 4. Voluntary Redemption. The corporation, at the option of the
--------------------
Board of Directors and together with the affirmative vote of holders of 66
2/3% of the outstanding Series A Preferred Stock, may at any time or times
on or after December 31, 1992 voluntarily redeem all or any part of the
Series A Preferred Stock then outstanding by paying in cash a price equal
to 150% of the Stated Value plus declared but unpaid dividends thereon, if
any. If less than all the outstanding shares of Series A Preferred Stock
are to be redeemed, the shares to be redeemed shall be selected pro rata.
Notice of voluntary redemption shall be mailed, postage prepaid, to the
holders of record of the shares to be redeemed at their addresses then
appearing on the books of the corporation, not less than twenty (20) and
not more than fifty (50) days prior to the date fixed for the voluntary
redemption.
Section 5. Provision for Payment of Redemption Price. On or before the
-----------------------------------------
date fixed for a voluntary redemption, the corporation may provide for
payment of a sum sufficient to redeem the shares called for redemption by
either (1) setting aside the sum, separate from its other funds, in trust
for the benefit of the holders of the shares to be redeemed, or (2)
depositing such sum in a bank or trust company anywhere in the United
States having capital and surplus of at least one hundred million dollars
($100,000,000) according to its latest statement of condition, as a trust
fund, with irrevocable instructions and authority to the bank or trust
company to give or complete the notice of redemption and to pay, on or
after the date fixed for redemption, the redemption price on surrender of
the respective share certificates. The holders may be evidenced by a list
certified by the corporation (by its
<PAGE>
president or a vice president and by its secretary or an assistant
secretary) or by its transfer agent. If the corporation so provides for
payment, then from and after the date fixed for redemption (i) the shares
shall be deemed to be redeemed, (ii) such setting aside or deposit shall
be deemed to constitute full payment for the shares, (iii) the shares
shall no longer be deemed to be outstanding, (iv) the holders thereof
shall cease to be shareholders with respect to such shares, and (v) the
holders shall have no rights with respect thereto except the right to
receive their proportionate shares of the funds so set aside or deposited
(but without interest) upon the surrender of their respective
certificates. Any interest accrued on funds so set aside or deposited
shall belong to the corporation. If the holders of any shares do not
within six (6) years after such deposit claim any amount so deposited for
redemption thereof, the bank or trust company shall, on demand by the
corporation, pay over to the corporation the balance of the funds so
deposited, and the bank or trust company shall thereupon be relieved of
all liability to such holders.
Section 6. Status of Redeemed Shares. Shares of Series A Preferred
-------------------------
Stock which are redeemed shall be cancelled and shall be restored to the
status of authorized but unissued shares.
Section 7. Conversion. The holders of the Series A Preferred Stock
----------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series A
----------------------------------
Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the
holder thereof, at any time after the date of issuance of such share, at
the office of the corporation or any transfer agent for the Series A
Preferred Stock. The conversion price at which shares of Common Stock
shall be deliverable upon conversion without the payment of any additional
consideration by the holder of Series A Preferred Stock shall be the
Stated Value (the "Conversion Price"). Such Conversion Price shall be
subject to adjustment, in order to adjust the number of shares of Common
Stock into which the Series A Preferred Stock is convertible, as
hereinafter
<PAGE>
provided. The right of conversion with respect to any shares
of Series A Preferred Stock which shall have been called for redemption
under Section 4 hereof shall terminate at the close of business at 5:00
p.m., Pacific Time, on the day first preceding the day fixed for
redemption unless the corporation shall default in the payment of the
redemption price.
(b) Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock shall be entitled to convert the same into full shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for
the Series A Preferred Stock, and shall give written notice to the
corporation at such office that he elects to convert the same and shall
state therein his name or the name or names of his nominees in which he
wishes the certificate or certificates for shares of Common Stock to be
issued. No fractional shares of Common Stock shall be issued upon
conversion of the Series A Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the corporation
shall pay cash equal to such fraction multiplied by the then effective
Conversion Price. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, or to his nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid, together with cash in lieu of any fraction of a
share. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Series A Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
(c) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 7(c),
-------------------
the following definitions shall apply:
(1) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection
7(c)(iii), deemed to be issued) by the corporation after the
Original Issue Date, other than
<PAGE>
(A) shares of Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock; and (B)
shares of Common Stock, not to exceed 1,090,000 issued and
outstanding at any time (subject to adjustment for stock
splits, recapitalizations and similar transactions), issued
or issuable to officers, directors, employees or consultants
of the corporation or issued pursuant to an employee or
consultant stock purchase plan or employee or director
option plan or other employee stock bonus arrangement
(collectively, the "Plans") approved by the corporation's
Board of Directors.
(2) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common
Stock.
(3) "Option" shall mean any rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities (except for the options
referenced in subsection (1)(B) above).
(4) "Original Issue Date" shall mean the date on which a
-------------------
share of Series A Preferred Stock was first issued.
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which the Series A Preferred
Stock is convertible shall be made by adjustment in the Conversion
Price in respect of the issuance of Additional Shares of Common
Stock if the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is
equal to or greater than the Conversion Price in effect on the date
of, and immediately prior to, the issue of such Additional Share of
Common Stock.
(iii) Issue of Securities Deemed Issued as Additional Shares
------------------------------------------------------
of Common Stock.
---------------
<PAGE>
(1) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination
of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case
of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall
be deemed to be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Subsection
7(c)(v) hereof) of such Additional Shares of Common Stock
would be less than the Conversion Price in effect on the
date of and immediately prior to such issue, or such record
date, as the case may be, and provided further that in any
such case in which Additional Shares of Common Stock are
deemed to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise
of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the corporation, or decrease in the number
of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price
computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto),
<PAGE>
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective,
be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of
conversion or exchange under such Convertible
Securities;
(C) upon the expiration of any such Options or
any rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such
expiration, be recomputed as if (I) in the case of
Convertible Securities or Options for Common Stock,
the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued
upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the consideration
actually received by the corporation for the issue of
all such Options, whether or not exercised, plus the
consideration actually received by the corporation
upon such exercise, or for the issue of all such
Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if
any, actually received by the corporation upon such
conversion or exchange, and (II) in the case of
Options for Convertible Securities, only the
Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue
of such Options, and the consideration received by the
corporation for the Additional Shares of Common Stock
deemed to have been then issued was the consideration
actually received by the corporation for the issue of
all such Options, whether or not exercised, plus the
consideration deemed to have been received by the
corporation (determined pursuant to Subsection
7(c)(v)) upon the issue of the
<PAGE>
Convertible Securities with respect to which such
Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the
Conversion Price to an amount which exceeds the lower
of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have
resulted from any issuance of Additional Shares of
Common Stock between the original adjustment date and
such readjustment date;
(E) in the case of any Options which expire by
their terms not more than 30 days after the date of
issue thereof, no adjustment of the Conversion Price
shall be made until the expiration or exercise of all
such Options, whereupon such adjustment shall be made
in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and
such Options or Convertible Securities are not issued
on the date fixed therefor, the adjustment previously
made in the conversion price which became effective on
such record date shall be cancelled as of the close of
business on such record date, and thereafter the
Conversion Price shall be adjusted pursuant to this
Subsection 7(c)(iii) as of the actual date of their
issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions.
-----------------------------------------------------
In the event the corporation at any time or from time to
time after the Original Issue Date shall declare or pay any
dividend or make any other distribution on the Common Stock
payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock),
then and in any such event, Additional Shares of Common
Stock shall be deemed to have been issued (A) in the case of
any such dividend or distribution, immediately after the
close of
<PAGE>
business on the record date for the determination of holders
of any class of securities entitled to receive such dividend
or distribution, or(B) in the case of any such subdivision,
at the close of business on the date immediately prior to
the date upon which such corporate action becomes effective.
If such record date shall have been fixed and such dividend
shall not have been fully paid on the date fixed therefor,
the adjustment previously made in the Conversion Price which
became effective on such record date shall be cancelled as
of the close of business on such record date, and thereafter
the Conversion Price shall be adjusted pursuant to this
Subsection 7(c)(iii) as of the time of actual payment of
such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of
-----------------------------------------------
Additional Shares of Common Stock. If at any time or from time
---------------------------------
to time after the Original Issue Date, the corporation shall issue
or sell Additional Shares of Common Stock (including additional
shares of Common Stock deemed to be issued pursuant to Subsection
7(c)(iii), but excluding additional shares of Common Stock issued
as a dividend or other distribution on any class of stock as
provided in Subsection 7(c)(iii)(2) or 7(c)(vi)) for a
consideration per share less than the then existing Conversion
Price (or, if an adjusted Conversion Price shall be in effect by
reason of a previous adjustment, then less than such adjusted
Conversion Price), then and in each case the then Conversion Price
shall be adjusted to a price (computed to the nearest cent) as of
the opening of business on the date of such issue or sale, to a
price equal to quotient obtained by dividing
--------
(1) an amount equal to the sum of (A) the total number of
shares of Common Stock outstanding on the Original Issue
Date, multiplied by the Conversion Price then in effect,
----------
plus (B) the aggregate consideration received by the
corporation for all Additional Shares of Common Stock issued
since the Original Issue Date, by
--
(2) an amount equal to the sum of (A) the number of shares
of Common Stock outstanding on the Original
<PAGE>
Issue Date or sale of such Additional Shares of Common
Stock, plus (B) the total number of Additional Shares of
Common Stock issued since the Original Issue Date.
(v) Determination of Consideration. For purposes of this
------------------------------
Section 7(c), the consideration received by the corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(1) Cash and Property: Such consideration shall (A)
-----------------
insofar as it consists of cash, be computed at the aggregate
amounts of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued
dividends and any expenses, underwriting commissions or
concessions incurred in connection therewith; (B) insofar
as it consists of property other than cash, be computed at
the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and (C)
in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of
the corporation for consideration which covers both, be the
proportion of such consideration so received, computed as
provided in clauses (A) and (B) above, as determined in good
faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration
----------------------------------
per share received by the corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to
Subsection 7(c)(iii)(1), relating to Options and Convertible
Securities, shall be determined by dividing (x) the total
amount, if any, received or receivable by the corporation as
consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable
to the corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in
the case of Options for Convertible Securities,
<PAGE>
the exercise of such Options for Convertible Securities and
the conversion or exchange of such Convertible Securities,
by (y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible
Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock/./
----------------------------------------------
(1) Stock Dividends, Distributions or Subdivisions. In
----------------------------------------------
the event the corporation shall issue Additional Shares of
Common Stock pursuant to Subsection 7(c)(iii)(2) in a stock
dividend, stock distribution or subdivision, the Conversion
Price in effect immediately prior to such stock dividend,
stock distribution or subdivision shall, concurrently with
the effectiveness of such stock dividend, stock distribution
or subdivision, be proportionately decreased without regard
to the adjustment provisions set forth in Subsection
7(c)(iv) hereof.
(2) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion
Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately
increased.
(d) Automatic Conversion. Each share of Series A Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then
effective Conversion Price upon: (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer
and sale of Common Stock for the account of the corporation to the
<PAGE>
public at an initial public offering price per share not less than $3.00,
and (ii) with gross proceeds to the corporation of not less than
$5,000,000 including underwriting discounts and commissions (in the event
of which offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock shall not be
deemed to have converted that Series A Preferred Stock until the closing
of such offering).
Upon the occurrence of the event specified in this Section 7(d), the
Series A Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the corporation
or its transfer agent; provided, however, that the corporation shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such shares
of the Series A Preferred Stock being converted are either delivered to
the corporation or its transfer agent, or the holder notifies the
corporation or any transfer agent that such certificates have been lost,
stolen, or destroyed and executes an agreement satisfactory to the
corporation to indemnify the corporation from any loss incurred by it in
connection therewith and, if the corporation so elects, provides an
appropriate indemnity bond. Upon the automatic conversion of the Series A
Preferred Stock, the holders of such Series A Preferred Stock shall
surrender the certificates representing such shares at the office of the
corporation or of its transfer agent. Thereupon, there shall be issued
and delivered to such holder, promptly at such office and in his name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the
shares of the Series A Preferred Stock surrendered were convertible on the
date on which such automatic conversion occurred. No fractional shares of
Common Stock shall be issued upon conversion of the Series
A Preferred Stock. In lieu of any fractional shares to which the holder
would otherwise be entitled, the corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Articles of Incorporation or through any
<PAGE>
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation but shall at all times in good
faith assist in the carrying out of all the provisions of this Section 7
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the Series A
Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this
Section 7, the corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish
to each affected holder of Series A Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The corporation shall,
upon the written request at any time of any affected holder of Series A
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of each share of Series A Preferred
Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the corporation shall
mail to each holder of Series A Preferred Stock at least ten (10) days
prior to such record date a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the issued and outstanding Series A Preferred Stock.
<PAGE>
(i) Certain Taxes. The corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of the Series A Preferred
Stock, provided, however, that the corporation shall not be required to
pay any tax which may be payable in respect of any transfer to a name
other than that of the holder of the Series A Preferred Stock then
outstanding.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series A Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any
shares of Series A Preferred Stock in any manner which interferes with the
timely conversion of such Series A Preferred Stock.
Section 8. Voting Rights. (a) In addition to the voting rights provided
-------------
in subparagraphs 8(b) and 8(C) below and by applicable Delaware law, the
holders of shares of Series A Preferred Stock shall be entitled to vote
upon all matters upon which holders of the Common Stock have the right to
vote, and shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which such shares of Series A
Preferred Stock could be converted pursuant to the provisions of Section 7
hereof at the Record Date for the determination of the stockholders
entitled to vote on such matters, or, if no such Record Date is
established, at the date such vote is taken or any written consent of
stockholders is solicited, such votes to be counted together with all
other shares of capital stock having general voting powers and not
separately as a class. In all cases where the holders of shares of Series
A Preferred Stock have the right to vote separately as a class, such
holders shall be entitled to one vote for each such share held by them
respectively.
(b) Without the consent of the holders of at least a majority of the
shares of Series A Preferred Stock then outstanding (voting together as a
single class with such other series of Preferred Stock which may, from
time to time, be issued by the Company with such voting rights), given in
writing or by vote at a meeting of stockholders called for such purpose,
the corporation will not (A) increase the authorized number of shares of
Series A Preferred Stock, (B) create any other class of shares having
preference over or being on a parity with the Series A Preferred Stock,
except as provided
<PAGE>
in Section 9 hereto, or (C) alter or change the rights, preferences or
privileges of the Series A Preferred Stock materially or adversely; and
(c) So long as 100,000 of the shares of Series A Preferred Stock
(together with shares of any other series of Preferred Stock which may
vote together as a single class with the Series A Preferred Stock) are
issued and outstanding, the holders of the Series A Preferred Stock
(voting together as a single class with such other series of Preferred
Stock which may, from time to time, be issued by the Company with such
voting rights) shall have the voting power to elect two directors on the
Board of Directors. The directors elected by the holders of the Series A
Preferred Stock may be removed only by a vote of holders of a majority of
the issued and outstanding Series A Preferred Stock (voting together as a
single class with such other series of Preferred Stock which may, from
time to time, be issued by the Company with such voting rights), provided
that such holders remain entitled to vote pursuant to the first sentence
of this paragraph (c). If the office of a director elected by the holders
of the Series A Preferred Stock becomes vacant by reason of resignation,
death or removal, the vacancy shall be filled by the vote of the holders
of a majority of the Series A Preferred Stock (voting together as a single
class with such other series of Preferred Stock which may, from time to
time, be issued by the Company with such voting rights).
Section 9. Additional Series of Preferred Stock. Notwithstanding
------------------------------------
anything in this resolution to the contrary, the Corporation shall be
authorized to issue additional series of Preferred Stock ("Additional
Series") having identical rights and preferences, and ranking pari passu
with, the Series A Preferred Stock except that such Additional Series may
have an equal stated value and conversion price which differs from the
Stated Value and Conversion Price. Such Additional Series shall vote as a
single class together Series A Preferred Stock with respect to the matters
set forth in Section 8(a) hereof."
<PAGE>
IN WITNESS WHEREOF, Hybrid Fax, Inc. has caused this Certificate to be
executed this ___ day of December, 1988.
HYBRID FAX, INC.
By: /s/Edward R. Prince III
-----------------------
EDWARD R. PRINCE III
PRESIDENT
ATTEST: /s/ James M. Prince
-------------------
JAMES M. PRINCE
ASST. SECRETARY
STATE OF CALIFORNIA
CITY AND COUNTY OF ___________
I, ________________, do hereby certify that on this ___ day of December,
1988, Edward R. Prince III, personally appeared before me, who being by me duly
sworn, declared that he executed the foregoing Certificate in his capacity as
President of Hybrid Fax, Inc., and that the statements contained therein are
true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this ___ day of December, 1988.
________________
Notary Public in and for the
State of California
________________
Printed Name of Notary Public
My Commission Expires:
________________
<PAGE>
EXHIBIT 3.8
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES B PREFERRED STOCK
OF
HYBRID FAX, INC.
Pursuant to Section 151 of the Delaware General Corporation Law
The undersigned, Edward R. Prince, III and James M. Prince, do hereby
certify that (i) they are, and at all times mentioned herein were, the duly
elected and acting President and Assistant Secretary, respectively, of HYBRID
FAX, INC., a corporation organized and existing under the Delaware General
Corporation Law (the "Corporation"), and (ii) pursuant to the authority
conferred upon the Board of Directors by the Certificate of Incorporation of the
Corporation and pursuant to Section 151 of the Delaware General Corporation Law,
said Board of Directors by unanimous consent dated July 27, 1989, duly adopted a
resolution designating the preferences, rights and limitations of the
Corporation's Series B Preferred Stock and providing for the issuance of shares
thereof out of the Corporation's authorized and unissued Preferred Stock, $.01
par value, which resolution is and reads as follows:
"RESOLVED that, pursuant to the authority expressly granted to and vested in
the Board of Directors in the Corporation's Certificate of Incorporation and
pursuant to Section 151 of Delaware General Corporation Law, said Board of
Directors hereby designates, approves and adopts the foregoing Certificate of
Designation which provides for the creation, establishment and authorization of
the second series of Preferred Stock, par value $.01 per share, of the
Corporation, and this Board of Directors hereby declares and affirms that each
share of such stock of said second series shall have identical rights and
privileges in every respect and shall have the designations, preferences,
limitations and relative rights described as follows:
Section 1. Designation; Number of Shares The designation of said
-----------------------------
series of preferred stock authorized hereby shall be "Series B Preferred
Stock." The maximum number of shares of Series B Preferred Stock that may
be issued shall be 1,000,000.
<PAGE>
The Stated Value of the Series B Preferred Stock shall be $1.00 per share.
Section 2. Dividends. (a) The holders of record of shares of Series B
---------
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available for the payment of
dividends, non-cumulative dividends, and no more, payable in cash to
persons who are holders of record of the Series B Preferred Stock on a
record date designated by the Board of Directors (a "Record Date"). Such
dividends with respect to any share of Series B Preferred Stock shall be
non-cumulative.
(b) So long as any of the Series B Preferred Stock remains outstanding,
no dividends shall be paid on, or declared or set apart for, the Common
Stock, unless such dividends shall have been shared on a per share basis
(as equitably adjusted for stock splits, stock dividends and similar
events) between holders of Series B Preferred Stock (as if the Series B
Preferred Stock had been converted into Common Stock) and Common Stock.
Section 3. Liquidation Preference. In the event of voluntary or
----------------------
involuntary liquidation, dissolution or winding up of the corporation, the
holders of the Series B Preferred Stock shall be entitled to receive,
after payment or provision for payment of all debts of the corporation,
but before any distribution of assets to the holders of Common Stock (or
any series of Preferred Stock created or issued after the date hereof
which ranks junior in preference to the Series B Preferred Stock), an
amount equal to the Stated Value per share of such Series B Preferred
Stock plus declared but unpaid dividends thereon, if any, to the date
fixed for the liquidation, dissolution or winding up. After (a) such
payment described in the foregoing sentence has been made in full to the
holders of the outstanding Series B Preferred Stock and (b) a payment in
full or other distribution of assets in an amount equal to the the Stated
Value per share has been made with respect to each outstanding share of
Common Stock and each share of any series of Preferred Stock, including
Series A Preferred Stock, which is entitled to participate in such payment
or other distribution ratably with such Common Stock (as adjusted for any
stock dividends, combinations or splits with respect to
<PAGE>
such shares), or in each case funds necessary for such payment have been
set aside in trust for the account of such holders and continue to be
available therefor, thereafter the holders of the Series B Preferred Stock
and the holders of Common Stock (together with holders of any series of
Preferred Stock, including Series A Preferred Stock, which is entitled to
participate in such payment or other distribution ratably with such Common
Stock) shall be entitled to share in further distributions and the
remaining assets of the corporation in the same manner as if all shares of
Series B Preferred Stock had been converted into Common Stock. If on
liquidation, dissolution or winding up, the assets of the corporation so
distributable among the holders of the Series B Preferred Stock are
insufficient to ermit full payment to them of an amount equal to the
Stated Value per share, such assets shall be distributed ratably among (i)
the holders of the Series B Preferred Stock, (ii) holders of Series A
Preferred Stock of the Corporation and (iii) any other series of Preferred
Stock created or issued after the date hereof ranking pari passu with the
Series B Preferred Stock, each ratably in accordance with the stated
values of such shares. A consolidation or merger of the corporation, a
sale or transfer of substantially all of its assets as an entirety, or a
purchase or redemption by the corporation of its shares of any class, is
not a "voluntary or involuntary liquidation, dissolution or winding up of
the corporation" within the meaning of this paragraph.
Section 4. Voluntary Redemption. The corporation, at the option of the
--------------------
Board of Directors and together with the affirmative vote of holders of 66
2/3% of the outstanding Series B Preferred Stock, may at any time or times
on or after December 31, 1992 voluntarily redeem all or any part of the
Series B Preferred Stock then outstanding by paying in cash a price equal
to 150% of the Stated Value plus declared but unpaid dividends thereon, if
any. If less than all the outstanding shares of Series B Preferred Stock
are to be redeemed, the shares to be redeemed shall be selected pro rata.
Notice of voluntary redemption shall be mailed, postage prepaid, to the
holders of record of the shares to be redeemed at their addresses then
appearing on the books of the corporation, not less than twenty (20) and
not more than fifty (50) days prior to the date fixed for the voluntary
redemption.
<PAGE>
Section 5. Provision for Payment of Redemption Price. On or before the
-----------------------------------------
date fixed for a voluntary redemption, the corporation may provide for
payment of a sum sufficient to redeem the shares called for redemption by
either (1) setting aside the sum, separate from its other funds, in trust
for the benefit of the holders of the shares to be redeemed, or (2)
depositing such sum in a bank or trust company anywhere in the United
States having capital and surplus of at least one hundred million dollars
($100,000,000) according to its latest statement of condition, as a trust
fund, with irrevocable instructions and authority to the bank or trust
company to give or complete the notice of redemption and to pay, on or
after the date fixed for redemption, the redemption price on surrender of
the respective share certificates. The holders may be evidenced by a list
certified by the corporation (by its president or a vice president and by
its secretary or an assistant secretary) or by its transfer agent. If the
corporation so provides for payment, then from and after the date fixed
for redemption (i) the shares shall be deemed to be redeemed, (ii) such
setting aside or deposit shall be deemed to constitute full payment for
the shares, (iii) the shares shall no longer be deemed to be outstanding,
(iv) the holders thereof shall cease to be shareholders with respect to
such shares, and (v) the holders shall have no rights with respect thereto
except the right to receive their proportionate shares of the funds so set
aside or deposited (but without interest) upon the surrender of their
respective certificates. Any interest accrued on funds so set aside or
deposited shall belong to the corporation. If the holders of any shares do
not within six (6) years after such deposit claim any amount so deposited
for redemption thereof, the bank or trust company shall, on demand by the
corporation, pay over to the corporation the balance of the funds so
deposited, and the bank or trust company shall thereupon be relieved of
all liability to such holders.
Section 6. Status of Redeemed Shares. Shares of Series B Preferred
-------------------------
Stock which are redeemed shall be cancelled and shall be restored to the
status of authorized but unissued shares.
<PAGE>
Section 7. Conversion. The holders of the Series B Preferred Stock
----------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series B
----------------------------------
Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the
holder thereof, at any time after the date of issuance of such share, at
the office of the corporation or any transfer agent for the Series B
Preferred Stock. The conversion price at which shares of Common Stock
shall be deliverable upon conversion without the payment of any additional
consideration by the holder of Series B Preferred Stock shall be the
Stated Value (the "Conversion Price"). Such Conversion Price shall be
subject to adjustment, in order to adjust the number of shares of Common
Stock into which the Series B Preferred Stock is convertible, as
hereinafter provided. The right of conversion with respect to any shares
of Series B Preferred Stock which shall have been called for redemption
under Section 4 hereof shall terminate at the close of business at 5:00
p.m., Pacific Time, on the day first preceding the day fixed for
redemption unless the corporation shall default in the payment of the
redemption price.
(b) Mechanics of Conversion. Before any holder of Series B Preferred
-----------------------
Stock shall be entitled to convert the same into full shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for
the Series B Preferred Stock, and shall give written notice to the
corporation at such office that he elects to convert the same and shall
state therein his name or the name or names of his nominees in which he
wishes the certificate or certificates for shares of Common Stock to be
issued. No fractional shares of Common Stock shall be issued upon
conversion of the Series B Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the corporation
shall pay cash equal to such fraction multiplied by the then effective
Conversion Price. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B
Preferred Stock, or to his nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid, together with
<PAGE>
cash in lieu of any fraction of a share. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(c) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 7(c),
-------------------
the following definitions shall apply:
(1) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection
7(c)(iii), deemed to be issued) by the corporation after the
Original Issue Date, other than (A) shares of Common Stock
issued or issuable upon conversion of shares of Series B
Preferred Stock; and (B) shares of Common Stock, not to
exceed 1,090,000 issued and outstanding at any time (subject
to adjustment for stock splits, recapitalizations and
similar transactions), issued or issuable to officers,
directors, employees or consultants of the corporation or
issued pursuant to an employee or consultant stock purchase
plan or employee or director option plan or other employee
stock bonus arrangement (collectively, the "Plans") approved
by the corporation's Board of Directors.
(2) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common
Stock.
(3) "Option" shall mean any rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities (except for the options
referenced in subsection (1)(B) above).
<PAGE>
(4) "Original Issue Date" shall mean the date on which a
-------------------
share of Series B Preferred Stock was first issued.
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which the Series B Preferred
Stock is convertible shall be made by adjustment in the Conversion
Price in respect of the issuance of Additional Shares of Common
Stock if the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is
equal to or greater than the Conversion Price in effect on the date
of, and immediately prior to, the issue of such Additional Share of
Common Stock.
(iii) Issue of Securities Deemed Issued as Additional Shares
------------------------------------------------------
of Common Stock.
---------------
(1) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination
of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case
of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall
be deemed to be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such
record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Subsection
7(c)(v) hereof) of such Additional Shares of Common Stock
would be less than the Conversion Price in effect on the
date of and immediately prior to such issue, or such record
date, as the case may be, and provided further that in any
<PAGE>
such case in which Additional Shares of Common Stock are
deemed to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise
of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the corporation, or decrease in the number
of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price
computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of
conversion or exchange under such Convertible
Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such
expiration, be recomputed as if (I) in the case of
Convertible Securities or Options for Common Stock,
the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued
upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the consideration
actually received by the corporation for the issue of
all such Options, whether or not exercised, plus the
consideration actually received by the corporation
upon such exercise, or for the issue of all such
Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if
any, actually received by the corporation
<PAGE>
upon such exercise, or for the issue of all such
Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if
any, actually received by the corporation upon such
conversion or exchange, and (II) in the case of
Options for Convertible Securities, only the
Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue
of such Options, and the consideration received by the
corporation for the Additional Shares of Common Stock
deemed to have been then issued was the consideration
actually received by the corporation for the issue of
all such Options, whether or not exercised, plus the
consideration deemed to have been received by the
corporation (determined pursuant to Subsection
7(c)(v)) upon the issue of the Convertible Securities
with respect to which such Options were actually
exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the
Conversion Price to an amount which exceeds the lower
of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have
resulted from any issuance of Additional Shares of
Common Stock between the original adjustment date and
such readjustment date;
(E) in the case of any Options which expire by
their terms not more than 30 days after the date of
issue thereof, no adjustment of the Conversion Price
shall be made until the expiration or exercise of all
such Options, whereupon such adjustment shall be made
in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and
such Options or Convertible Securities are not issued
on the date fixed therefor, the adjustment previously
made in the Conversion Price which became effective on
such record date shall be
<PAGE>
cancelled as of the close of business on such record
date, and thereafter the Conversion Price shall be
adjusted pursuant to this Subsection 7(c)(iii) as of
the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions.
-----------------------------------------------------
In the event the corporation at any time or from time to
time after the Original Issue Date shall declare or pay any
dividend or make any other distribution on the Common Stock
payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock),
then and in any such event, Additional Shares of Common
Stock shall be deemed to have been issued (A) in the case of
any such dividend or distribution, immediately after the
close of business on the record date for the determination
of holders of any class of securities entitled to receive
such dividend or distribution, or (B) in the case of any
such subdivision, at the close of business on the date
immediately prior to the date upon which such corporate
action becomes effective. If such record date shall have
been fixed and such dividend shall not have been fully paid
on the date fixed therefor, the adjustment previously made
in the Conversion Price which became effective on such
record date shall be cancelled as of the close of business
on such record date, and thereafter the Conversion Price
shall be adjusted pursuant to this Subsection 7(c)(iii) as
of the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock. If at any time or from time to time after
----------------------
the Original Issue Date, the corporation shall issue or sell
Additional Shares of Common Stock (including additional shares of
Common Stock deemed to be issued pursuant to Subsection 7(c)(iii),
but excluding additional shares of Common Stock issued as a
dividend or other distribution on any class of stock as provided in
Subsection 7(c)(iii)(2) or 7(c)(vi)) for a consideration per share
less than the then existing Conversion Price (or, if an adjusted
Conversion Price
<PAGE>
shall be in effect by reason of a previous adjustment, then less
than such adjusted Conversion Price), then and in each case the
then Conversion Price shall be adjusted to a price (computed to the
nearest cent) as of the opening of business on the date of such
issue or sale, to a price equal to quotient obtained by dividing
--------
(1) an amount equal to the sum of (A) the total number of
shares of Common Stock outstanding on the Original Issue
Date, multiplied by the Conversion Price then in effect,
----------
plus (B) the aggregate consideration received by the
corporation for all Additional Shares of Common Stock issued
since the Original Issue Date, by
(2) an amount equal to the sum of (A) the number of shares
of Common Stock outstanding on the Original Issue Date or
sale of such Additional Shares of Common Stock, plus (B) the
total number of Additional Shares of Common Stock issued
since the Original Issue Date.
(v) Determination of Consideration. For purposes of this
------------------------------
Section 7(c), the consideration received by the corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(1) Cash and Property: Such consideration shall (A)
-----------------
insofar as it consists of cash, be computed at the aggregate
amounts of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued
dividends and any expenses, underwriting commissions or
concessions incurred in connection therewith; (B) insofar as
it consists of property other than cash, be computed at the
fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and (C) in the
event Additional Shares of Common Stock are issued together
with other shares or securities or other assets of the
corporation for consideration which covers both, be the
proportion of such consideration so received, computed as
provided in clauses (A) and (B) above, as determined in good
faith by the Board of Directors.
<PAGE>
(2) Options and Convertible Securities. The consideration
----------------------------------
per share received by the corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to
Subsection 7(c)(iii)(1), relating to Options and Convertible
Securities, shall be determined by dividing (x) the total
amount, if any, received or receivable by the corporation as
consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable
to the corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in
the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible
Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock
----------------------------------------------
(1) Stock Dividends, Distributions or Subdivisions. In
----------------------------------------------
the event the corporation shall issue Additional Shares of
Common Stock pursuant to Subsection 7(c)(iii)(2) in a stock
dividend, stock distribution or subdivision, the Conversion
Price in effect immediately prior to such stock dividend,
stock distribution or subdivision shall, concurrently with
the effectiveness of such stock dividend, stock distribution
or subdivision, be proportionately decreased without regard
to the adjustment provisions set forth in Subsection
7(c)(iv) hereof.
<PAGE>
(2) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion
Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately
increased.
(d) Automatic Conversion. Each share of Series B Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then
effective Conversion Price upon: (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer
and sale of Common Stock for the account of the corporation to the public
at an initial public offering price per share not less than $3.00, and
(ii) with gross proceeds to the corporation of not less than $5,000,000
including underwriting discounts and commissions (in the event of which
offering, the person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series B Preferred Stock shall not be deemed to
have converted that Series B Preferred Stock until the closing of such
offering).
Upon the occurrence of the event specified in this Section 7(d), the
Series B Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the corporation
or its transfer agent; provided, however, that the corporation shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such shares
of the Series B Preferred Stock being converted are either delivered to
the corporation or its transfer agent, or the holder notifies the
corporation or any transfer agent that such certificates have been lost,
stolen, or destroyed and executes an agreement satisfactory to the
corporation to indemnify the corporation from any loss incurred by it in
connection therewith and, if the corporation so elects, provides an
appropriate indemnity bond. Upon the automatic conversion of the Series B
Preferred Stock, the
<PAGE>
holders of such Series B Preferred Stock shall surrender the certificates
representing such shares at the office of the corporation or of its
transfer agent. Thereupon, there shall be issued and delivered to such
holder, promptly at such office and in his name as shown on such
surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of the Series B
Preferred Stock surrendered were convertible on the date on which such
automatic conversion occurred. No fractional shares of Common Stock shall
be issued upon conversion of the Series B Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the corporation but shall at all times in good faith assist in the
carrying out of all the provisions of this Section 7 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series B Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this
Section 7, the corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish
to each affected holder of Series B Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The corporation shall,
upon the written request at any time of any affected holder of Series B
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of each share of Series
B Preferred Stock.
<PAGE>
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the corporation shall
mail to each holder of Series B Preferred Stock at least ten (10) days
prior to such record date a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the issued and outstanding Series B Preferred Stock.
(i) Certain Taxes. The corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of the Series B Preferred
Stock, provided, however, that the corporation shall not be required to
pay any tax which may be payable in respect of any transfer to a name
other than that of the holder of the Series B Preferred Stock then
outstanding.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series B Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any
shares of Series B Preferred Stock in any manner which interferes with the
timely conversion of such Series B Preferred Stock.
Section 8. Voting Rights. (a) In addition to the voting rights
-------------
provided in subparagraphs 8(b) below and by applicable Delaware law, the
holders of shares of Series B Preferred Stock shall be entitled to vote
upon all matters upon which holders of the Common Stock have the right to
vote, and shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which such shares of Series B
Preferred Stock could be converted pursuant to the provisions of Section 7
hereof at the Record Date for the determination of the stockholders
entitled to vote on such matters, or, if no such Record Date is
established, at the date such vote is taken or any written consent of
stockholders is solicited, such
<PAGE>
votes to be counted together with all other shares of capital stock having
general voting powers and not separately as a class. In all cases where
the holders of shares of Series B Preferred Stock have the right to vote
separately as a class, such holders shall be entitled to one vote for each
such share held by them respectively; and
(b) Without the consent of the holders of at least a majority of the
shares of Series B Preferred Stock then outstanding (voting together as a
single class with such other series of Preferred Stock which may, from
time to time, be issued by the Company with such voting rights), given in
writing or by vote at a meeting of stockholders called for such purpose,
the corporation will not (A) increase the authorized number of shares of
Series B Preferred Stock, (B) create any other class or series of shares
having preference over, or ranking on a parity with, the Series B
Preferred Stock, except as provided in Section 9 hereto, or (C) alter or
change the rights, preferences or privileges of the Series B Preferred
Stock materially or adversely.
Section 9. Additional Series of Preferred Stock. Notwithstanding
------------------------------------
anything in this resolution to the contrary, the Corporation shall be
authorized to issue additional series of Preferred Stock ("Additional
Series") having substantially identical rights and preferences, and
ranking pari passu with, the Series B Preferred Stock except that such
Additional Series may have an equal stated value and conversion price
which differs from the Stated Value and Conversion Price. Such Additional
Series shall vote as a single class together Series B Preferred Stock with
respect to the matters set forth in Section 8(a) hereof."
<PAGE>
IN WITNESS WHEREOF, Hybrid Fax, Inc. has caused this Certificate to be
executed this ___ day of July, 1989.
HYBRID FAX, INC.
By: /s/Edward R. Prince III
-----------------------
EDWARD R. PRINCE III
PRESIDENT
Attest: /s/James M. Prince
------------------
JAMES M. PRINCE
ASST. SECRETARY
STATE OF CALIFORNIA
COUNTY OF ___________
I, ________________, do hereby certify that on this ___ day of July,
1989, Edward R. Prince III personally appeared before me, who being by me duly
sworn, declared that he executed the foregoing Certificate in his capacity as
President of Hybrid Fax, Inc., and that the statements contained therein are
true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this ___ day of July, 1989.
________________
Notary Public in and for the
State of California
________________
Printed Name of Notary Public
<PAGE>
My Commission Expires:
________________
<PAGE>
EXHIBIT 3.9
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES C PREFERRED STOCK
OF
HYBRID FAX, INC.
Pursuant to Section 151 of the Delaware General Corporation Law
The undersigned, Edward R. Prince, III and James M. Prince, do hereby
certify that (i) they are, and at all times mentioned herein were, the duly
elected and acting President and Assistant Secretary, respectively, of HYBRID
FAX, INC., a corporation organized and existing under the Delaware General
Corporation Law (the "Corporation"), and (ii) pursuant to the authority
conferred upon the Board of Directors by the Certificate of Incorporation of the
Corporation and pursuant to Section 151 of the Delaware General Corporation Law,
said Board of Directors at a duly convened special meeting held on August 31,
1990, duly adopted a resolution designating the preferences, rights and
limitations of the Corporation's Series C Preferred Stock and providing for the
issuance of shares thereof out of the Corporation's authorized and unissued
Preferred Stock, $.01 par value, which resolution is and reads as follows:
"RESOLVED that, pursuant to the authority expressly granted to and
vested in the Board of Directors in the Corporation's Certificate of
Incorporation and pursuant to Section 151 of Delaware General Corporation Law,
said Board of Directors hereby designates, approves and adopts the foregoing
Certificate of Designation which provides for the creation, establishment and
authorization of the third series of Preferred Stock, par value $.01 per share,
of the Corporation, and this Board of Directors hereby declares and affirms that
each share of such stock of said third series shall have identical rights and
privileges in every respect and shall have the designations, preferences,
limitations and relative rights described as follows:
Section 1. Designation; Number of Shares The designation of said
-----------------------------
series of preferred stock authorized hereby shall be "Series C Preferred
Stock." The maximum number of shares of Series C Preferred Stock that may
be issued shall be 600,000. The Stated Value of the Series C Preferred
Stock shall be $1.25 per share.
Section 2. Dividends. (a) The holders of record of shares of Series C
---------
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available for the payment of
dividends, noncumulative dividends, and no more, payable in cash to persons
who are holders of record of the Series C Preferred Stock on a record date
designated by the Board of Directors (a "Record Date"). Such dividends
with respect to any share of Series C Preferred Stock shall be non-
cumulative.
(b) So long as any of the Series C Preferred Stock remains
outstanding, no dividends shall be paid on, or declared or set apart for,
the Common Stock, unless such
<PAGE>
dividends shall have been shared on a per share basis (as equitably
adjusted for stock splits, stock dividends and similar events) between
holders of Series C Preferred Stock (as if the Series C Preferred Stock had
been converted into Common Stock) and Common Stock.
Section 3. Liquidation Preference. In the event of voluntary or
----------------------
involuntary liquidation, dissolution or winding up of the corporation, the
holders of the Series C Preferred Stock shall be entitled to receive, after
payment or provision for payment of all debts of the corporation, but
before any distribution of assets to the holders of Common Stock (or any
series of Preferred Stock created or issued after the date hereof which
ranks junior in preference to the Series C Preferred Stock), an amount
equal to the Stated Value per share of such Series C Preferred Stock plus
declared but unpaid dividends thereon, if any, to the date fixed for the
liquidation, dissolution or winding up. After (a) such payment described in
the foregoing sentence has been made in full to the holders of the
outstanding Series C Preferred Stock and (b) a payment in full or other
distribution of assets in an amount equal to the Stated Value per share has
been made with respect to each outstanding share of Common Stock and each
share of any series of Preferred Stock, including Series A Preferred Stock
and Series B Preferred Stock, which is entitled to participate in such
payment or other distribution ratably with such Common Stock (as adjusted
for any stock dividends, combinations or splits with respect to such
shares), or in each case funds necessary for such payment have been set
aside in trust for the account of such holders and continue to be available
therefor, thereafter the holders of the Series C Preferred Stock and the
holders of Common Stock (together with holders of any series of Preferred
Stock, including Series A Preferred Stock and Series B Preferred Stock,
which is entitled to participate in such payment or other distribution
ratably with such Common Stock) shall be entitled to share in further
distributions and the remaining assets of the corporation in the same
manner as if all shares of Series C Preferred Stock had been converted into
Common Stock. If on liquidation, dissolution or winding up, the assets of
the corporation so distributable among the holders of the Series C
Preferred Stock are insufficient to permit full payment to them of an
amount equal to the Stated Value per share, such assets shall be
distributed ratably among (i) the holders of the Series C Preferred Stock,
(ii) holders of Series A Preferred Stock of the Corporation, (iii) holders
of Series B Preferred Stock of the Corporation, and (iv) any other series
of Preferred Stock created or issued after the date hereof ranking pari
passu with the Series C Preferred Stock, each ratably in accordance with
the stated values of such shares. A consolidation or merger of the
corporation, a sale or transfer of substantially all of its assets as an
entirety, or a purchase or redemption by the corporation of its shares of
any class, is not a "voluntary or involuntary liquidation, dissolution or
winding up of the corporation" within the meaning of this paragraph.
Section 4. Voluntary Redemption. The corporation, at the option of the
--------------------
Board of Directors and together with the affirmative vote of holders of 66
2/3% of the outstanding Series C Preferred Stock, may at any time or times
on or after December 31, 1992 voluntarily redeem all or any part of the
Series C Preferred Stock then outstanding by paying in cash a
-2-
<PAGE>
price equal to $1.50 per share plus declared but unpaid dividends thereon,
if any. If less than all the outstanding shares of Series C Preferred Stock
are to be redeemed, the shares to be redeemed shall be selected pro rata.
Notice of voluntary redemption shall be mailed, postage prepaid, to the
holders of record of the shares to be redeemed at their addresses then
appearing on the books of the corporation, not less than twenty (20) and
not more than fifty (50) days prior to the date fixed for the voluntary
redemption.
Section 5. Provision for Payment of Redemption Price. On or before the
-----------------------------------------
date fixed for a voluntary redemption, the corporation may provide for
payment of a sum sufficient to redeem the shares called for redemption by
either (1) setting aside the sum, separate from its other funds, in trust
for the benefit of the holders of the shares to be redeemed, or (2)
depositing such sum in a bank or trust company anywhere in the United
States having capital and surplus of at least one hundred million dollars
($100,000,000) according to its latest statement of condition, as a trust
fund, with irrevocable instructions and authority to the bank or trust
company to give or complete the notice of redemption and to pay, on or
after the date fixed for redemption, the redemption price on surrender of
the respective share certificates. The holders may be evidenced by a list
certified by the corporation (by its president or a vice president and by
its secretary or an assistant secretary) or by its transfer agent. If the
corporation so provides for payment, then from and after the date fixed for
redemption (i) the shares shall be deemed to be redeemed, (ii) such setting
aside or deposit shall be deemed to constitute full payment for the shares,
(iii) the shares shall no longer be deemed to be outstanding, (iv) the
holders thereof shall cease to be shareholders with respect to such shares,
and (v) the holders shall have no rights with respect thereto except the
right to receive their proportionate shares of the funds so set aside or
deposited (but without interest) upon the surrender of their respective
certificates. Any interest accrued on funds so set aside or deposited shall
belong to the corporation. If the holders of any shares do not within six
(6) years after such deposit claim any amount so deposited for redemption
thereof, the bank or trust company shall, on demand by the corporation, pay
over to the corporation the balance of the funds so deposited, and the bank
or trust company shall thereupon be relieved of all liability to such
holders.
Section 6. Status of Redeemed Shares. Shares of Series C Preferred
-------------------------
Stock which are redeemed shall be cancelled and shall be restored to the
status of authorized but unissued shares.
Section 7. Conversion. The holders of the Series C Preferred Stock
----------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series C
----------------------------------
Preferred Stock shall be convertible, without the payment of any additional
consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the
office of the corporation or any transfer agent for the Series C Preferred
Stock.
-3-
<PAGE>
The conversion price at which shares of Common Stock shall be
deliverable upon conversion without the payment of any additional
consideration by the holder of Series C Preferred Stock shall be the Stated
Value (the "Conversion Price"). Such Conversion Price shall be subject to
adjustment, in order to adjust the number of shares of Common Stock into
which the Series C Preferred Stock is convertible, as hereinafter provided.
The right of conversion with respect to any shares of Series C Preferred
Stock which shall have been called for redemption under Section 4 hereof
shall terminate at the close of business at 5:00 p.m., Pacific Time, on the
day first preceding the day fixed for redemption unless the corporation
shall default in the payment of the redemption price.
(b) Mechanics of Conversion. Before any holder of Series C Preferred
-----------------------
Stock shall be entitled to convert the same into full shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for the
Series C Preferred Stock, and shall give written notice to the corporation
at such office that he elects to convert the same and shall state therein
his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. No
fractional shares of Common Stock shall be issued upon conversion of the
Series C Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the corporation shall pay cash equal to
such fraction multiplied by the then effective Conversion Price. The
corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series C Preferred Stock, or to his nominee
or nominees, a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled as aforesaid, together with cash
in lieu of any fraction of a share. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series C Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(c) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 7(c),
-------------------
the following definitions shall apply:
(1) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection
7(c)(iii), deemed to be issued) by the corporation after the
Original Issue Date, other than (A) shares of Common Stock issued
or issuable upon conversion of shares of Series C Preferred
Stock; and (B) shares of Common Stock, not to exceed 1,090,000
issued and outstanding at any time (subject to adjustment for
stock splits, recapitalizations and similar transactions), issued
or issuable to officers, directors, employees or consultants of
the corporation or issued pursuant to
-4-
<PAGE>
an employee or consultant stock purchase plan or employee or
director option plan or other employee stock bonus arrangement
(collectively, the "Plans") approved by the corporation's Board
of Directors.
(2) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(3) "Option" shall mean any rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities (except for the options referenced in
subsection (1)(B) above).
(4) "Original Issue Date" shall mean the date on which a
-------------------
share of Series C Preferred Stock was first issued.
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which the Series C Preferred
Stock is convertible shall be made by adjustment in the Conversion
Price in respect of the issuance of Additional Shares of Common Stock
if the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is equal to or
greater than the Conversion Price in effect on the date of, and
immediately prior to, the issue of such Additional Share of Common
Stock.
(iii) Issue of Securities Deemed Issued as Additional Shares of
---------------------------------------------------------
Common Stock.
------------
(1) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Subsection 7(c)(v) hereof) of
such Additional Shares of Common Stock
-5-
<PAGE>
would be less than the Conversion Price in effect on the date of
and immediately prior to such issue, or such record date, as the
case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible
Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the
corporation, or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the
Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if (I) in the
case of Convertible Securities or Options for Common Stock,
the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of
such Convertible Securities and the consideration received
therefor was the consideration actually received by the
corporation for the issue of all such Options, whether or
not exercised, plus the consideration actually received by
the corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the corporation upon such conversion or
exchange, and (II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued at the
time of issue of such Options, and the consideration
received by the
-6-
<PAGE>
corporation for the Additional Shares of Common Stock deemed
to have been then issued was the consideration actually
received by the corporation for the issue of all such
Options, whether or not exercised, plus the consideration
deemed to have been received by the corporation (determined
pursuant to Subsection 7(c)(v)) upon the issue of the
Convertible Securities with respect to which such Options
were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion
Price to an amount which exceeds the lower of (i) the
Conversion Price on the original adjustment date, or (ii)
the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the Conversion Price shall be made until
the expiration or exercise of all such Options, whereupon
such adjustment shall be made in the same manner provided in
clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date
shall be cancelled as of the close of business on such
record date, and thereafter the Conversion Price shall be
adjusted pursuant to this Subsection 7(c)(iii) as of the
actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions.
-----------------------------------------------------
In the event the corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend
or make any other distribution on the Common Stock payable in
Common Stock or effect a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of
a dividend in Common Stock), then and in any such event,
Additional Shares of Common Stock shall be deemed to have been
issued (A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for
the determination of holders of any class of securities entitled
to receive such dividend or distribution, or (B) in the case of
any such subdivision, at the close of business on the date
immediately prior to the date upon which such corporate action
becomes effective. If such record date shall have been fixed and
such dividend shall not have been fully
-7-
<PAGE>
paid on the date fixed therefor, the adjustment previously made
in the Conversion Price which became effective on such record
date shall be cancelled as of the close of business on such
record date, and thereafter the Conversion Price shall be
adjusted pursuant to this Subsection 7(c)(iii) as of the time of
actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock. If at any time or from time to time after the
----------------------
Original Issue Date, the corporation shall issue or sell Additional
Shares of Common Stock (including additional shares of Common Stock
deemed to be issued pursuant to Subsection 7(c)(iii), but excluding
additional shares of Common Stock issued as a dividend or other
distribution on any class of stock as provided in Subsection
7(c)(iii)(2) or 7(c)(vi)) for a consideration per share less than the
then existing Conversion Price (or, if an adjusted Conversion Price
shall be in effect by reason of a previous adjustment, then less than
such adjusted Conversion Price), then and in each case the then
Conversion Price shall be adjusted to a price (computed to the nearest
cent) as of the opening of business on the date of such issue or sale,
to a price equal to quotient obtained by dividing
--------
(1) an amount equal to the sum of (A) the total number of
shares of Common Stock outstanding on the Original Issue Date,
multiplied by the Conversion Price then in effect, plus (B) the
aggregate consideration received by the corporation for all
Additional Shares of Common Stock issued since the Original Issue
Date, by
--
(2) an amount equal to the sum of (A) the number of shares
of Common Stock outstanding on the Original Issue Date or sale of
such Additional Shares of Common Stock, plus (B) the total number
of Additional Shares of Common Stock issued since the Original
Issue Date.
(v) Determination of Consideration. For purposes of this Section
------------------------------
7(c), the consideration received by the corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall (A) insofar
-----------------
as it consists of cash, be computed at the aggregate amounts of
cash received by the corporation excluding amounts paid or
payable for accrued interest or accrued dividends and any
expenses, underwriting commissions or concessions incurred in
connection therewith; (B) insofar as it consists of property
other than cash, be computed at the fair value thereof at the
time of such issue, as determined in good faith by the Board of
Directors; and (C) in the event Additional Shares of Common Stock
are issued together with other
-8-
<PAGE>
shares or securities or other assets of the corporation for
consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A)
and (B) above, as determined in good faith by the Board of
Directors.
(2) Options and Convertible Securities. The consideration
----------------------------------
per share received by the corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection
7(c)(iii)(1), relating to Options and Convertible Securities,
shall be determined by dividing (x) the total amount, if any,
received or receivable by the corporation as consideration for
the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
consideration) payable to the corporation upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by (y) the
maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
Combinations or Consolidations of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions. In the
----------------------------------------------
event the corporation shall issue Additional Shares of Common
Stock pursuant to Subsection 7(c)(iii)(2) in a stock dividend,
stock distribution or subdivision, the Conversion Price in effect
immediately prior to such stock dividend, stock distribution or
subdivision shall, concurrently with the effectiveness of such
stock dividend, stock distribution or subdivision, be
proportionately decreased without regard to the adjustment
provisions set forth in Subsection 7(c)(iv) hereof.
(2) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
-9-
<PAGE>
(d) Automatic Conversion. Each share of Series C Preferred Stock
--------------------
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price upon: (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer
and sale of Common Stock for the account of the corporation to the public
at an initial public offering price per share not less than $3.00, and (ii)
with gross proceeds to the corporation of not less than $5,000,000
including underwriting discounts and commissions (in the event of which
offering, the person(s) entitled to receive the Common Stock issuable
upon such conversion of the Series C Preferred Stock shall not be deemed to
have converted that Series C Preferred Stock until the closing of such
offering).
Upon the occurrence of the event specified in this Section 7(d),
the Series C Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the corporation or
its transfer agent; provided, however, that the corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such shares of
the Series C Preferred Stock being converted are either delivered to the
corporation or its transfer agent, or the holder notifies the corporation
or any transfer agent that such certificates have been lost, stolen, or
destroyed and executes an agreement satisfactory to the corporation to
indemnify the corporation from any loss incurred by it in connection
therewith and, if the corporation so elects, provides an appropriate
indemnity bond. Upon the automatic conversion of the Series C Preferred
Stock, the holders of such Series C Preferred Stock shall surrender the
certificates representing such shares at the office of the corporation or
of its transfer agent. Thereupon, there shall be issued and delivered to
such holder, promptly at such office and in his name as shown on such
surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of the Series C
Preferred Stock surrendered were convertible on the date on which such
automatic conversion occurred. No fractional shares of Common Stock shall
be issued upon conversion of the Series C Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the corporation but shall at all times in good faith assist in the carrying
out of all the provisions of this Section 7 and in the taking of all such
action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series C Preferred Stock against
impairment.
-10-
<PAGE>
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section
7, the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each
affected holder of Series C Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The corporation shall, upon the
written request at any time of any affected holder of Series C Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion
Price at the time in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be
received upon the conversion of each share of Series C Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the corporation shall
mail to each holder of Series C Preferred Stock at least ten (10) days
prior to such record date a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the issued and outstanding Series C Preferred Stock.
(i) Certain Taxes. The corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of the Series C Preferred
Stock, provided, however, that the corporation shall not be required to pay
any tax which may be payable in respect of any transfer to a name other
than that of the holder of the Series C Preferred Stock then outstanding.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series C Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any
shares of Series C Preferred Stock in any manner which interferes with the
timely conversion of such Series C Preferred Stock.
Section 8. Voting Rights. (a) In addition to the voting rights
-------------
provided in subparagraphs 8(b) below and by applicable Delaware law, the
holders of shares of Series C Preferred Stock shall be entitled to vote
upon all matters upon which holders of the Common Stock have the right to
vote, and shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which such shares of Series C
Preferred Stock could be converted pursuant to the provisions of Section 7
hereof at the
-11-
<PAGE>
Record Date for the determination of the stockholders entitled to vote on
such matters, or, if no such Record Date is established, at the date such
vote is taken or any written consent of stockholders is solicited, such
votes to be counted together with all other shares of capital stock having
general voting powers and not separately as a class. In all cases where the
holders of shares of Series C Preferred Stock have the right to vote
separately as a class, such holders shall be entitled to one vote for each
such share held by them respectively; and
(b) Without the consent of the holders of at least a majority of the
shares of Series C Preferred Stock then outstanding (voting together as a
single class with such other series of Preferred Stock which may, from time
to time, be issued by the Company with such voting rights), given in
writing or by vote at a meeting of stockholders called for such purpose,
the corporation will not (A) increase the authorized number of shares of
Series C Preferred Stock, (B) create any other class or series of shares
having preference over, or ranking on a parity with, the Series C Preferred
Stock, except as provided in Section 9 hereto, or (C) alter or change the
rights, preferences or privileges of the Series C Preferred Stock
materially or adversely.
Section 9. Additional Series of Preferred Stock. Notwithstanding
------------------------------------
anything in this resolution to the contrary, the Corporation shall be
authorized to issue additional series of Preferred Stock ("Additional
Series") having substantially identical rights and preferences, and ranking
pari passu with, the Series C Preferred Stock except that such Additional
Series may have an equal stated value and conversion price which differs
from the Stated Value and Conversion Price. Such Additional Series shall
vote as a single class together Series C Preferred Stock with respect to
the matters set forth in Section 8(a) hereof."
-12-
<PAGE>
IN WITNESS WHEREOF, Hybrid Fax, Inc. has caused this Certificate to be
executed this 4th day of September, 1990.
HYBRID FAX, INC.
By:/s/ Edward R. Prince III
------------------------
Edward R. Prince III
President
Attest: /s/ James M. Prince
-------------------
James M. Prince
Asst. Secretary
STATE OF CALIFORNIA
COUNTY OF SAN MATEO
I, Kimberlee Mirabelli , do hereby certify that on this 5 day of
-------------------
September, 1990, Edward R. Prince III personally appeared before me, who being
by me duly sworn, declared that he executed the foregoing Certificate in his
capacity as President of Hybrid Fax, Inc., and that the statements contained
therein are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 5 day of September, 1990.
/s/Kimberlee Mirabelli
----------------------
Notary Public in and for the State of California
KIMBERLEE MIRABELLI
----------------------
Printed Name of Notary Public
My Commission Expires:
12-18-90
-------------
-13-
<PAGE>
EXHIBIT 3.10
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES D PREFERRED STOCK
OF
JETFAX, INC.
Pursuant to Section 151 of the Delaware General Corporation Law
The undersigned, Edward R. Prince, III and Lori K. Evans, do hereby
certify that (i) they are, and at all times mentioned herein were, the duly
elected and acting President and Secretary, respectively, of JETFAX, INC., a
corporation organized and existing under the Delaware General Corporation Law
(the "Corporation"), and (ii) pursuant to the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation and pursuant
to Section 151 of the Delaware General Corporation Law, said Board of Directors
at a duly convened special meeting held on July 15, 1991, duly adopted a
resolution designating the preferences, rights and limitations of the
Corporation's Series D Preferred Stock and providing for the issuance of shares
thereof out of the Corporation's authorized and unissued Preferred Stock, $.01
par value, which resolution is and reads as follows:
"RESOLVED that, pursuant to the authority expressly granted to and vested
in the Board of Directors in the Corporation's Certificate of Incorporation and
pursuant to Section 151 of Delaware General Corporation Law, said Board of
Directors hereby designates, approves and adopts the foregoing Certificate of
Designation which provides for the creation, establishment and authorization of
the fourth series of Preferred Stock, par value $.01 per share, of the
Corporation, and this Board of Directors hereby declares and affirms that each
share of such stock of said fourth series shall have identical rights and
privileges in every respect and shall have the designations, preferences,
limitations and relative rights described as follows:
Section 1. Designation; Number of Shares The designation of said
series of preferred stock authorized hereby shall be "Series D Preferred
Stock." The number of shares of Series D Preferred Stock authorized for
issuance is 100,000. The Stated Value of the Series D Preferred Stock shall
be $1.62 per share.
Section 2. Dividends. (a) The holders of record of shares of Series D
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available for the payment of
dividends, non-cumulative dividends, and no more, payable in cash to
persons who are holders of record of the Series D Preferred Stock on a
record date designated by the Board of Directors (a "Record Date"). Such
dividends with respect to any share of Series D Preferred Stock shall be
non-cumulative.
(b) So long as any of the Series D Preferred Stock remains
outstanding, no dividends shall be paid on, or declared or set apart for,
the Common Stock, unless such
<PAGE>
dividends shall have been shared on a per share basis (as equitably
adjusted for stock splits, stock dividends and similar events) between
holders of Series D Preferred Stock (as if the Series D Preferred Stock had
been converted into Common Stock) and Common Stock.
Section 3. Liquidation Preference. In the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, the
holders of the Series D Preferred Stock shall be entitled to receive, after
payment or provision for payment of all debts of the corporation, but
before any distribution of assets to the holders of Common Stock (or any
series of Preferred Stock created or issued after the date hereof which
ranks junior in preference to the Series D Preferred Stock), an amount
equal to the Stated Value per share of such Series D Preferred Stock plus
declared but unpaid dividends thereon, if any, to the date fixed for the
liquidation, dissolution or winding up. After (a) such payment described in
the foregoing sentence has been made in full to the holders of the
outstanding Series D Preferred Stock and (b) a payment in full or other
distribution of assets in an amount equal to the Stated Value per share has
been made with respect to each outstanding share of Common Stock and each
share of any series of Preferred Stock, including Series A Preferred Stock
and Series B Preferred Stock, which is entitled to participate in such
payment or other distribution ratably with such Common Stock (as adjusted
for any stock dividends, combinations or splits with respect to such
shares), or in each case funds necessary for such payment have been set
aside in trust for the account of such holders and continue to be available
therefor, thereafter the holders of the Series D Preferred Stock and the
holders of Common Stock (together with holders of any series of Preferred
Stock, including Series A Preferred Stock and Series B Preferred Stock,
which is entitled to participate in such payment or other distribution
ratably with such Common Stock) shall be entitled to share in further
distributions and the remaining assets of the corporation in the same
manner as if all shares of Series D Preferred Stock had been converted into
Common Stock. If on liquidation, dissolution or winding up, the assets of
the corporation so distributable among the holders of the Series D
Preferred Stock are insufficient to permit full payment to them of an
amount equal to the Stated Value per share, such assets shall be
distributed ratably among (i) the holders of the Series D Preferred Stock,
(ii) holders of Series A Preferred Stock of the Corporation, (iii) holders
of Series B Preferred Stock of the Corporation, and (iv) any other series
of Preferred Stock created or issued after the date hereof ranking pari
passu with the Series D Preferred Stock, each ratably in accordance with
the stated values of such shares. A consolidation or merger of the
corporation, a sale or transfer of substantially all of its assets as an
entirety, or a purchase or redemption by the corporation of its shares of
any class, is not a "voluntary or involuntary liquidation, dissolution or
winding up of the corporation" within the meaning of this paragraph.
Section 4. Voluntary Redemption. The corporation, at the option of the
Board of Directors and together with the affirmative vote of holders of 66
2/3% of the outstanding Series D Preferred Stock, may at any time or times
on or after December 31, 1992 voluntarily redeem all or any part of the
Series D Preferred Stock then outstanding by paying
-2-
<PAGE>
in cash a price equal to $1.62 per share plus declared but unpaid dividends
thereon, if any. If less than all the outstanding shares of Series D
Preferred Stock are to be redeemed, the shares to be redeemed shall be
selected pro rata. Notice of voluntary redemption shall be mailed, postage
prepaid, to the holders of record of the shares to be redeemed at their
addresses then appearing on the books of the corporation, not less than
twenty (20) and not more than fifty (50) days prior to the date fixed for
the voluntary redemption.
Section 5. Provision for Payment of Redemption Price. On or before the
date fixed for a voluntary redemption, the corporation may provide for
payment of a sum sufficient to redeem the shares called for redemption by
either (1) setting aside the sum, separate from its other funds, in trust
for the benefit of the holders of the shares to be redeemed, or (2)
depositing such sum in a bank or trust company anywhere in the United
States having capital and surplus of at least one hundred million dollars
($100,000,000) according to its latest statement of condition, as a trust
fund, with irrevocable instructions and authority to the bank or trust
company to give or complete the notice of redemption and to pay, on or
after the date fixed for redemption, the redemption price on surrender of
the respective share certificates. The holders may be evidenced by a list
certified by the corporation (by its president or a vice president and by
its secretary or an assistant secretary) or by its transfer agent. If the
corporation so provides for payment, then from and after the date fixed for
redemption (i) the shares shall be deemed to be redeemed, (ii) such setting
aside or deposit shall be deemed to constitute full payment for the shares,
(iii) the shares shall no longer be deemed to be outstanding, (iv) the
holders thereof shall cease to be shareholders with respect to such shares,
and (v) the holders shall have no rights with respect thereto except the
right to receive their proportionate shares of the funds so set aside or
deposited (but without interest) upon the surrender of their respective
certificates. Any interest accrued on funds so set aside or deposited shall
belong to the corporation. If the holders of any shares do not within six
(6) years after such deposit claim any amount so deposited for redemption
thereof, the bank or trust company shall, on demand by the corporation, pay
over to the corporation the balance of the funds so deposited, and the bank
or trust company shall thereupon be relieved of all liability to such
holders.
Section 6. Status of Redeemed Shares. Shares of Series D Preferred
Stock which are redeemed shall be cancelled and shall be restored to the
status of authorized but unissued shares.
Section 7. Conversion. The holders of the Series D Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series D
----------------------------------
Preferred Stock shall be convertible, without the payment of any additional
consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the
office of the corporation or any transfer agent for the Series D Preferred
Stock.
-3-
<PAGE>
The conversion price at which shares of Common Stock shall be deliverable
upon conversion without the payment of any additional consideration by the
holder of Series D Preferred Stock shall be the Stated Value (the
"Conversion Price"). Such Conversion Price shall be subject to adjustment,
in order to adjust the number of shares of Common Stock into which the
Series D Preferred Stock is convertible, as hereinafter provided. The right
of conversion with respect to any shares of Series D Preferred Stock which
shall have been called for redemption under Section 4 hereof shall
terminate at the close of business at 5:00 p.m., Pacific Time, on the day
first preceding the day fixed for redemption unless the corporation shall
default in the payment of the redemption price.
(b) Mechanics of Conversion. Before any holder of Series D Preferred
-----------------------
Stock shall be entitled to convert the same into full shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for the
Series D Preferred Stock, and shall give written notice to the corporation
at such office that he elects to convert the same and shall state therein
his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. No
fractional shares of Common Stock shall be issued upon conversion of the
Series D Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the corporation shall pay cash equal to
such fraction multiplied by the then effective Conversion Price. The
corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series D Preferred Stock, or to his nominee
or nominees, a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled as aforesaid, together with cash
in lieu of any fraction of a share. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series D Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(c) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 7(c),
-------------------
the following definitions shall apply:
(1) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection
7(c)(iii), deemed to be issued) by the corporation after the
Original Issue Date, other than (A) shares of Common Stock issued
or issuable upon conversion of shares of Series D Preferred
Stock; and (B) shares of Common Stock, not to exceed 1,090,000
issued and outstanding at any time (subject to adjustment for
stock splits, recapitalizations and similar transactions), issued
or issuable to officers, directors, employees or consultants of
the corporation or issued pursuant to
-4-
<PAGE>
an employee or consultant stock purchase plan or employee or
director option plan or other employee stock bonus arrangement
(collectively, the "Plans") approved by the corporation's Board
of Directors.
(2) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(3) "Option" shall mean any rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities (except for the options referenced in
subsection (1)(B) above).
(4) "Original Issue Date" shall mean the date on which a
-------------------
share of Series D Preferred Stock was first issued.
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which the Series D Preferred
Stock is convertible shall be made by adjustment in the Conversion
Price in respect of the issuance of Additional Shares of Common Stock
if the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is equal to or
greater than the Conversion Price in effect on the date of, and
immediately prior to, the issue of such Additional Share of Common
Stock.
(iii) Issue of Securities Deemed Issued as Additional Shares of
---------------------------------------------------------
Common Stock.
------------
(1) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Subsection 7(c)(v) hereof) of
such Additional Shares of Common Stock
-5-
<PAGE>
would be less than the Conversion Price in effect on the date of
and immediately prior to such issue, or such record date, as the
case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible
Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the
corporation, or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the
Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if (I) in the
case of Convertible Securities or Options for Common Stock,
the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of
such Convertible Securities and the consideration received
therefor was the consideration actually received by the
corporation for the issue of all such Options, whether or
not exercised, plus the consideration actually received by
the corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the corporation upon such conversion or
exchange, and (II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued at the
time of issue of such Options, and the consideration
received by the
-6-
<PAGE>
corporation for the Additional Shares of Common Stock deemed
to have been then issued was the consideration actually
received by the corporation for the issue of all such
Options, whether or not exercised, plus the consideration
deemed to have been received by the corporation (determined
pursuant to Subsection 7(c)(v)) upon the issue of the
Convertible Securities with respect to which such Options
were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion
Price to an amount which exceeds the lower of (i) the
Conversion Price on the original adjustment date, or (ii)
the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the Conversion Price shall be made until
the expiration or exercise of all such Options, whereupon
such adjustment shall be made in the same manner provided in
clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date
shall be cancelled as of the close of business on such
record date, and thereafter the Conversion Price shall be
adjusted pursuant to this Subsection 7(c)(iii) as of the
actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions.
-----------------------------------------------------
In the event the corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend
or make any other distribution on the Common Stock payable in
Common Stock or effect a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of
a dividend in Common Stock), then and in any such event,
Additional Shares of Common Stock shall be deemed to have been
issued (A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for
the determination of holders of any class of securities entitled
to receive such dividend or distribution, or (B) in the case of
any such subdivision, at the close of business on the date
immediately prior to the date upon which such corporate action
becomes effective. If such record date shall have been fixed and
such dividend shall not have been fully
-7-
<PAGE>
paid on the date fixed therefor, the adjustment previously made
in the Conversion Price which became effective on such record
date shall be cancelled as of the close of business on such
record date, and thereafter the Conversion Price shall be
adjusted pursuant to this Subsection 7(c)(iii) as of the time of
actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock. If at any time or from time to time after the
----------------------
Original Issue Date, the corporation shall issue or sell Additional
Shares of Common Stock (including additional shares of Common Stock
deemed to be issued pursuant to Subsection 7(c)(iii), but excluding
additional shares of Common Stock issued as a dividend or other
distribution on any class of stock as provided in Subsection
7(c)(iii)(2) or 7(c)(vi)) for a consideration per share less than the
then existing Conversion Price (or, if an adjusted Conversion Price
shall be in effect by reason of a previous adjustment, then less than
such adjusted Conversion Price), then and in each case the then
Conversion Price shall be adjusted to a price (computed to the nearest
cent) as of the opening of business on the date of such issue or sale,
to a price equal to quotient obtained by dividing
(1) an amount equal to the sum of (A) the total number of
shares of Common Stock outstanding on the Original Issue Date,
multiplied by the Conversion Price then in effect, plus (B) the
aggregate consideration received by the corporation for all
Additional Shares of Common Stock issued since the Original Issue
Date, by
(2) an amount equal to the sum of (A) the number of shares
of Common Stock outstanding on the Original Issue Date or sale of
such Additional Shares of Common Stock, plus (B) the total number
of Additional Shares of Common Stock issued since the Original
Issue Date.
(v) Determination of Consideration. For purposes of this Section
------------------------------
7(c), the consideration received by the corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall (A) insofar
-----------------
as it consists of cash, be computed at the aggregate amounts of
cash received by the corporation excluding amounts paid or
payable for accrued interest or accrued dividends and any
expenses, underwriting commissions or concessions incurred in
connection therewith; (B) insofar as it consists of property
other than cash, be computed at the fair value thereof at the
time of such issue, as determined in good faith by the Board of
Directors; and (C) in the event Additional Shares of Common Stock
are issued together with other
-8-
<PAGE>
shares or securities or other assets of the corporation for
consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A)
and (B) above, as determined in good faith by the Board of
Directors.
(2) Options and Convertible Securities. The consideration
----------------------------------
per share received by the corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection
7(c)(iii)(1), relating to Options and Convertible Securities,
shall be determined by dividing (x) the total amount, if any,
received or receivable by the corporation as consideration for
the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
consideration) payable to the corporation upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by (y) the
maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock.
----------------------------------------------
(1) Stock Dividends, Distributions or Subdivisions. In the
----------------------------------------------
event the corporation shall issue Additional Shares of Common
Stock pursuant to Subsection 7(c)(iii)(2) in a stock dividend,
stock distribution or subdivision, the Conversion Price in effect
immediately prior to such stock dividend, stock distribution or
subdivision shall, concurrently with the effectiveness of such
stock dividend, stock distribution or subdivision, be
proportionately decreased without regard to the adjustment
provisions set forth in Subsection 7(c)(iv) hereof.
(2) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
-9-
<PAGE>
(d) Automatic Conversion. Each share of Series D Preferred Stock
--------------------
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price upon: (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer
and sale of Common Stock for the account of the corporation to the public
at an initial public offering price per share not less than $3.00, and (ii)
with gross proceeds to the corporation of not less than $5,000,000
including underwriting discounts and commissions (in the event of which
offering, the person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series D Preferred Stock shall not be deemed to have
converted that Series D Preferred Stock until the closing of such
offering).
Upon the occurrence of the event specified in this Section 7(d),
the Series D Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the corporation or
its transfer agent; provided, however, that the corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such shares of
the Series D Preferred Stock being converted are either delivered to the
corporation or its transfer agent, or the holder notifies the corporation
or any transfer agent that such certificates have been lost, stolen, or
destroyed and executes an agreement satisfactory to the corporation to
indemnify the corporation from any loss incurred by it in connection
therewith and, if the corporation so elects, provides an appropriate
indemnity bond. Upon the automatic conversion of the Series D Preferred
Stock, the holders of such Series D Preferred Stock shall surrender the
certificates representing such shares at the office of the corporation or
of its transfer agent. Thereupon, there shall be issued and delivered to
such holder, promptly at such office and in his name as shown on such
surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of the Series D
Preferred Stock surrendered were convertible on the date on which such
automatic conversion occurred. No fractional shares of Common Stock shall
be issued upon conversion of the Series D Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the corporation but shall at all times in good faith assist in the carrying
out of all the provisions of this Section 7 and in the taking of all such
action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series D Preferred Stock against
impairment.
-10-
<PAGE>
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section
7, the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each
affected holder of Series D Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The corporation shall, upon the
written request at any time of any affected holder of Series D Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion
Price at the time in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be
received upon the conversion of each share of Series D Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the corporation shall
mail to each holder of Series D Preferred Stock at least ten (10) days
prior to such record date a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the issued and outstanding Series D Preferred Stock.
(i) Certain Taxes. The corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of the Series D Preferred
Stock, provided, however, that the corporation shall not be required to pay
any tax which may be payable in respect of any transfer to a name other
than that of the holder of the Series D Preferred Stock then outstanding.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series D Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any
shares of Series D Preferred Stock in any manner which interferes with the
timely conversion of such Series D Preferred Stock.
Section 8. Voting Rights. (a) In addition to the voting rights
provided in subparagraphs 8(b) below and by applicable Delaware law, the
holders of shares of Series D Preferred Stock shall be entitled to vote
upon all matters upon which holders of the Common Stock have the right to
vote, and shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which such shares of Series D
Preferred Stock could be converted pursuant to the provisions of Section 7
hereof at the
-11-
<PAGE>
Record Date for the determination of the stockholders entitled to vote on
such matters, or, if no such Record Date is established, at the date such
vote is taken or any written consent of stockholders is solicited, such
votes to be counted together with all other shares of capital stock having
general voting powers and not separately as a class. In all cases where the
holders of shares of Series D Preferred Stock have the right to vote
separately as a class, such holders shall be entitled to one vote for each
such share held by them respectively; and
(b) Without the consent of the holders of at least a majority of the
shares of Series D Preferred Stock then outstanding (voting together as a
single class with such other series of Preferred Stock which may, from time
to time, be issued by the Company with such voting rights), given in
writing or by vote at a meeting of stockholders called for such purpose,
the corporation will not (A) increase the authorized number of shares of
Series D Preferred Stock above 100,000 authorized Shares, (B) create any
other class or series of shares having preference over, or ranking on a
parity with, the Series D Preferred Stock, except as provided in Section 9
hereto, or (C) alter or change the rights, preferences or privileges of the
Series D Preferred Stock materially or adversely.
Section 9. Additional Series of Preferred Stock. Notwithstanding
anything in this resolution to the contrary, the Corporation shall be
authorized to issue additional series of Preferred Stock ("Additional
Series") having substantially identical rights and preferences, and ranking
pari passu with, the Series D Preferred Stock except that such Additional
Series may have an equal stated value and conversion price which differs
from the Stated Value and Conversion Price. Such Additional Series shall
vote as a single class together Series D Preferred Stock with respect to
the matters set forth in Section 8(a) hereof."
-12-
<PAGE>
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be
executed this 9th day of August, 1991.
HYBRID FAX, INC.
By:/s/ Edward R. Prince III
------------------------
Edward R. Prince III
President
Attest: /s/ Lori K. Evans
-----------------
Lori K. Evans
Asst. Secretary
STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
I, Jeni Frenn , do hereby certify that on this 9th day of August,
----------
1991, Edward R. Prince III personally appeared before me, who being by me duly
sworn, declared that he executed the foregoing Certificate in his capacity as
President of JetFax, Inc., and that the statements contained therein are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 9th day of August, 1991.
/s/Jeni Frenn
-----------------------------
Notary Public in and for the State of California
JENI FRENN
-------------------------
Printed Name of Notary Public
My Commission Expires:
8-3-93
-----------
-13-
<PAGE>
EXHIBIT 3.11
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES E PREFERRED STOCK
OF
JETFAX, INC.
Pursuant to Section 151 of the Delaware General Corporation Law
The undersigned, Edward R. Prince, III and Lori K. Evans, do hereby
certify that (i) they are, and at all times mentioned herein were, the duly
elected and acting President and Secretary, respectively, of JETFAX, INC., a
corporation organized and existing under the Delaware General Corporation Law
(the "Corporation"), and (ii) pursuant to the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation and pursuant
to Section 151 of the Delaware General Corporation Law, said Board of Directors
at a duly convened special meeting held on July 15, 1991 duly adopted a
resolution designating the preferences, rights and limitations of the
Corporation's Series E Preferred Stock and providing for the issuance of shares
thereof out of the Corporation's authorized and unissued Preferred Stock, $.01
par value, which resolution is and reads as follows:
"RESOLVED that, pursuant to the authority expressly granted to and vested in
the Board of Directors in the Corporation's Certificate of Incorporation and
pursuant to Section 151 of Delaware General Corporation Law, said Board of
Directors hereby designates, approves and adopts the foregoing Certificate of
Designation which provides for the creation, establishment and authorization of
the fifth series of Preferred Stock, par value $.01 per share, of the
Corporation, and this Board of Directors hereby declares and affirms that each
share of such stock of said fifth series shall have identical rights and
privileges in every respect and shall have the designations, preferences,
limitations and relative rights described as follows:
Section 1. Designation; Number of Shares The designation of said series
of preferred stock authorized hereby shall be "Series E Preferred Stock."
The number of shares of Series E Preferred Stock authorized for issuance is
1,500,000. The Stated Value of the Series E Preferred Stock shall be $2.15
per share.
Section 2. Dividends. (a) The holders of record of shares of Series E
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available for the payment of
dividends, non-cumulative dividends, and no more, payable in cash to persons
who are holders of record of the Series E Preferred Stock on a record date
designated by the Board of Directors (a "Record Date"). Such dividends with
respect to any share of Series E Preferred Stock shall be non-cumulative.
(b) So long as any of the Series E Preferred Stock remains outstanding,
no dividends shall be paid on, or declared or set apart for, the Common
Stock, unless such dividends shall have been shared on a per share basis (as
equitably adjusted for stock splits, stock dividends and similar events)
between holders of Series E Preferred Stock (as if the Series E Preferred
Stock had been converted into Common Stock) and Common Stock.
Section 3. Liquidation Preference. In the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, the
holders of the Series E Preferred Stock shall be
<PAGE>
entitled to receive, after payment or provision for payment of all debts of
the corporation, but before any distribution of assets to the holders of
Common Stock (or any series of Preferred Stock created or issued after the
date hereof which ranks junior in preference to the Series E Preferred
Stock), an amount equal to the Stated Value per share of such Series E
Preferred Stock plus declared but unpaid dividends thereon, if any, to the
date fixed for the liquidation, dissolution or winding up. After (a) such
payment described in the foregoing sentence has been made in full to the
holders of the outstanding Series E Preferred Stock and (b) a payment in
full or other distribution of assets in an amount equal to the the Stated
Value per share has been made with respect to each outstanding share of
Common Stock and each share of any series of Preferred Stock, including
Series A Preferred Stock and Series B Preferred Stock, which is entitled to
participate in such payment or other distribution ratably with such Common
Stock (as adjusted for any stock dividends, combinations or splits with
respect to such shares), or in each case funds necessary for such payment
have been set aside in trust for the account of such holders and continue to
be available therefor, thereafter the holders of the Series E Preferred
Stock and the holders of Common Stock (together with holders of any series
of Preferred Stock, including Series A Preferred Stock and Series B
Preferred Stock, which is entitled to participate in such payment or other
distribution ratably with such Common Stock) shall be entitled to share in
further distributions and the remaining assets of the corporation in the
same manner as if all shares of Series E Preferred Stock had been converted
into Common Stock. If on liquidation, dissolution or winding up, the assets
of the corporation so distributable among the holders of the Series E
Preferred Stock are insufficient to permit full payment to them of an amount
equal to the Stated Value per share, such assets shal be distributed ratably
among (i) the holders of the Series E Preferred Stock, (ii) holders of
Series A Preferred Stock of the Corporation, (iii) holders of Series B
Preferred Stock of the Corporation, and (iv) any other series of Preferred
Stock created or issued after the date hereof ranking pari passu with the
Series E Preferred Stock, each ratably in accordance with the stated values
of such shares. A consolidation or merger of the corporation, a sale or
transfer of substantially all of its assets as an entirety, or a purchase or
redemption by the corporation of its shares of any class, is not a
"voluntary or involuntary liquidation, dissolution or winding up of the
corporation" within the meaning of this paragraph.
Section 4. Voluntary Redemption. The corporation, at the option of the
Board of Directors and together with the affirmative vote of holders of 66
2/3% of the outstanding Series E Preferred Stock, may at any time or times
on or after December 31, 1992 voluntarily redeem all or any part of the
Series E Preferred Stock then outstanding by paying in cash a price equal to
$2.15 per share plus declared but unpaid dividends thereon, if any. If less
than all the outstanding shares of Series E Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected pro rata. Notice of
voluntary redemption shall be mailed, postage prepaid, to the holders of
record of the shares to be redeemed at their addresses then appearing on the
books of the corporation, not less than twenty (20) and not more than fifty
(50) days prior to the date fixed for the voluntary redemption.
Section 5. Provision for Payment of Redemption Price. On or before the
date fixed for a voluntary redemption, the corporation may provide for
payment of a sum sufficient to redeem the shares called for redemption by
either (1) setting aside the sum, separate from its other funds, in trust
for the benefit of the holders of the shares to be redeemed, or (2)
depositing such sum in a bank or trust company anywhere in the United States
having capital and surplus of at least one hundred million dollars
($100,000,000) according to its latest statement of condition, as a trust
fund, with irrevocable instructions and authority to the bank or trust
company to give or complete the notice of redemption
<PAGE>
and to pay, on or after the date fixed for redemption, the redemption price
on surrender of the respective share certificates. The holders may be
evidenced by a list certified by the corporation (by its president or a vice
president and by its secretary or an assistant secretary) or by its transfer
agent. If the corporation so provides for payment, then from and after the
date fixed for redemption (i) the shares shall be deemed to be redeemed,
(ii) such setting aside or deposit shall be deemed to constitute full
payment for the shares, (iii) the shares shall no longer be deemed to be
outstanding, (iv) the holders thereof shall cease to be shareholders with
respect to such shares, and (v) the holders shall have no rights with
respect thereto except the right to receive their proportionate shares of
the funds so set aside or deposited (but without interest) upon the
surrender of their respective certificates. Any interest accrued on funds so
set aside or deposited shall belong to the corporation. If the holders of
any shares do not within six (6) years after such deposit claim any amount
so deposited for redemption thereof, the bank or trust company shall, on
demand by the corporation, pay over to the corporation the balance of the
funds so deposited, and the bank or trust company shall thereupon be
relieved of all liability to such holders.
Section 6. Status of Redeemed Shares. Shares of Series E Preferred
Stock which are redeemed shall be cancelled and shall be restored to the
status of authorized but unissued shares.
Section 7. Conversion. The holders of the Series E Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series E
----------------------------------
Preferred Stock shall be convertible, without the payment of any additional
consideration by the holder thereof and at the option of the holder thereof,
at any time after the date of issuance of such share, at the office of the
corporation or any transfer agent for the Series E Preferred Stock. The
conversion price at which shares of Common Stock shall be deliverable upon
conversion without the payment of any additional consideration by the holder
of Series E Preferred Stock shall be the Stated Value (the "Conversion
Price"). Such Conversion Price shall be subject to adjustment, in order to
adjust the number of shares of Common Stock into which the Series E
Preferred Stock is convertible, as hereinafter provided. The right of
conversion with respect to any shares of Series E Preferred Stock which
shall have been called for redemption under Section 4 hereof shall terminate
at the close of business at 5:00 p.m., Pacific Time, on the day first
preceding the day fixed for redemption unless the corporation shall default
in the payment of the redemption price.
(b) Mechanics of Conversion. Before any holder of Series E Preferred
-----------------------
Stock shall be entitled to convert the same into full shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for the
Series E Preferred Stock, and shall give written notice to the corporation
at such office that he elects to convert the same and shall state therein
his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. No
fractional shares of Common Stock shall be issued upon conversion of the
Series E Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the corporation shall pay cash equal to
such fraction multiplied by the then effective Conversion Price. The
corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series E Preferred Stock, or to his nominee or
nominees, a certificate or certificates for the number of shares of Common
Stock to which he shall be entitled as aforesaid, together with cash in lieu
of any fraction of a share. Such
<PAGE>
conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series E
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such shares of Common
Stock on such date.
(c) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 7(c), the
-------------------
following definitions shall apply:
(1) "Additional Shares of Common Stock" shall mean all shares
---------------------------------
of Common Stock issued (or, pursuant to Subsection 7(c)(iii), deemed
to be issued) by the corporation after the Original Issue Date,
other than (A) shares of Common Stock issued or issuable upon
conversion of shares of Series E Preferred Stock; and (B) shares of
Common Stock, not to exceed 1,090,000 issued and outstanding at any
time (subject to adjustment for stock splits, recapitalizations and
similar transactions), issued or issuable to officers, directors,
employees or consultants of the corporation or issued pursuant to an
employee or consultant stock purchase plan or employee or director
option plan or other employee stock bonus arrangement (collectively,
the "Plans") approved by the corporation's Board of Directors.
(2) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(3) "Option" shall mean any rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities (except for the options referenced in
subsection (1)(B) above).
(4) "Original Issue Date" shall mean the date on which a share
-------------------
of Series E Preferred Stock was first issued.
(ii) No Adjustment of Conversion Price. No adjustment in the number
---------------------------------
of shares of Common Stock into which the Series E Preferred Stock is
convertible shall be made by adjustment in the Conversion Price in
respect of the issuance of Additional Shares of Common Stock if the
consideration per share for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is equal to or greater than
the Conversion Price in effect on the date of, and immediately prior to,
the issue of such Additional Share of Common Stock.
(iii) Issue of Securities Deemed Issued as Additional Shares of
---------------------------------------------------------
Common Stock.
------------
(1) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard
<PAGE>
to any provisions contained therein for a subsequent adjustment of
such number) of Common Stock issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date,
provided that Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration per share (determined
pursuant to Subsection 7(c)(v) hereof) of such Additional Shares of
Common Stock would be less than the Conversion Price in effect on
the date of and immediately prior to such issue, or such record
date, as the case may be, and provided further that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any
increase in the consideration payable to the corporation, or
decrease in the number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such
Convertible Securities;
(C) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities
which shall not have been exercised, the Conversion Price
computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if (I) in the case of Convertible
Securities or Options for Common Stock, the only Additional
Shares of Common Stock issued were the shares of Common Stock,
if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration
actually received by the corporation for the issue of all such
Options, whether or not exercised, plus the consideration
actually received by the corporation upon such exercise, or for
the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional
consideration, if any, actually received by the corporation
upon such conversion or exchange, and (II) in the case of
Options for Convertible Securities, only the Convertible
Securities, if any, actually issued upon the exercise thereof
were issued at the time of issue of such Options, and the
consideration received by the corporation for the Additional
Shares of Common Stock deemed to have been then issued was the
consideration actually received by the corporation for the
issue of all such
<PAGE>
Options, whether or not exercised, plus the consideration
deemed to have been received by the corporation (determined
pursuant to Subsection 7(c)(v)) upon the issue of the
Convertible Securities with respect to which such Options were
actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (i) the Conversion Price on
the original adjustment date, or (ii) the Conversion Price that
would have resulted from any issuance of Additional Shares of
Common Stock between the original adjustment date and such
readjustment date;
(E) in the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the
expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date
shall be cancelled as of the close of business on such record
date, and thereafter the Conversion Price shall be adjusted
pursuant to this Subsection 7(c)(iii) as of the actual date of
their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions. In
-----------------------------------------------------
the event the corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend or make any
other distribution on the Common Stock payable in Common Stock or
effect a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
Common Stock), then and in any such event, Additional Shares of
Common Stock shall be deemed to have been issued (A) in the case of
any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of any
class of securities entitled to receive such dividend or
distribution, or (B) in the case of any such subdivision, at the
close of business on the date immediately prior to the date upon
which such corporate action becomes effective. If such record date
shall have been fixed and such dividend shall not have been fully
paid on the date fixed therefor, the adjustment previously made in
the Conversion Price which became effective on such record date
shall be cancelled as of the close of business on such record date,
and thereafter the Conversion Price shall be adjusted pursuant to
this Subsection 7(c)(iii) as of the time of actual payment of such
dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock. If at any time or from time to time after the
----------------------
Original Issue Date, the corporation shall issue or sell Additional
Shares of Common Stock (including additional shares of Common Stock
deemed to be issued pursuant to Subsection 7(c)(iii), but excluding
additional shares of Common Stock issued as a dividend or other
distribution on any class of stock as provided in Subsection
7(c)(iii)(2) or 7(c)(vi)) for a consideration per share less than the
then existing
<PAGE>
Conversion Price (or, if an adjusted Conversion Price shall be in effect
by reason of a previous adjustment, then less than such adjusted
Conversion Price), then and in each case the then Conversion Price shall
be adjusted to a price (computed to the nearest cent) as of the opening
of business on the date of such issue or sale, to a price equal to
quotient obtained by dividing
(1) an amount equal to the sum of (A) the total number of
shares of Common Stock outstanding on the Original Issue Date,
multiplied by the Conversion Price then in effect, plus (B) the
aggregate consideration received by the corporation for all
Additional Shares of Common Stock issued since the Original Issue
Date, by
(2) an amount equal to the sum of (A) the number of shares of
Common Stock outstanding on the Original Issue Date or sale of such
Additional Shares of Common Stock, plus (B) the total number of
Additional Shares of Common Stock issued since the Original Issue
Date.
(v) Determination of Consideration. For purposes of this Section
------------------------------
7(c), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall (A) insofar as
-----------------
it consists of cash, be computed at the aggregate amounts of cash
received by the corporation excluding amounts paid or payable for
accrued interest or accrued dividends and any expenses, underwriting
commissions or concessions incurred in connection therewith; (B)
insofar as it consists of property other than cash, be computed at
the fair value thereof at the time of such issue, as determined in
good faith by the Board of Directors; and (C) in the event
Additional Shares of Common Stock are issued together with other
shares or securities or other assets of the corporation for
consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and
(B) above, as determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per
----------------------------------
share received by the corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Subsection
7(c)(iii)(1), relating to Options and Convertible Securities, shall
be determined by dividing (x) the total amount, if any, received or
receivable by the corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount
of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the
corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options
for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, by (y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities.
<PAGE>
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock.
----------------------------------------------
(1) Stock Dividends, Distributions or Subdivisions. In the
----------------------------------------------
event the corporation shall issue Additional Shares of Common Stock
pursuant to Subsection 7(c)(iii)(2) in a stock dividend, stock
distribution or subdivision, the Conversion Price in effect
immediately prior to such stock dividend, stock distribution or
subdivision shall, concurrently with the effectiveness of such stock
dividend, stock distribution or subdivision, be proportionately
decreased without regard to the adjustment provisions set forth in
Subsection 7(c)(iv) hereof.
(2) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number
of shares of Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(d) Automatic Conversion. Each share of Series E Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon: (i) the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common
Stock for the account of the corporation to the public at an initial public
offering price per share not less than $3.00, and (ii) with gross proceeds
to the corporation of not less than $5,000,000 including underwriting
discounts and commissions (in the event of which offering, the person(s)
entitled to receive the Common Stock issuable upon such conversion of the
Series E Preferred Stock shall not be deemed to have converted that Series E
Preferred Stock until the closing of such offering).
Upon the occurrence of the event specified in this Section 7(d), the
Series E Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the corporation or
its transfer agent; provided, however, that the corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such shares of
the Series E Preferred Stock being converted are either delivered to the
corporation or its transfer agent, or the holder notifies the corporation or
any transfer agent that such certificates have been lost, stolen, or
destroyed and executes an agreement satisfactory to the corporation to
indemnify the corporation from any loss incurred by it in connection
therewith and, if the corporation so elects, provides an appropriate
indemnity bond. Upon the automatic conversion of the Series E Preferred
Stock, the holders of such Series E Preferred Stock shall surrender the
certificates representing such shares at the office of the corporation or of
its transfer agent. Thereupon, there shall be issued and delivered to such
holder, promptly at such office and in his name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of
shares of Common Stock into which the shares of the Series E Preferred Stock
surrendered were convertible on the date on which such automatic conversion
occurred. No fractional shares of Common Stock shall be issued upon
conversion of the Series E Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the corporation shall pay
cash equal to such fraction multiplied by the then effective Conversion
Price.
<PAGE>
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the corporation
but shall at all times in good faith assist in the carrying out of all the
provisions of this Section 7 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series E Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section
7, the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each
affected holder of Series E Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the
written request at any time of any affected holder of Series E Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion
Price at the time in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be
received upon the conversion of each share of Series E Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the corporation shall mail
to each holder of Series E Preferred Stock at least ten (10) days prior to
such record date a notice specifying the date on which any such record is to
be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the issued and outstanding Series E Preferred Stock.
(i) Certain Taxes. The corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of the Series E Preferred
Stock, provided, however, that the corporation shall not be required to pay
any tax which may be payable in respect of any transfer to a name other than
that of the holder of the Series E Preferred Stock then outstanding.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series E Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any
shares of Series E Preferred Stock in any manner which interferes with the
timely conversion of such Series E Preferred Stock.
Section 8. Voting Rights. (a) In addition to the voting rights
provided in subparagraph 8(b) below and by applicable Delaware law, the
holders of shares of Series E Preferred Stock shall be entitled to vote upon
all matters upon which holders of the Common Stock have the right to vote,
and shall be entitled to the number of votes equal to the largest number of
full shares of Common Stock into which such shares of Series E Preferred
Stock could be converted pursuant to the provisions of Section 7 hereof at
the Record Date for the determination of the stockholders entitled to vote
on such
<PAGE>
matters, or, if no such Record Date is established, at the date such vote is
taken or any written consent of stockholders is solicited, such votes to be
counted together with all other shares of capital stock having general
voting powers and not separately as a class. In all cases where the holders
of shares of Series E Preferred Stock have the right to vote separately as a
class, such holders shall be entitled to one vote for each such share held
by them respectively; and
(b) Without the consent of the holders of at least a majority of the
shares of Series E Preferred Stock then outstanding (voting together as a
single class with such other series of Preferred Stock which may, from time
to time, be issued by the Company with such voting rights), given in writing
or by vote at a meeting of stockholders called for such purpose, the
corporation will not (A) increase the authorized number of shares of Series
E Preferred Stock above 1,500,000 authorized shares, (B) create any other
class or series of shares having preference over, or ranking on a parity
with, the Series E Preferred Stock, except as provided in Section 9 hereto,
or (C) alter or change the rights, preferences or privileges of the Series E
Preferred Stock materially or adversely.
Section 9. Additional Series of Preferred Stock. Notwithstanding
anything in this resolution to the contrary, the Corporation shall be
authorized to issue additional series of Preferred Stock ("Additional
Series") having substantially identical rights and preferences, and ranking
pari passu with, the Series E Preferred Stock except that such Additional
Series may have an equal stated value and conversion price which differs
from the Stated Value and Conversion Price. Such Additional Series shall
vote as a single class together Series E Preferred Stock with respect to the
matters set forth in Section 8(a) hereof."
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be
executed this 9th day of August, 1991.
JETFAX, INC.
By: /s/Edward R. Prince III
-----------------------
Edward R. Prince III
President
Attest:/s/ Lori K. Evans
-----------------
Lori K. Evans
Secretary
<PAGE>
STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
I, Jeni Frenn, do hereby certify that on this 9th day of August, 1991,
Edward R. Prince III personally appeared before me, who being by me duly sworn,
declared that he executed the foregoing Certificate in his capacity as President
of JetFax, Inc., and that the statements contained therein are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 9th day of August, 1991.
/s/Jeni Frenn
-----------------------------
Notary Public in and for the
State of California
Jeni Frenn
-----------------------------
Printed Name of Notary Public
My Commission Expires:
August 3, 1993
---------------------
<PAGE>
EXHIBIT 3.12
AMENDED
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES E PREFERRED STOCK
OF
JETFAX, INC.
JetFax, Inc., a corporation organized and existing under the Delaware
General Corporation Law (the"Corporation"), does hereby certify:
FIRST: That Edward R. Prince, III and Eli Morowitz are, and at all times
mentioned herein were, the duly elected and acting President and Secretary,
respectively, of JetFax, Inc.
SECOND: That pursuant to the authority conferred upon the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation and pursuant to Section 151 of the Delaware General Corporation Law,
said Board of Directors, by written consent in lieu of a meeting pursuant to
Section 141(f) of the Delaware General Corporation Law dated as of July 1, 1992,
duly adopted a resolution amending the Corporation's Certificate of
Designations, Preferences and Rights of Series E Preferred Stock, which
resolution is and reads as follows:
"RESOLVED, that, pursuant to the authority expressly granted to and vested
in the Board of Directors in the Corporation's Certificate of Incorporation and
pursuant to Section 151 of Delaware General Corporation Law, said Board of
Directors hereby amends the Corporation's Certificate of Designations,
Preferences and Rights of Series E Preferred Stock, so that the number of
authorized shares. of Series E Preferred Stock will increase by 1,000,000, by
deleting Section 1 thereof and replacing such section in its entirety with the
following:
Section 1. Designation; Number of Shares. The designation of said
-----------------------------
series of preferred stock authorized hereby shall be "Series E Preferred
Stock." The number of shares of Series E Preferred Stock authorized for
issuance is 2,500,000. The Stated Value of the Series E Preferred Stock
shall be $2.15 per share.
The effectiveness of this amendment shall be subject to receipt of the consent
(affirmative vote) of the holders of a majority of the Corporation's Series A
Preferred Stock and Series E Preferred Stock, each voting separately as a class,
as provided in certain of the Corporation's Certificates of Designations,
Preferences and Rights."
THIRD: That thereafter, pursuant to resolution of the Corporation's Board
of Directors, the annual meeting of stockholders was duly called and held, upon
notice in accordance with Section 222 of the Delaware General Corporation Law,
at which meeting the holders of a majority of the Corporation's Series A
Preferred Stock and Series E Preferred Stock, each voting separately as a class,
voted in favor of the increase in the number of authorized shares of Series E
Preferred Stock by 1,000,000.
<PAGE>
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be executed
this 7th day of May, 1993.
JETFAX, INC.
By: /s/ Edward R. Prince III
-------------------------
Edward R. Prince, III
President
Attest:
/s/Eli Morowitz
- ---------------
Eli Morowitz
Secretary
-2-
<PAGE>
EXHIBIT 3.13
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES P PREFERRED STOCK
OF
JETFAX, INC.
Pursuant to Section 151 of the Delaware General Corporation Law:
The undersigned, Edward R. Prince, III and Eli Morowitz, do hereby
certify that (i) they are, and at all times mentioned herein were, the duly
elected and acting President and Secretary, respectively, of JETFAX, INC., a
corporation organized and existing under the Delaware General Corporation Law
(the "Corporation"), and (ii) pursuant to the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation and pursuant
to Section 151 of the Delaware General Corporation Law, said Board of Directors
at a duly convened special meeting held on October 2, 1995 duly adopted a
resolution designating the preferences, rights and limitations of the
Corporation's Series P Preferred Stock and providing for the issuance of shares
thereof out of the Corporation's authorized and unissued Preferred Stock, $.01
par value, which resolution is and reads as follows:
"RESOLVED that, pursuant to the authority expressly granted to and
vested in the Board of Directors in the Corporation's Certificate of
Incorporation and pursuant to Section 151 of Delaware General Corporation Law,
said Board of Directors hereby designates, approves and adopts the following
Certificate of Designation which provides for the creation, establishment and
authorization of a series of Preferred Stock, par value $.01 per share, of the
Corporation, and this Board of Directors hereby declares and affirms that each
share of such stock of said series shall have identical rights and privileges in
every respect and shall have the designations, preferences, limitations and
relative rights described as follows:
Section 1. DESIGNATION; NUMBER OF SHARES. The designation of the
series of preferred stock authorized hereby shall be "Series P Preferred
Stock." The number of shares of Series P Preferred Stock authorized for
issuance is 500,000. The Stated Value of the Series P Preferred Stock shall
be $7.50 per share.
Section 2. DIVIDENDS. (a) The holders of record of shares of
Series P Preferred Stock shall be entitled to receive, when and as declared
by the Board of Directors, out of funds legally available for the payment
of dividends, dividends at an annual
<PAGE>
rate of six percent (6.0%) of the Stated Value per share (subject to
equitable adjustment for stock splits, combinations, stock dividends,
reclassifications and similar events), payable in preference and priority
to any payment of any cash dividend on the Common Stock or on the Preferred
Stock (other than the next series of Preferred Stock of the Corporation
designated after the date of this Certificate of Designation, hereinafter
the "Next Series of Preferred"). Such dividends shall accrue and shall be
cumulative so that if at any time such accrued dividends on the Series P
Preferred Stock shall not have been paid, or declared and set apart for
payment, the deficiency (including any amounts from any prior year in which
dividends accrued but remain unpaid) shall be fully paid, or declared and
set apart for payment, before any cash dividend shall be paid on or
declared or set apart for payment on the Common Stock or on the Preferred
Stock (other than the Next Series of Preferred).
(b) So long as any of the Series P Preferred Stock remains
outstanding, after the payment or setting apart for payment of the amount
of any dividends to be paid pursuant to the provisions of paragraph (a) of
this Section 2, no cash dividends shall be paid on, or declared or set
apart for, the Common Stock, unless such dividends shall have been shared
on a per share basis (as equitably adjusted for stock splits, combinations,
stock dividends, reclassifications and similar events) between holders of
Series P Preferred Stock (excluding the amount of any dividends paid
pursuant to the provisions of paragraph (a) of this Section 2) and Common
Stock.
Section 3. LIQUIDATION PREFERENCE. Subject to the provisions of
Sections 4, 5 and 7, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of
the Series P Preferred Stock shall be entitled to receive, after payment or
provision for payment of all debts of the Corporation, but before any
distribution of assets to the holders of Common Stock or of any Series of
Preferred Stock (other than the Next Series of Preferred) by reason of
their ownership thereof, an amount equal to the Stated Value per share of
such Series P Preferred Stock plus any accrued or declared but unpaid
dividends thereon, if any, to the date fixed for the liquidation,
dissolution or winding up. If on any liquidation, dissolution or winding
up, the assets of the Corporation distributable among the holders of the
Series P Preferred Stock of the Corporation are insufficient to permit full
payment to the holders of the Series P Preferred Stock of an amount equal
to the Stated Value per share, such assets shall be distributed ratably
among the holders of the Series P Preferred
-2-
<PAGE>
Stock in proportion to the full preferential amount each such holder is
otherwise entitled to receive. A consolidation or merger of the
Corporation, or a purchase or redemption by the Corporation of its shares
of any class, is not a "voluntary or involuntary liquidation, dissolution
or winding up of the Corporation" within the meaning of this Section 3. The
holders of the Series P Preferred Stock shall not be entitled to receive
any payment or distribution with respect to any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation other than as
provided in this Section 3 or in Sections 5 or 7.
Section 4. VOLUNTARY REDEMPTION. (a) The Corporation, at the option of
the Board of Directors, may at any time or times prior to the earlier of
the closing of an IPO (as defined below) or the closing of a Buy-Out Event
(as defined below) voluntarily redeem all or any part of the Series P
Preferred Stock then outstanding by paying a price equal to the Stated
Value per share (subject to equitable adjustment for stock splits,
combinations, stock dividends, reclassifications and similar events) plus
any accrued or declared but unpaid dividends thereon, if any, to the date
fixed for such redemption. If less than all the outstanding shares of
Series P Preferred Stock are to be redeemed, the shares to be redeemed
shall be selected pro rata. Notice of voluntary redemption shall be mailed,
postage prepaid, to the holders of record of the shares to be redeemed at
their addresses then appearing on the books of the Corporation, not less
than five (5) and not more than sixty (60) days prior to the date fixed for
the voluntary redemption.
(b) On or before the date fixed for a voluntary redemption, the
Corporation may provide for payment of a sum sufficient to redeem the
shares called for redemption by either (1) setting aside the sum, separate
from its other funds, in trust for the benefit of the holders of the shares
to be redeemed, or (2) depositing such sum in a bank or trust company
anywhere in the United States having capital and surplus of at least one
hundred million dollars ($100,000,000) according to its latest statement of
condition, as a trust fund, with irrevocable instructions and authority to
the bank or trust company to give or complete the notice of redemption and
to pay, on or after the date fixed for redemption, the redemption price on
surrender of the respective share certificates. The holders may be
evidenced by a list certified by the Corporation (by its president or a
vice president and by its secretary or an assistant secretary) or by its
transfer agent. If the Corporation so provides for payment, then from and
after the date fixed for redemption (i) the shares
-3-
<PAGE>
shall be deemed to be redeemed, (ii) such setting aside or deposit shall be
deemed to constitute full payment for the shares, (iii) the shares shall no
longer be deemed to be outstanding, (iv) the holders thereof shall cease to
be shareholders with respect to such shares, and (v) the holders shall have
no rights with respect thereto except the right to receive their
proportionate shares of the funds so set aside or deposited (but without
interest) upon the surrender of their respective certificates. Any interest
accrued on funds so set aside or deposited shall belong to the Corporation.
If the holders of any shares do not within six (6) years after such deposit
claim any amount so deposited for redemption thereof, the bank or trust
company shall, on demand by the Corporation, pay over to the Corporation
the balance of the funds so deposited, and the bank or trust company shall
thereupon be relieved of all liability to such holders.
Section 5. MANDATORY REDEMPTION. (a) If and to the extent the
holders of the Series P Preferred Stock have not elected to convert all of
the outstanding Series P Preferred Stock pursuant to the provisions of
Section 7(a), upon the closing of an IPO or the closing of a Buy-Out Event,
and subject to the terms and conditions set forth in this Section 5, the
Corporation shall redeem that amount of the Series P Preferred Stock then
outstanding as is determined pursuant to the following sentence by paying
out of any source of funds legally available therefor a price equal to the
Stated Value per share (subject to equitable adjustment for stock splits,
combinations, stock dividends, reclassifications and similar events) plus
any accrued or declared but unpaid dividends thereon, if any, to the date
of such redemption. The Corporation shall only be obligated to apply
towards the redemption of Series P Preferred Stock under this Section 5(a)
an amount equal to (i) the greater of fifteen percent (15.0%) of the
aggregate proceeds, if any, to the Corporation from the IPO or Buy-Out
Event or $1,125,000.00, minus (ii) the amount, if any, applied at that time
to the repayment under the Corporation's Purchase and Debt Restructuring
Agreement dated as of August 3, 1994 (the "Restructuring Agreement") of any
unpaid Debt (as defined in the Restructuring Agreement). If less than all
the outstanding shares of Series P Preferred Stock are to be redeemed
hereunder, the shares to be redeemed shall be selected pro rata.
(b) In the event that, from time to time, the Corporation has net
income in excess of $1,000,000.00 per fiscal year as described in the
following sentence, and subject to the terms and conditions set forth in
this Section 5, the Corporation shall
-4-
<PAGE>
redeem that amount of the Series P Preferred Stock then outstanding as is
determined pursuant to the following sentence by paying out of any source
of funds legally available therefor a price equal to the Stated Value per
share (subject to equitable adjustment for stock splits, combinations,
stock dividends, reclassifications and similar events) plus any accrued or
declared but unpaid dividends thereon, if any, to the date of such
redemption. The Corporation shall only be obligated to apply towards the
redemption of Series P Preferred Stock under this Section 5(b) an amount
equal to ten percent (10.0%) of the Corporation's net income in excess of
$1,000,000.00 per fiscal year as set forth in the Corporation's audited
annual financial statements and as determined on a consolidated basis in
accordance with U.S. GAAP consistently applied. If less than all the
outstanding shares of Series P Preferred Stock are to be redeemed
hereunder, the shares to be redeemed shall be selected pro rata.
(c) In connection with any redemption under this Section 5, the
Corporation may provide for payment of a sum sufficient to redeem the
shares called for redemption by either (1) setting aside the sum, separate
from its other funds, in trust for the benefit of the holders of the shares
to be redeemed, or (2) depositing such sum in a bank or trust company
anywhere in the United States having capital and surplus of at least one
hundred million dollars ($100,000,000) according to its latest statement of
condition, as a trust fund, with irrevocable instructions and authority to
the bank or trust company to give or complete the notice of redemption and
to pay, on or after the date fixed for redemption, the redemption price on
surrender of the respective share certificates. The holders may be
evidenced by a list certified by the Corporation (by its president or a
vice president and by its secretary or an assistant secretary) or by its
transfer agent. If the Corporation so provides for payment, then from and
after the date fixed for redemption (i) the shares shall be deemed to be
redeemed, (ii) such setting aside or deposit shall be deemed to constitute
full payment for the shares, (iii) the shares shall no longer be deemed to
be outstanding, (iv) the holders thereof shall cease to be shareholders
with respect to such shares, and (v) the holders shall have no rights with
respect thereto except the right to receive their proportionate shares of
the funds so set aside or deposited (but without interest) upon the
surrender of their respective certificates. Any interest accrued on funds
so set aside or deposited shall belong to the Corporation. If the holders
of any shares do not within six (6) years after such deposit claim any
amount so deposited for redemption thereof, the
-5-
<PAGE>
bank or trust company shall, on demand by the Corporation, pay over to the
Corporation the balance of the funds so deposited, and the bank or trust
company shall thereupon be relieved of all liability to such holders.
Section 6. STATUS OF REDEEMED SHARES. Shares of Series P Preferred
Stock which are redeemed shall be cancelled and shall be restored to the
status of authorized but unissued shares.
Section 7. CONVERSION. The Series P Preferred Stock shall be subject
to conversion as follows:
(a) Right to Convert; Conversion Price. Each share of Series P
----------------------------------
Preferred Stock shall be convertible, without the payment of any additional
consideration by the holder thereof and at the option of the holder
thereof, upon the closing of an IPO or the closing of a Buy-Out Event, at
the office of the Corporation or any transfer agent for the Series P
Preferred Stock, into that number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) the Stated Value per share of
such Series P Preferred Stock plus any accrued or declared but unpaid
dividends thereon, if any, to the date of the closing of such IPO or Buy-
Out Event by (ii) an amount (the "Conversion Price") equal to seventy-five
percent (75.0%) of the IPO price per share of Common Stock in the event of
the closing of an IPO or seventy-five percent (75.0%) of the value of a
share of Common Stock at the closing of a Buy-Out Event (which shall be
calculated as the purchase price for such share in the case of a stock
purchase, the exchange price for such share in the case of a consolidation
or merger or the value determined by an investment banking firm assisting
the Corporation in the case of a different form of Buy-Out Event or, in the
absence of such firm, the value as determined by the Corporation'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). Such Conversion Price shall be subject to adjustment, in
order to adjust the number of shares of Common Stock into which the Series
P Preferred Stock is convertible, as provided in Section 7(c). The right
of conversion with respect to any shares of Series P Preferred Stock which
shall have been called for redemption under Section 4 hereof shall
terminate at the close of business at 5:00 p.m., Pacific Time, on the day
first preceding the day fixed for redemption unless the Corporation shall
default in the payment of the redemption price.
-6-
<PAGE>
(b) Mechanics of Conversion. The Corporation shall notify the holders
-----------------------
of the Series P Preferred Stock at least 30 days but no more than 60 days
prior to the filing of the Corporation's registration statement for an IPO
or the closing of a Buy-Out Event. A holder of Series P Preferred Stock
shall notify the Corporation in writing of its election to convert Series P
Preferred Stock pursuant to Section 7(a) within 30 days after the
Corporation notifies the holders of the Series P Preferred Stock as set
forth in the preceding sentence. Such electing holder of Series P Preferred
Stock shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series P Preferred Stock and shall state in its notice to the Corporation
its name or the name or names of its nominees in which it wishes the
certificate or certificates for shares of Common Stock to be issued. No
fractional shares of Common Stock shall be issued upon conversion of the
Series P Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to
such fraction multiplied by the then effective Conversion Price. The
Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series P Preferred Stock, or to its nominee
or nominees, a certificate or certificates for the number of shares of
Common Stock to which it shall be entitled as aforesaid, together with cash
in lieu of any fraction of a share. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of the
closing of the IPO or the closing of the Buy-Out Event, and the person or
persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(c) Adjustments to Conversion Price for Dividends, Distributions,
-------------------------------------------------------------
Subdivisions, Combinations or Consolidations of Common Stock.
------------------------------------------------------------
(i) Stock Dividends, Distributions or Subdivisions. In the event
----------------------------------------------
the Corporation shall issue additional shares of Common Stock in a
stock dividend, stock distribution or subdivision, the Conversion
Price in effect immediately prior to such stock dividend, stock
distribution or subdivision shall, concurrently with the effectiveness
of such stock dividend, stock distribution or subdivision, be
proportionately decreased.
-7-
<PAGE>
(ii) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of
Common Stock, the Conversion Price in effect immediately prior to such
combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(d) Automatic Conversion. If and to the extent the holders of the
--------------------
Series P Preferred Stock have not elected to convert all of the outstanding
Series P Preferred Stock pursuant to the provisions of Section 7(a), and if
and to the extent all of the outstanding Series P Preferred Stock are not
redeemed or then subject to redemption pursuant to the provisions of
Section 5(a), upon the closing of an IPO or the closing of a Buy-Out Event
each share of Series P Preferred Stock then outstanding shall automatically
be converted into that number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) the Stated Value per share of
such Series P Preferred Stock plus any accrued or declared but unpaid
dividends thereon, if any, to the date of the closing of such IPO or Buy-
Out Event by (ii) the then effective Conversion Price.
Upon the occurrence of the events specified in this Section 7(d),
the Series P Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or
its transfer agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such shares of
the Series P Preferred Stock being converted are either delivered to the
Corporation or its transfer agent, or the holder notifies the Corporation
or any transfer agent that such certificates have been lost, stolen, or
destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection
therewith and, if the Corporation so elects, provides an appropriate
indemnity bond. Upon the automatic conversion of the Series P Preferred
Stock, the holders of such Series P Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or
of its transfer agent. Thereupon, there shall be issued and delivered to
such holder, promptly at such office and in his name as shown on such
surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of the
-8-
<PAGE>
Series P Preferred Stock surrendered were convertible on the date on which
such automatic conversion occurred. No fractional shares of Common Stock
shall be issued upon conversion of the Series P Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(e) No Impairment. The Corporation shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation but shall at all times in good faith assist in the carrying
out of all the provisions of this Section 7 and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series P Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment of the Conversion Price pursuant to this Section 7, the
Corporation at its expense shall promptly compute such adjustment in
accordance with the terms hereof and furnish to each affected holder of
Series P Preferred Stock a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based. The
Corporation shall, upon the written request at any time of any affected
holder of Series P Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and (ii)
the Conversion Price at the time in effect.
(g) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the Corporation shall
mail to each holder of Series P Preferred Stock at least ten (10) days
prior to such record date a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the issued and outstanding Series P Preferred Stock.
-9-
<PAGE>
(i) Certain Taxes. The Corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of the Series P Preferred
Stock, provided, however, that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer to a name other
than that of the holder of the Series P Preferred Stock then outstanding.
(j) Closing of Books. The Corporation shall at no time close its
----------------
transfer books against the transfer of any Series P Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any
shares of Series P Preferred Stock in any manner which interferes with the
timely conversion of such Series P Preferred Stock.
(k) Special Definitions. For purposes of this Certificate, the
-------------------
following definitions shall apply:
(i) "IPO" shall mean the closing of a firm commitment
---
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the
offer and sale of Common Stock for the account of the Corporation to
the public.
(ii) "Buy-Out Event" shall mean: (1) the closing of the
-------------
consolidation or merger of the Corporation with or into any entity in
which the holders of the Corporation'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 power of the surviving entity; (2) the closing of the purchase
by a third party of more than fifty percent (50.0%) of the capital
stock of the Corporation representing a majority of the voting power
of the Corporation; or (3) the liquidation, dissolution or winding up
of the Corporation if a majority of the holders of the Series P
Preferred provide the Corporation with written notice of their intent
to treat such event as a Buy-Out Event within 30 days after the
Corporation notifies the holders of the Series P Preferred of its
intention to liquidate, dissolve or wind-up (provided that the
Corporation notifies the holders of the Series P Preferred at least 30
days but no more than 60 days prior to the closing of such
transaction). A sale or transfer of all or substantially all of the
Corporation's assets as an entirety shall be regarded as a
"liquidation, dissolution or winding up of the Corporation" within the
meaning of this Section 7(k)(ii).
-10-
<PAGE>
Section 8. VOTING RIGHTS. (a) The holders of shares of Series P
Preferred Stock shall be entitled to vote upon all matters upon which
holders of the Common Stock have the right to vote, and shall be entitled
to one vote for each such share of Series P Preferred Stock held by them
(as equitably adjusted for stock splits, combinations, stock dividends,
reclassifications and similar events) respectively at the Record Date for
the determination of the stockholders entitled to vote on such matters, or,
if no such Record Date is established, at the date such vote is taken or
any written consent of stockholders is solicited, such votes to be counted
together with all other shares of capital stock having general voting
powers and not separately as a class. In all cases where the holders of
shares of Series P Preferred Stock have the right to vote separately as a
class, such holders shall be entitled to one vote for each such share held
by them respectively.
(b) Without the consent of the holders of at least a majority of the
shares of Series P Preferred Stock then outstanding (voting together as a
single class with such other series of Preferred Stock which may, from time
to time, be issued by the Company with such voting rights), given in
writing or by vote at a meeting of stockholders called for such purpose,
the corporation will not (i) increase the authorized number of shares of
Series P Preferred Stock, (ii) create any other class or series of shares
having preference over, or ranking on a parity with, the Series P Preferred
Stock, except for the Next Series of Preferred, or (iii) alter or change
the rights, preferences or privileges of the Series P Preferred Stock
materially or adversely."
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be
executed this 24th day of January, 1996.
JETFAX, INC.
By: /s/ Edward R. Prince, III
-------------------------
Edward R. Prince, III
President
Attest: /s/ Eli Morowitz
-----------------
Eli Morowitz
-11-
<PAGE>
Secretary
-12-
<PAGE>
STATE OF CALIFORNIA
COUNTY OF [_______________]
I, Juliet H. Tibbetts, do hereby certify that on this 24th day of
January, 1996, Edward R. Prince, III personally appeared before me, who being by
me duly sworn, declared that he executed the foregoing Certificate in his
capacity as President of JetFax, Inc., and that the statements contained therein
are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 24th day of January, 1996.
____________________________
Notary Public in and for the
State of California
_____________________________
Printed Name of Notary Public
My Commission Expires:
__________________________
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<PAGE>
EXHIBIT 3.14
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES F PREFERRED STOCK
OF
JETFAX, INC.
Pursuant to Section 151 of the Delaware General Corporation Law:
The undersigned, Edward R. Prince, III and Eli Morowitz, do hereby
certify that (i) they are, and at all times mentioned herein were, the duly
elected and acting President and Secretary, respectively, of JETFAX, INC., a
corporation organized and existing under the Delaware General Corporation Law
(the "Corporation"), and (ii) pursuant to the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation and pursuant
to Section 151 of the Delaware General Corporation Law, said Board of Directors
at a duly convened special meeting held on February 1, 1996 duly adopted a
resolution designating the preferences, rights and limitations of the
Corporation's Series F Preferred Stock and providing for the issuance of shares
thereof out of the Corporation's authorized and unissued Preferred Stock, $.01
par value, which resolution is and reads as follows:
"RESOLVED that, pursuant to the authority expressly granted to and
vested in the Board of Directors in the Corporation's Certificate of
Incorporation and pursuant to Section 151 of Delaware General Corporation Law,
said Board of Directors hereby designates, approves and adopts the following
Certificate of Designation which provides for the creation, establishment and
authorization of a series of Preferred Stock, par value $.01 per share, of the
Corporation, and this Board of Directors hereby declares and affirms that each
share of such stock of said series shall have identical rights and privileges in
every respect and shall have the designations, preferences, limitations and
relative rights described as follows:
Section 1. DESIGNATION; NUMBER OF SHARES. The designation of the
series of Preferred Stock authorized hereby shall be "Series F Preferred
Stock." The number of shares of Series F Preferred Stock authorized for
issuance is 3,500,000. The Stated Value of the Series F Preferred Stock
shall be $2.75 per share.
Section 2. DIVIDENDS. (a) The holders of record of shares of Series
F Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available for the payment of
dividends, dividends at an annual
<PAGE>
rate of ten percent (10.0%) of the Stated Value per share (subject to
equitable adjustment for stock splits, combinations, stock dividends,
reclassifications and similar events), payable in preference and priority
to any payment of any cash dividend on the Common Stock or on the Preferred
Stock other than the Series F Preferred Stock. Such dividends shall accrue
quarterly and shall be cumulative so that if at any time such accrued
dividends on the Series F Preferred Stock shall not have been paid, or
declared and set apart for payment, the deficiency (including any amounts
from any prior year in which dividends accrued but remain unpaid) shall be
fully paid, or declared and set apart for payment, before any cash dividend
shall be paid on or declared or set apart for payment on the Common Stock
or on the Preferred Stock.
(b) So long as any of the Series F Preferred Stock remains
outstanding, after the payment or setting apart for payment of the amount
of any dividends to be paid pursuant to the provisions of paragraph (a) of
this Section 2, no cash dividends shall be paid on, or declared or set
apart for, the Common Stock, unless a dividend is paid on, or declared or
set apart for, each outstanding share of Preferred Stock in an amount equal
to or greater than the aggregate amount of such dividends for all shares of
Common Stock into which each such share of Preferred Stock could then be
converted (as equitably adjusted for stock splits, combinations, stock
dividends, reclassifications and similar events and excluding the amount of
any dividends paid pursuant to the provisions of paragraph (a) of this
Section 2).
(c) Notwithstanding any accrual of cumulative dividends as provided
above, for a period of two years commencing on the Original Issue Date (as
defined below), the Corporation shall neither pay nor declare any cash
dividends with respect to the Series F Preferred Stock if the effect of
such action would limit or impair the special conversion provisions
described in Section 4(k) below.
Section 3. LIQUIDATION PREFERENCE. In the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, each
holder of the Series F Preferred Stock shall be entitled to receive, after
payment or provision for payment of all debts of the Corporation, but
before any distribution of assets or surplus funds to the holders of Common
Stock or Preferred Stock (other than the Series F Preferred Stock) by
reason of their ownership thereof, an amount equal to the Stated Value per
share of such Series F Preferred Stock (as equitably adjusted for stock
splits, combinations, stock
-2-
<PAGE>
dividends, reclassifications and similar events) plus any accrued or
declared but unpaid dividends thereon, if any, to the date fixed for the
liquidation, dissolution or winding up for each share of Series F Preferred
Stock then held by such holder. After (a) such payment described in the
foregoing sentence has been made in full to the holders of the outstanding
Series F Preferred Stock and (b) a payment in full or other distribution of
assets in an amount equal to the Stated Value per share has been made with
respect to each outstanding share of Common Stock and each share of any
series of Preferred Stock (other than the Series F Preferred Stock) which
is entitled to participate in such payment or other distribution ratably
with such Common Stock (as adjusted for any stock dividends, combinations
or splits with respect to such shares), or funds necessary for such payment
have been set aside in trust for the account of such holders and continue
to be available therefor, thereafter the holders of the Series F Preferred
Stock and the holders of Common Stock (together with holders of any series
of Preferred Stock which is entitled to participate in such payment or
other distribution ratably with such Common Stock) shall be entitled to
share in further distributions and the remaining assets of the Corporation
in the same manner as if all shares of Series F Preferred Stock had been
converted into Common Stock. If on any liquidation, dissolution or winding
up, the assets of the Corporation so distributable among the holders of the
Series F Preferred Stock are insufficient to permit full payment to the
holders of the Series F Preferred Stock of an amount equal to the Stated
Value per share multiplied by the number of such shares than outstanding,
plus any accrued or declared but unpaid dividends on such shares to the
date fixed for the liquidation, dissolution or winding up, such assets
shall be distributed ratably among the holders of the Series F Preferred
Stock in proportion to the full preferential amount each such holder is
otherwise entitled to receive. A consolidation or merger of the Corporation
(other than whereby the Corporation or its shareholders own not less than a
majority of the voting power of the surviving or successor corporation) or
a sale or transfer of substantially all of its assets as an entirety (other
than pursuant to a pledge of assets by the Corporation as collateral
pursuant to any agreement with any bank, lender or group of lenders,
equipment lessor or similar lending institution or individuals in
connection with such entities or individuals providing credit facilities or
equipment financings to the Corporation pursuant to any approval of the
Board of Directors of the Corporation) whereby the holders of the Series F
Preferred Stock would receive as a result of such consolidation, merger,
sale or transfer (but for the application of the provisions of this Section
3) an amount per share less
-3-
<PAGE>
than or equal to the Stated Value per share of such Series F Preferred
Stock (as equitably adjusted for stock splits, combinations, stock
dividends, reclassifications and similar events) plus any accrued or
declared but unpaid dividends thereon, if any, to the date of such
consolidation, merger, sale or transfer shall be deemed a "voluntary or
involuntary liquidation, dissolution or winding up of the Corporation"
within the meaning of this Section 3. Any other consolidation or merger of
the Corporation or sale or transfer of substantially all of its assets, and
any purchase or redemption by the Corporation of its shares of any class,
is not a "voluntary or involuntary liquidation, dissolution or winding up
of the Corporation" within the meaning of this Section 3.
Section 4. CONVERSION. The holders of the Series F Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series F
----------------------------------
Preferred Stock shall be convertible, without the payment of any additional
consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the
office of the Corporation or any transfer agent for the Series F Preferred
Stock, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing (i) the Stated Value per share of such
Series F Preferred Stock by (ii) the Conversion Price as determined as
hereinafter provided. If a Liquidity Event as defined in Section 4(k)
occurs during the two-year period commencing on the Original Issue Date (or
if notice is given by the Corporation that a Liquidity Event is impending
and such Liquidity Event then occurs in the 120 day period following such
notice), and shares of Series F Preferred Stock are converted pursuant to
this Section 4(a) in connection with or subsequent to such Liquidity Event
(or notice) but before the expiration of that two-year period, Section 4(k)
shall govern the conversion of any accrued but unpaid dividends on the
shares converted. In all other cases, upon conversion of Series F Preferred
Stock pursuant to this Section 4(a) any accrued or declared but unpaid
dividends to the date of conversion on the shares of Series F Preferred
Stock being converted pursuant to this Section 4(a) shall be, at the
Corporation's option, either (i) paid in cash to the holder of such Stock,
or (ii) converted into such number of shares of Common Stock as is
determined by dividing the amount of such dividends by the lesser of $2.75
or the share price of any Additional Shares of Common Stock (as defined in
Section 4(c)(i)(1)) issued (or deemed to be issued under Section
-4-
<PAGE>
4(c)(iii)) by the Corporation subsequent to the Original Issue date. The
share price of any Additional Shares of Common Stock issued (or deemed to
be issued under Section 4(c)(iii)) shall be determined under Section
4(c)(v). The conversion price at which shares of Common Stock shall be
deliverable upon conversion without the payment of any additional
consideration by the holder of Series F Preferred Stock initially shall be
the Stated Value (the "Conversion Price"). Such Conversion Price shall be
subject to adjustment, in order to adjust the number of shares of Common
Stock into which the Series F Preferred Stock is convertible, as
hereinafter provided.
(b) Mechanics of Conversion. Before any holder of Series F Preferred
-----------------------
Stock shall be entitled to convert the same into full shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series F Preferred Stock, and shall give written notice to the Corporation
at such office that he elects to convert the same and shall state therein
his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. No
fractional shares of Common Stock shall be issued upon conversion of the
Series F Preferred Stock. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Series F
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Conversion Price. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Series F Preferred Stock, or to his nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to
which he shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share and cash in the amount of all accrued or declared but
unpaid dividends on the converted shares of Series F Preferred Stock, if
the Corporation elects to pay such dividends in cash rather than converting
them to additional shares of Common Stock. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of
such surrender of the shares of Series F Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon
-5-
<PAGE>
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(c) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 4(c),
-------------------
the following definitions shall apply:
(1) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection
4(c)(iii), deemed to be issued) by the Corporation after the
Original Issue Date, other than (A) shares of Common Stock issued
or issuable upon conversion of shares of Preferred Stock; (B)
shares of Common Stock, not to exceed 1,915,000 issued and
outstanding at any time (subject to adjustment for stock splits,
recapitalizations and similar transactions), issued or issuable
to officers, directors, employees or consultants of the
Corporation or issued pursuant to an employee or consultant stock
purchase plan or employee or director option plan or other
employee stock bonus arrangement (collectively, the "Plans")
approved by the Corporation's Board of Directors; (C) shares of
the Corporation's capital stock issued or issuable pursuant to
those certain warrants issued pursuant to the Note Purchase
Agreement between the corporation and certain investors dated as
of August 3, 1994, as amended, as any of such warrants may be
amended from time to time, or pursuant to any stock purchase
warrants issued by the Corporation in replacement of or exchange
for any such warrants; (D) shares of the Corporation's capital
stock issued or issuable pursuant to those certain warrants
issued pursuant to the Purchase and Debt Restructuring Agreement
between the Corporation and Ailicec International Enterprises
Limited dated as of August 3, 1994, as any of such warrants may
be amended from time to time, or pursuant to any stock purchase
warrants issued by the Corporation in replacement of or exchange
for any such warrants; and (E) shares of the Corporation's
capital stock issued or issuable pursuant to an option to
Endeavor Capital Management pursuant to the Corporation's letter
agreement of December 15, 1993 with Endeavor Capital Management
as the same may be amended.
-6-
<PAGE>
(2) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock (except for the
convertible securities referenced in Subsections (1) (A), (B),
(C), (D) or (E) above).
(3) "Option" shall mean any rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities (except for the options referenced in
Subsections (1) (A), (B), (C), (D) or (E) above).
(4) "Original Issue Date" shall mean the date on which a
-------------------
share of Series F Preferred Stock was first issued.
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which the Series F Preferred
Stock is convertible shall be made by adjustment in the Conversion
Price in respect of the issuance of Additional Shares of Common Stock
if the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is equal to or
greater than the Conversion Price in effect on the date of, and
immediately prior to, the issue of such Additional Share of Common
Stock.
(iii) Issue of Securities Deemed Issued as Additional Shares of
---------------------------------------------------------
Common Stock.
------------
(1) Options and Convertible Securities. In the event the
----------------------------------
Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against
dilution) of Common Stock issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a
record date
-7-
<PAGE>
shall have been fixed, as of the close of business on such record
date, provided that Additional Shares of Common Stock shall not
be deemed to have been issued unless the consideration per share
(determined pursuant to Subsection 4(c)(v) hereof) of such
Additional Shares of Common Stock would be less than the
Conversion Price in effect on the date of and immediately prior
to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares
of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price shall
be made upon the subsequent issue of Convertible Securities
or shares of Common Stock upon the exercise of such Options
or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the
Corporation, or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities
(provided, however, that no such adjustment of the
Conversion Price shall affect Common Stock previously issued
upon any conversion of Series F Preferred Stock);
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the
Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be
-8-
<PAGE>
recomputed as if (I) in the case of Convertible Securities
or Options for Common Stock, the only Additional Shares of
Common Stock issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration
actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the
consideration actually received by the Corporation upon such
exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus
the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange, and (II)
in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed to have
been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration deemed to have been
received by the Corporation (determined pursuant to
Subsection 4(c)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually
exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price to
an amount which exceeds the lower of (i) the Conversion
Price on the original adjustment date, or (ii) the
Conversion Price that would have resulted from any issuance
of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the Conversion Price shall be made until
the expiration or exercise of all such Options,
-9-
<PAGE>
whereupon such adjustment shall be made in the same manner
provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date
shall be cancelled as of the close of business on such
record date, and thereafter the Conversion Price shall be
adjusted pursuant to this Subsection 4(c)(iii) as of the
actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions.
-----------------------------------------------------
In the event the Corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend
or make any other distribution on the Common Stock payable in
Common Stock or in any right to acquire Common Stock or effect a
subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
Common Stock or in any right to acquire Common Stock), then and
in any such event, Additional Shares of Common Stock shall be
deemed to have been issued (A) in the case of any such dividend
or distribution, immediately after the close of business on the
record date for the determination of holders of any class of
securities entitled to receive such dividend or distribution, or
(B) in the case of any such subdivision, at the close of business
on the date immediately prior to the date upon which such
Corporate action becomes effective. If such record date shall
have been fixed and such dividend shall not have been fully paid
on the date fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date shall
be cancelled as of the close of business on such record date, and
thereafter the Conversion Price shall be adjusted pursuant to
this Subsection 4(c)(iii) as of the time of actual payment of
such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock. If at any time or from time to time after the
----------------------
Original Issue Date, the Corporation shall issue or sell Additional
Shares of Common Stock (including additional shares of Common Stock
deemed to be
-10-
<PAGE>
issued pursuant to Subsection 4(c)(iii), but excluding additional
shares of Common Stock issued as a dividend or other distribution on
any class of stock as provided in Subsection 4(c)(iii)(2) or 4(c)(vi))
without consideration or for a consideration per share less than the
then existing Conversion Price (or, if an adjusted Conversion Price
shall be in effect by reason of a previous adjustment, then less than
such adjusted Conversion Price), then and in each case the then
Conversion Price shall be adjusted to a price (computed to the nearest
cent), as of the opening of business on the date of such issue or
sale, equal to the quotient obtained by dividing
(1) an amount equal to the sum of (A) the total number of
shares of Common Stock outstanding on the Original Issue Date,
multiplied by the Conversion Price then in effect, plus (B) the
aggregate consideration received by the Corporation for all
Additional Shares of Common Stock issued since the Original Issue
Date, by
(2) an amount equal to the sum of (A) the number of shares
of Common Stock outstanding on the Original Issue Date or sale of
such Additional Shares of Common Stock, plus (B) the total number
of Additional Shares of Common Stock issued since the Original
Issue Date.
For the purpose of the above calculation, the number of shares of
Common Stock outstanding immediately prior to such issue shall be
calculated on a fully diluted basis, as if all shares of Preferred
Stock and all Convertible Securities had been fully converted into
shares of Common Stock immediately prior to such issuance, and any
outstanding warrants, options or other rights for the purchase of
shares of stock or convertible securities had been fully exercised
immediately prior to such issuance (and the resulting securities fully
converted into shares of Common Stock, if so convertible) as of such
date.
(v) Determination of Consideration. For purposes of this Section
------------------------------
4(c), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall (A) insofar
-----------------
as it consists of cash, be computed at the aggregate amounts of
cash received by the Corporation
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<PAGE>
excluding amounts paid or payable for accrued interest or accrued
dividends and any expenses, underwriting commissions or
concessions incurred in connection therewith; (B) insofar as it
consists of property other than cash, be computed at the fair
value thereof at the time of such issue, as determined in good
faith by the Board of Directors; and (C) in the event Additional
Shares of Common Stock are issued together with other shares or
securities or other assets of the Corporation for consideration
which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration
----------------------------------
per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection
4(c)(iii)(1), relating to Options and Convertible Securities,
shall be determined by dividing (x) the total amount, if any,
received or receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by (y) the
maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(vi) Adjustment of Conversion Price for Dividends, Distributions,
------------------------------------------------------------
Subdivisions, Combinations or Consolidations of Common Stock.
------------------------------------------------------------
(1) Stock Dividends, Distributions or Subdivisions. In the
----------------------------------------------
event the Corporation shall issue or be deemed to issue
Additional Shares of
-12-
<PAGE>
Common Stock pursuant to Subsection 4(c)(iii)(2) in a stock
dividend, stock distribution or subdivision, the Conversion Price
in effect immediately prior to such stock dividend, stock
distribution or subdivision shall, concurrently with the
effectiveness of such stock dividend, stock distribution or
subdivision, be proportionately decreased without regard to the
adjustment provisions set forth in Subsection 4(c)(iv) hereof.
(2) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(d) Automatic Conversion. Each share of Series F Preferred Stock
--------------------
shall automatically be converted into such number of shares of Common Stock
as is determined by dividing (i) the Stated Value per share of such Series
F Preferred Stock by (ii) the then effective Conversion Price upon the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of the
Corporation to the public at an initial public offering price per share not
less than $5.00, and with gross proceeds to the Corporation of not less
than $8,000,000 including underwriting discounts and commissions (in the
event of which offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series F Preferred Stock shall not be
deemed to have converted that Series F Preferred Stock until the closing of
such offering). If a Liquidity Event as defined in Section 4(k) occurs
during the two-year period commencing on the Original Issue Date, and
shares of Series F Preferred Stock are converted pursuant to this Section
4(d) in connection with or subsequent to such Liquidity Event but before
the expiration of that two-year period, Section 4(k) shall govern the
conversion of any accrued but unpaid dividends on the shares converted. In
all other cases, upon conversion of Series F Preferred Stock pursuant to
this Section 4(d) any accrued or declared but unpaid dividends to the date
of conversion on the shares of Series F Preferred Stock being converted
pursuant to this Section 4(d) shall be, at the Corporation's option, either
-13-
<PAGE>
(i) paid in cash to the holder of such Stock, or (ii) converted into such
number of shares of Common Stock as is determined by dividing the amount of
such dividends by the lesser of $2.75 or the share price of any Additional
Shares of Common Stock (as defined in Section 4(c)(i)(1)) issued (or deemed
to be issued under Section 4(c)(iii)) by the Corporation subsequent to the
Original Issue date. The share price of any Additional Shares of Common
Stock issued (or deemed to be issued under Section 4(c)(iii)) shall be
determined under Section 4(c)(v).
Upon the occurrence of the event specified in this Section 4(d),
the Series F Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or
its transfer agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such shares of
the Series F Preferred Stock being converted are either delivered to the
Corporation or its transfer agent, or the holder notifies the Corporation
or any transfer agent that such certificates have been lost, stolen, or
destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection
therewith and, if the Corporation so elects, provides an appropriate
indemnity bond. Upon the automatic conversion of the Series F Preferred
Stock, the holders of such Series F Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or
of its transfer agent. Thereupon, there shall be issued and delivered to
such holder, promptly at such office and in his name as shown on such
surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of the Series F
Preferred Stock surrendered were convertible on the date on which such
automatic conversion occurred, plus either (i) cash in the amount of all
accrued or declared but unpaid dividends on the converted shares of the
Series F Preferred Stock, if the Corporation elected to pay such dividends
in cash rather than in the form of additional shares of Common Stock, or
(ii) a certificate or certificates for the number of shares of Common Stock
into which the accrued or declared but unpaid dividends on the shares of
Series F Preferred Stock were converted, if the Corporation elected to pay
such dividends in the form of Common Stock. No fractional shares of Common
Stock shall be issued upon conversion of the Series F Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction
-14-
<PAGE>
multiplied by the then effective Conversion Price. An automatic conversion
as specified in this Section 4(d) shall be deemed to have been made
immediately prior to the closing of the public offering described in the
first paragraph of this Section 4(d), and the person or persons entitled to
receive such shares of Common Stock issuable upon such conversion shall be
treated for all such purposes as the record holder of holders of such
shares of Common Stock on such date.
(e) No Impairment. The Corporation shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation but shall at all times in good faith assist in the carrying
out of all the provisions of this Section 4 and in the taking of all such
action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series F Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section
4, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each
affected holder of Series F Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any affected holder of Series F Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion
Price at the time in effect and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be
received upon the conversion of each share of Series F Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the Corporation shall
mail to each holder of Series F Preferred Stock at least ten (10) days
prior to such record date a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
-15-
<PAGE>
(h) Common Stock Reserved. The Corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the issued and outstanding Series F Preferred Stock, and if
at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding
shares of Series F Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary and
within its power to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(i) Certain Taxes. The Corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of the Series F Preferred
Stock, provided, however, that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer to a name other
than that of the holder of the Series F Preferred Stock then outstanding.
(j) Closing of Books. The Corporation shall at no time close its
----------------
transfer books against the transfer of any Series F Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any
shares of Series F Preferred Stock in any manner which interferes with the
timely conversion of such Series F Preferred Stock.
(k) Special Conversion.
------------------
(i) In the event of the closing of a public offering sufficient
to trigger automatic conversion of the Series F Preferred Stock under
Section 4(d) or in the event of the closing by the Corporation of a
merger or consolidation (other than whereby the Corporation or its
shareholders own not less than a majority of the voting power of the
surviving or successor corporation) or in the event of the closing by
the Corporation of a sale or other transfer of all or substantially
all of the Corporation's assets (other than pursuant to a pledge of
assets by the Corporation as collateral pursuant to any agreement with
any bank, lender or group of lenders, equipment lessor or similar
lending institution or individuals in connection with such entities or
individuals providing credit facilities or equipment financings to the
Corporation pursuant to any approval of the Board of Directors of the
Corporation) (a "Liquidity Event") (or if notice is given by the
Corporation that a Liquidity Event is impending and such Liquidity
Event then
-16-
<PAGE>
occurs in the 120 day period following such notice), and if such
Liquidity Event occurs during the period of two years commencing on
the Original Issue Date, then from and after such Liquidity Event or
notice (and including any conversion in connection therewith) but
prior to the termination of such two-year period, any conversion of
Series F Preferred Stock, whether pursuant to Section 4(a) or 4(d)
shall be subject to the special conversion provisions set forth in
Subsection 4(k)(ii).
(ii) Subject to the terms and conditions of Subsection 4(k)(i),
upon a conversion of Series F Preferred Stock pursuant to either
Section 4(a) or 4(d), any accrued or declared but unpaid dividends
thereon, if any, to the date of such conversion, shall be converted
into such number of shares of Common Stock as is determined by
dividing (1) the amount of any such accrued or declared but unpaid
dividends by (2) an amount equal to seventy-five percent (75.0%) of
the value of a share of Common Stock at the closing of the Liquidity
Event described in Subsection 4(k)(i). Nothing in this Section 4(k)
shall affect the Conversion Price or the number of shares of Common
Stock into which shares of Series F Preferred Stock are convertible.
Section 5. VOTING RIGHTS. (a) In addition to the voting rights
provided in subparagraph 5(b) below and by applicable Delaware law, the
holders of shares of Series F Preferred Stock shall be entitled to vote
upon all matters upon which holders of the Common Stock have the right to
vote, and shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which such shares of Series F
Preferred Stock could be converted pursuant to the provisions of Section 4
hereof at the Record Date for the determination of the stockholders
entitled to vote on such matters, or, if no such Record Date is
established, at the date such vote is taken or any written consent of
stockholders is solicited, such votes to be counted together with all other
shares of capital stock having general voting powers and not separately as
a class. In all cases where the holders of shares of Series F Preferred
Stock have the right to vote separately as a class, such holders shall be
entitled to one vote for each such share held by them respectively;
(b) Without the consent of the holders of at least a majority of the
shares of Series F Preferred Stock then outstanding (voting together as a
single class with such other series of Preferred Stock which may, from time
to time, be issued
-17-
<PAGE>
by the Corporation with such voting rights), given in writing or by vote at
a meeting of stockholders called for such purpose, the Corporation will not
(A) increase the authorized number of shares of Series F Preferred Stock
above 3,500,000 authorized shares, (B) create any other class or series of
shares having preference or priority as to dividends or assets superior to,
or ranking on a parity with, the Series F Preferred Stock or (C) alter or
change the rights, preferences or privileges of the Series F Preferred
Stock materially or adversely; and
(c) So long as 400,000 or more shares of Series F Preferred are issued
and outstanding, the holders of the Series F Preferred shall have, in
accordance with the laws of the State of Delaware, the right to elect as a
member of the Board of Directors of the Corporation one (1) individual
designated by the holders of a majority in interest of the outstanding
Series F Preferred; provided, however, that in lieu of the foregoing, so
long as 1,818,182 or more shares of Series F Preferred are issued and
outstanding, the holders of the Series F Preferred shall have, in
accordance with the laws of the State of Delaware, the right to elect as
members of the Board of Directors of the Corporation two (2) individuals
designated by the holders of a majority in interest of the outstanding
Series F Preferred. The provisions of this Section 5(c) shall be of no
effect upon and after the closing of an underwritten public offering by the
Corporation under the Securities Act of 1933, as amended, covering the
offer and sale of Common Stock for the account of the Corporation to the
public at an initial public offering price per share not less than $5.00,
and with gross proceeds to the Corporation of not less than $8,000,000
including underwriting discounts and commissions.
Section 6. NO REISSUANCE OF SERIES F PREFERRED STOCK. No share or
shares of Series F Preferred Stock acquired by the Corporation by reason of
purchase, conversion or otherwise shall be reissued, and all such shares
shall be canceled, retired and eliminated from the shares that the
Corporation shall be authorized to issue. The Corporation may, from time
to time, take such appropriate corporate action as may be necessary to
reduce the authorized number of shares of the Series F Preferred Stock."
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<PAGE>
IN WITNESS WHEREOF, JetFax, Inc. has caused this Certificate to be
executed this 9th day of February, 1996.
JETFAX, INC.
By: /s/ Edward R. Prince III
--------------------------
Edward R. Prince III
President
Attest: /s/ Eli Morowitz
------------------
Eli Morowitz
Secretary
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<PAGE>
STATE OF CALIFORNIA
COUNTY OF SAN MATEO
I, Juliet H. Tibbetts, do hereby certify that on this 9th day of
February, 1996, Edward R. Prince III personally appeared before me, who being by
me duly sworn, declared that he executed the foregoing Certificate in his
capacity as President of JetFax, Inc., and that the statements contained therein
are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 9th day of February, 1996.
_____________________________
Notary Public in and for the
State of California
_____________________________
Printed Name of Notary Public
My Commission Expires:
______________________
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<PAGE>
EXHIBIT 3.15
RESTATED CERTIFICATE OF INCORPORATION
OF
JETFAX, INC.
Pursuant to Section 245 of the General Corporation Law of Delaware, Edward
R. Prince, III and Allen K. Jones certify that they are the President and
Secretary, respectively, of JetFax, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), and further certify
that the text of the Corporation's Certificate of Incorporation is restated and
amended to read as follows:
ARTICLE I
The name of the corporation is JetFax, Inc. (the "Corporation").
ARTICLE II
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE III
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock". The total
number of shares which the corporation is authorized to issue is Forty Million
(40,000,000) shares. Thirty-Five Million (35,000,000) shares shall be Common
Stock and Five Million (5,000,000) shares shall be Preferred Stock, each with a
par value of $.01 per share.
1
<PAGE>
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article III, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall
be cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such privileges, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
on case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
2
<PAGE>
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and the
relative rights of priority, of any, of payment of shares of that series; and
(h) Any other relative rights, preferences and limitations of that series.
ARTICLE IV
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, adopt, alter, amend or
repeal the Bylaws of the Corporation, subject to the right of the stockholders
entitled to vote with respect thereto to amend or repeal Bylaws made by the
Board of Directors as provided for in this Restated Certificate of
Incorporation. The affirmative vote of 66-2/3% of the total number of votes of
the then outstanding shares of capital stock of this Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required for the adoption, amendment or repeal of the following
Sections of the Corporation's Bylaws: 2.2 (Special Meeting), 2.10 (Advance
Notice of Stockholder Nominees) and 2.11 (Advance Notice of Stockholder
Business) by the stockholders of this Corporation.
3
<PAGE>
ARTICLE VII
The number of directors which will constitute the whole Board of Directors
of the Corporation shall be as specified in the Bylaws of the Corporation.
ARTICLE VIII
The election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE IX
(a) This Article IX shall become effective upon the earliest to occur of
the following events: (i) that date when the Corporation is no longer subject to
Section 2115 of the California Corporations Code concerning applicability of the
California Corporations Code to corporations incorporated in jurisdictions other
than the State of California, or (ii) that date when the Corporation becomes a
listed corporation within the meaning of Section 301.5 of the California
Corporations Code, which provisions refers to a corporation whose shares are
traded in New York Stock Exchange, American Stock Exchange or NASDAQ-National
Market System.
(b) There shall be no right with respect to shares of stock of the
Corporation to cumulate votes in the election of directors.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any statutory provision) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
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ARTICLE XI
If at any time this Corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, for so long
as such class is so registered, any action by the stockholders of such class
must be taken at an annual or special meeting of stockholders and may not be
taken by written consent. This provision shall supersede any provision to the
contrary in the Bylaws of the Corporation.
ARTICLE XII
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, a director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Neither any
amendment nor repeal of this Article XII, nor the adoption of any provision of
this Restated Certification of Incorporation inconsistent with this Article XII,
shall eliminate or reduce the effect of this Article XII in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article XII, would accrue or arise, prior to such amendment, repeal or adoption
of an inconsistent provision.
ARTICLE XIII
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
ARTICLE XIV
Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the Bylaws (and notwithstanding the fact that a lesser
percentage may be specified by law, this Restated Certificate of Incorporation
or the Bylaws of this Corporation), the affirmative vote of 66-2/3% of the total
number of the then outstanding shares of capital stock of this Corporation
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entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal, or to adopt any provision
inconsistent with the purpose or intent of Articles VI, IX, XI and this Article
XIV. Notice of any such proposed amendment, repeal or adoption, shall be
contained in the notice of the meeting at which it is to be considered. Subject
to the provisions set forth herein, this Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Restated
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
The Restated Certificate of Incorporation has been duly adopted by the
stockholders of the Corporation in accordance with the provisions of Section 242
and 245 of the General Corporate Law of the State of Delaware, as amended.
IN WITNESS WHEREOF, the undersigned have executed this certificate on
[______________], 1997.
-------------------------------
Edward R. Prince, III
President
Attest:
- ----------------------------
Allen K. Jones
Secretary
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The undersigned declare under penalty of perjury that the matters set forth
in the foregoing Restated Certificate of Incorporation are true and correct.
Executed in Santa Clara, California on [______________], 1997.
-------------------------------
Edward R. Prince, III
President
Attest:
- ---------------------------------
Allen K. Jones
Secretary
7
<PAGE>
EXHIBIT 3.16
AMENDED AND RESTATED
BYLAWS
OF
JETFAX, INC.
Amended and Restated as of December 20, 1994
<PAGE>
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I - Offices......................................................... 1
Section 1.1 Principal Office....................................... 1
Section 1.2 Registered Office...................................... 1
Section 1.3 Other Offices.......................................... 1
ARTICLE II - Stockholders' Meetings........................................... 1
Section 2.1 Annual Meeting......................................... 1
Section 2.2 Special Meetings....................................... 1
Section 2.3 Notice of Meetings and Adjourned Meetings.............. 2
Section 2.4 Voting Lists........................................... 2
Section 2.5 Quorum................................................. 2
Section 2.6 Organization........................................... 3
Section 2.7 Voting................................................. 3
Section 2.8 Stockholders Entitled to Vote.......................... 3
Section 2.9 Order of Business...................................... 4
Section 2.10 Advance Notice of Stockholder Nominees................. 4
Section 2.11 Advance Notice of Stockholder Business................. 4
ARTICLE III - Directors....................................................... 4
Section 3.1 Management............................................. 4
Section 3.2 Number and Term........................................ 4
Section 3.3 Quorum and Manner of Action............................ 4
Section 3.4 Series A Preferred Stock Director Voting Rights........ 5
Section 3.5 Vacancies.............................................. 5
Section 3.6 Resignations........................................... 5
Section 3.7 Removals............................................... 5
Section 3.8 Annual Meetings........................................ 5
Section 3.9 Regular Meetings....................................... 6
Section 3.10 Special Meetings....................................... 6
Section 3.11 Organization of Meetings............................... 6
Section 3.12 Place of Meetings...................................... 6
Section 3.13 Compensation of Directors.............................. 6
Section 3.14 Action by Unanimous Written Consent.................... 6
Section 3.15 Participation in Meetings by Telephone................. 7
ARTICLE IV - Committees of the Board.......................................... 7
Section 4.1 Membership and Authorities............................. 7
Section 4.2 Minutes................................................ 7
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.3 Vacancies.............................................. 7
Section 4.4 Telephone Meetings..................................... 7
Section 4.5 Action Without Meeting................................. 8
ARTICLE V - Officers.......................................................... 8
Section 5.1 Number and Title....................................... 8
Section 5.2 Term of Office; Vacancies.............................. 8
Section 5.3 Removal of Elected Officers............................ 8
Section 5.4 Resignations........................................... 8
Section 5.5 The Chairman of the Board.............................. 9
Section 5.6 President.............................................. 9
Section 5.7 Chief Financial Officer................................ 9
Section 5.8 Vice President......................................... 9
Section 5.9 Secretary.............................................. 9
Section 5.10 Assistant Secretaries.................................. 10
Section 5.11 Treasurer.............................................. 10
Section 5.12 Assistant Treasurers................................... 10
Section 5.13 Subordinate Officers................................... 10
Section 5.14 Salaries and Compensation.............................. 10
ARTICLE VI - Indemnification.................................................. 11
Section 6.1 Indemnification of Directors and Officers.............. 11
ARTICLE VII - Capital Stock................................................... 14
Section 7.1 Certificates of Stock.................................. 14
Section 7.2 Lost Certificates...................................... 14
Section 7.3 Fixing Date for Determination of Stockholders of Record
for Certain Purposes................................... 14
Section 7.4 Dividends.............................................. 15
Section 7.5 Registered Stockholders................................ 15
Section 7.6 Transfer of Stock...................................... 15
ARTICLE VIII - Miscellaneous Provisions....................................... 16
Section 8.1 Corporate Seal......................................... 16
Section 8.2 Fiscal Year............................................ 16
Section 8.3 Checks, Drafts, Notes.................................. 16
Section 8.4 Notice and Waiver of Notice............................ 16
Section 8.5 Examination of Books and Records....................... 17
Section 8.6 Voting Upon Shares Held by the Corporation............. 17
ARTICLE IX - Amendments....................................................... 17
Section 9.1 Amendment.................................................... 17
</TABLE>
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JETFAX, INC.
AMENDED AND RESTATED
B Y L A W S
ARTICLE I
Offices
SECTION 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall
be in the City of Menlo Park, California .
SECTION 1.2 REGISTERED OFFICE. The registered office of the Corporation
required to be maintained in the State of Delaware by the General Corporation
Laws of the State of Delaware, may be, but need not be, identical with the
Corporation's principal office, and the address of the registered office may be
changed from time to time by the Board of Directors.
SECTION 1.3 OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders' Meetings
SECTION 2.1 ANNUAL MEETING. The annual meeting of the holders of shares of
each class or series of stock as are entitled to notice thereof and to vote
thereat pursuant to applicable law and the Certificate of Incorporation for the
purpose of electing directors and transacting such other proper business as may
come before it shall be held in each year, commencing with the year 1989, at
such time, on such day and at such place, within or without the State of
Delaware, as may be designated by the Board of Directors.
SECTION 2.2 SPECIAL MEETINGS. A special meeting of the Stockholders may be
called at any time by the Board of Directors, or by the Chairman of the Board,
or by the President. No other person or persons are permitted to call a special
meeting. No business may be conducted at a special meeting other than the
business brought before the meeting by the Board of Directors or the Chairman of
the Board or the President.
<PAGE>
SECTION 2.3 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as otherwise
provided by law, written notice of any meeting of Stockholders shall be given
either by personal delivery or by mail to each Stockholder of record entitled to
vote thereat. Notice of each meeting shall be in such form as is approved by the
Board of Directors and shall state the date, place and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, such written notice shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. Except when a Stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
on the ground that the meeting is not lawfully called or convened, presence in
person or by proxy of a Stockholder shall constitute a waiver of notice of such
meeting. Further, a written waiver of any notice required by law or by these
Bylaws, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Except as otherwise
provided by law, the business that may be transacted at any such meeting shall
be limited to and consist of the purpose or purposes stated in such notice. If a
meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder of record entitled to vote at the meeting.
SECTION 2.4 VOTING LISTS. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten (10) days
before each meeting of the Stockholders, a complete list of Stockholders
entitled to vote at such meeting or any adjournment thereof? arranged in
alphabetical order with the address of each and the number of shares held by
each, which list, for a period of ten (10) days prior to such meeting, shall be
kept on file either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held, and such list shall be
subject to inspection by and Stockholders at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any Stockholder for the
duration of the meeting. The original stock transfer books shall be prima-facie
evidence as to who are the Stockholders entitled to examine such list or
transfer books or to vote at any meeting of Stockholders.
SECTION 2.5 QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the Corporation's
stock issued and outstanding and entitled to vote at a meeting, present in
person or represented by proxy, without regard to class or series, shall
constitute a quorum at all meetings of the Stockholders for the transaction of
business. If, however, such quorum shall not be present or represented at any
meeting of the Stockholders, the holders of a majority of such shares of stock,
present in person or represented by proxy, may adjourn any meeting from time to
time without notice other than announcement at the meeting, except as otherwise
required by these Bylaws, until
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a quorum shall be present or represented. At any
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 2.6 ORGANIZATION. Meetings of the Stockholders shall be presided
over by the Chairman of the Board of Directors, if one shall be elected, or in
his absence, by the President or by any Vice President, or, in the absence of
any of such officers, by a chairman to be chosen by a majority of the
Stockholders entitled to vote at the meeting who are present in person or by
proxy. The Secretary, or, in his absence, any Assistant Secretary or any person
appointed by the individual presiding over the meeting, shall act as secretary
at meetings of the Stockholders.
SECTION 2.7 VOTING. Each Stockholder of record, as determined pursuant to
Section 2.8, who is entitled to vote in accordance with the terms of the
Certificate of Incorporation and in accordance with the provisions of these
Bylaws, shall be entitled to one vote, in person or by proxy, for each share of
stock registered in his name on the books of the Corporation. Every Stockholder
entitled to vote at any Stockholders' meeting may authorize another person or
persons to act for him by proxy duly appointed by instrument in writing
subscribed by such Stockholder and executed not more than three (3) years prior
to the meeting, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
so long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A Stockholder's attendance at any meeting, when such
Stockholder who may have theretofore given a proxy, shall not have the effect of
revoking such proxy unless such Stockholder shall in writing so notify the
Secretary of the meeting prior to the voting of the proxy. Unless otherwise
provided by law, no vote on the election of directors or any question brought
before the meeting need be by ballot unless the chairman of the meeting shall
determine that it shall be by ballot or the holders of a majority of the shares
of stock present in person or by proxy and entitled to participate in such vote
shall so demand. In a vote by ballot, each ballot shall state the number of
shares voted and the name of the Stockholder or proxy voting. Except as
otherwise provided by law, by the Certificate of Incorporation or these Bylaws,
all elections of directors and all other matters before the Stockholders shall
be decided by the vote of the holders of a majority of the shares of stock
present in person or by proxy at the meeting and entitled to vote in the
election or on the question. In the election of directors, votes may not be
cumulated.
SECTION 2.8 STOCKHOLDERS ENTITLED TO VOTE. The Board of Directors may fix a
date not more than sixty (60) days nor less than ten (10) days prior to the date
of any meeting of Stockholders, or, in the case of corporate action by written
consent in accordance with the terms of Section 2.10, not more than sixty (60)
days prior to such action, as a record date for the determination of the
Stockholders entitled to notice of and to vote at such meeting and any
adjournment thereof, or to act by written consent, and in such case such
Stockholders and only such Stockholders as shall be Stockholders of record on
the date so fixed shall be
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<PAGE>
entitled to notice of and to vote at, such meeting and any adjournment thereof,
or to act by written consent, as the case may be, notwithstanding any transfer
of any stock on the books of the Corporation after such record date fixed as
aforesaid.
SECTION 2.9 ORDER OF BUSINESS. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting.
SECTION 2.10 ADVANCE NOTICE OF STOCKHOLDER NOMINEES. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of Stockholders by or at the discretion of the Board of Directors or by
any Stockholder of the Corporation entitled to vote in the election of directors
at the meeting who complies with the notice procedures set forth in this
Section. Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a Stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than twenty (20) days nor more than sixty (60) days prior
to the meeting; provided, however, that in the event less than thirty (30) days
notice or prior public disclosure of the date of the meeting is given or made to
Stockholders, notice by the Stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such Stockholder's notice shall set forth (a) as to each person, if any,
whom the Stockholder proposes to nominate for election or re-election as a
director: (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, (iv) any other information relating to such person that is required
by law to be disclosed in solicitations of proxies that is required by law to be
disclosed in solicitations of proxies for election of directors, and (v) such
person's written consent to being named as a nominee and to serving as a
director if elected; and (b) as to the Stockholder giving the notice: (i) the
name and address, as they appear on the Corporation's books, of such
Stockholder, and (ii) the class and number of shares of the Corporation which
are beneficially owned by such Stockholder, and (iii) a description of all
arrangements or understandings between such Stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the
nomination. At the request of the Board of Directors any person nominated by
the Board for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in the Stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section. The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting and
the defective nomination shall be disregarded.
4
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SECTION 2.11 ADVANCE NOTICE OF STOCKHOLDER BUSINESS. At the annual meeting
of the Stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be: (a) as specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
Stockholder. Business to be brought before an annual meeting by a Stockholder
shall not be considered properly brought if the Stockholder has not given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
Stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than twenty (20) nor
more than sixty (60) days prior to the meeting; provided, however, that in the
event that less than thirty (30) days notice or prior public disclosure of the
date of the meeting is given or made to Stockholders, notice by the Stockholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A Stockholder's notice to
the Secretary shall set forth as to each matter the Stockholder proposes to
bring before the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address of the Stockholder
proposing such business, (iii) the class and number of shares of the
Corporation, which are beneficially owned by the Stockholder, (iv) any material
interest of the Stockholder in such business, and (v) any other information that
is required by law to be provided by the Stockholder in his capacity as a
proponent of a Stockholder proposal. Notwithstanding anything in these Bylaws to
the contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section. The chairman of the
annual meeting shall, if the facts warrant, determine and declare at the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of this Section, and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
ARTICLE III
Directors
SECTION 3.1 MANAGEMENT. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all powers of the Corporation and do all lawful acts and
things as are not by law, by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the Stockholders.
5
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SECTION 3.2 NUMBER AND TERM. The number of directors shall consist of eight
(8) members who shall be elected annually by the Stockholders. Directors need
not be Stockholders. No decrease in the number of directors shall have the
effect of shortening the term of office of any incumbent director.
SECTION 3.3 QUORUM AND MANNER OF ACTION. At all meetings of the Board of
Directors a majority of the total number of directors holding office shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
law, by the Certificate of Incorporation or these Bylaws. When the Board of
Directors consists of one director, the one director shall constitute a majority
and a quorum. If at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum is obtained, and no further notice thereof need be
given other than by announcement at such adjourned meeting. Attendance by a
director at a meeting shall constitute a waiver of notice of such meeting except
where a director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
SECTION 3.4 [RESERVED].
SECTION 3.5 VACANCIES. Except as otherwise provided by law or the
Certificate of Incorporation, in the case of any increase in the authorized
number of directors or of any vacancy in the Board of Directors, however
created, the additional director or directors may be elected, or, as the case
may be, the vacancy or vacancies may be filled by majority vote of the directors
remaining on the whole Board of Directors although less than a quorum, or by a
sole remaining director. In the event one or more directors shall resign,
effective at a future date, such vacancy or vacancies shall be filled by a
majority of the directors who will remain on the whole Board of Directors,
although less than a quorum, or by a sole remaining director. Any director
elected or chosen as provided herein shall serve until the sooner of (i) the
unexpired term of the directorship to which he is appointed or (ii) until his
successor is elected and qualified; or (iii) until his earlier resignation or
removal.
SECTION 3.6 RESIGNATIONS. A director may resign at any time upon written
notice of resignation to the Corporation. Any resignation shall be effective
immediately unless a certain effective date is specified therein, in which event
it will be effective upon such date and acceptance of any resignation shall not
be necessary to make it effective.
SECTION 3.7 REMOVALS. Any director or the entire Board of Directors may be
removed, with or without cause, and another person or persons may be elected to
serve for the remainder of his or their term by the holders of a majority of the
shares of the Corporation entitled to vote in the election of directors. In case
any vacancy so created shall not be filled
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by the Stockholders at such meeting, such vacancy may be filled by the directors
as provided in Section 3.5.
SECTION 3.8 ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held, if a quorum be present, immediately following each annual meeting
of the Stockholders at the place such meeting of Stockholders took place, for
the purpose of organization and transaction of any other business that might be
transacted at a regular meeting thereof, and no notice of such meeting shall be
necessary. If a quorum is not present, such annual meeting may be held at any
other time or place that may be specified in a notice given in the manner
provided in Section 3.10 for special meetings of the Board of Directors or in a
waiver of notice thereof.
SECTION 3.9 REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such places and times as shall be determined from time
to time by resolution of the Board of Directors. Except as otherwise provided by
law, any business may be transacted at any regular meeting of the Board of
Directors.
SECTION 3.10 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called (i) by any two directors, (ii) by the President, or (iii) by the
Secretary on the written request of one-third (1/3) of the members of the whole
Board of Directors stating the purpose or purposes of such meeting. Notices of
special meetings, if mailed, shall be mailed to each director not later than two
(2) days before the day the meeting is to be held or if otherwise given in the
manner permitted by the Bylaws, not later than the day before such meeting.
Neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in any notice or written waiver of notice unless so
required by the Certificate of Incorporation or by the Bylaws and, unless
limited by law, the Certificate of Incorporation or by these Bylaws, any and all
business may be transacted at a special meeting.
SECTION 3.11 ORGANIZATION OF MEETINGS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as such Board
of Directors may from time to time determine, and all matters shall be
determined by the vote of a majority of the directors present at any meeting at
which there is a quorum, except as otherwise provided by these Bylaws or
required by law.
SECTION 3.12 PLACE OF MEETINGS. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
outside the State of Delaware, at any office or offices of the Corporation, or
at any other place as they may from time to time by resolution determine.
SECTION 3.13 COMPENSATION OF DIRECTORS. Directors shall not receive any
stated salary for their services as directors, but by resolution of the Board of
Directors a fixed honorarium or fees and expenses, if any, of attendance may be
allowed for attendance at
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each meeting. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
SECTION 3.14 ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise
restricted by law, the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if prior to such action all
members of the Board of Directors or of such committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or the committee.
SECTION 3.15 PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors or of any committee thereof may participate in a meeting of
such Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting in such manner shall
constitute presence in person at such meeting.
ARTICLE IV
Committees of the Board
SECTION 4.1 MEMBERSHIP AND AUTHORITIES. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one ( 1 ) or more Directors to constitute an Executive Committee and
such other committees as the Board of Directors may determine, each of which
committees to the extent provided in said resolution or resolutions or in these
Bylaws, shall have and may exercise all the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except in those
cases where the authority of the Board of Directors is specifically denied to
the Executive Committee or such other committee or committees by law, the
Certificate of Incorporation or these Bylaws, and may authorize the seal of the
Corporation to be affixed to all papers that may require it. The designation of
an Executive Committee or other committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed upon it or him by law.
SECTION 4.2 MINUTES. Each committee designated by the Board of Directors
shall keep regular minutes of its proceedings and report the same to the Board
of Directors when required.
SECTION 4.3 VACANCIES. The Board of Directors may designate one (1) or more
of its members as alternate members of any committee who may replace any absent
or disqualified
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member at any meeting of such committee. If no alternate members have been
appointed, the committee member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. The Board of
Directors shall have the power at any time to fill vacancies in, to change the
membership of, and to dissolve, any committee.
SECTION 4.4 TELEPHONE MEETINGS. Members of any committee designated by the
Board of Directors may participate in or hold a meeting by use of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section 4.4 shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
SECTION 4.5 ACTION WITHOUT MEETING. Any action required or permitted to be
taken at a meeting of any committee designated by the Board of Directors may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the committee and filed with the minutes
of the committee proceedings. Such consent shall have the same force and effect
as a unanimous vote at a meeting.
ARTICLE V
Officers
SECTION 5.1 NUMBER AND TITLE. The elected officers of the Corporation shall
be chosen by the Board of Directors and shall be a President, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose a Chairman of the Board, who must be a Board member of the Board
of Directors, and additional Vice Presidents, Assistant Secretaries and or
Assistant Treasurers. One person may hold any two or more of these offices.
SECTION 5.2 TERM OF OFFICE; VACANCIES. So far as is practicable, all elected
officers shall be elected by the Board of Directors at the annual meeting of the
Board of Directors in each year, and except as otherwise provided in this
Article V, shall hold office until the next such meeting of the Board of
Directors in the subsequent year and until their respective successors are
elected and qualified or until their earlier resignation or removal. All
appointed officers shall hold office at the pleasure of the Board of Directors.
If any vacancy shall occur in any office, the Board of Directors may elect or
appoint a successor to fill such vacancy for the remainder of the term.
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SECTION 5.3 REMOVAL OF ELECTED OFFICERS. Any elected officer may be removed
at any time, with or without cause, by affirmative vote of a majority of the
whole Board of Directors, at any regular meeting or at any special meeting
called for such purpose.
SECTION 5.4 RESIGNATIONS. Any officer may resign at any time upon written
notice of resignation to the President, Secretary or Board of Directors of the
Corporation. Any resignation shall be effective immediately unless a date
certain is specified for it to take effect. in which event it shall be effective
upon such date, and acceptance of any resignation shall not be necessary to make
it effective, irrespective of whether the resignation is tendered subject to
such acceptance.
SECTION 5.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
shall be elected, shall preside at all meetings of the Stockholders and Board of
Directors. In addition, the Chairman of the Board shall perform whatever duties
and shall exercise all powers that are given to him by the Board of Directors.
SECTION 5.6 PRESIDENT. The President shall be the chief executive officer of
the Corporation; shall (in the absence of the Chairman of the Board, if one be
elected) preside at meetings of the Stockholders and Board of Directors; shall
be ex officio a member of all standing committees; shall have general and active
management of business of the corporation; shall implement the general
directives, plans and policies formulated by the Board of Directors; and shall
further have such duties, responsibilities and authorities as may be assigned to
him by the Board of Directors. He may sign, with any other proper officer,
certificates for shares of the Corporation and any deeds, bonds, mortgages,
contracts and other documents which the Board of Directors has authorized to be
executed, except where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors or these Bylaws, to some other officer or agent of the
Corporation. In the absence of the President, his duties shall be performed and
his authority may be exercised by a Vice President of the Corporation as may
have been designated by the President with the right reserved to the Board of
Directors to designate or supersede any designation so made.
SECTION 5.7 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have
such powers and duties as may be assigned to him by these Bylaws, any of the
powers and duties coextensively with the Treasurer as provided in Section 5.11,
and as may from time to time be assigned to him by the Board of Directors and
may sign, with any other proper officer, certificates for shares of the
Corporation.
SECTION 5.8 VICE PRESIDENT. The Vice President shall have such powers and
duties as may be assigned to him by these Bylaws, and as may from time to time
be assigned to him by the Board of Directors and may sign, with any other proper
officer, certificates for shares of the Corporation.
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SECTION 5.9 SECRETARY. The Secretary, if available, shall attend all
meetings of the Board of Directors and all meetings of the Stockholders and
record the proceedings of the meetings in a book to be kept for that purpose and
shall perform like duties for any committee of the Board of Directors as shall
designate him to serve. He shall give, or cause to be given, notice of all
meetings of the Stockholders and meetings of the Board of Directors and
committees thereof and shall perform such other duties incident to the office of
secretary or as may be prescribed by the Board of Directors or the President,
under whose supervision he shall be. He shall have custody of the corporate seal
of the Corporation and he, or any Assistant Secretary, or any other person whom
the Board of Directors may designate, shall have authority to affix the same to
any instrument requiring it, and when so affixed it may be attested by his
signature or by the signature of any Assistant Secretary or by the signature of
such other person so affixing such seal.
SECTION 5.10 ASSISTANT SECRETARIES. Each Assistant Secretary shall have the
usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the
President or the Secretary. The Assistant Secretary or such other person as may
be designated by the President shall exercise the powers of the Secretary during
that officer's absence or inability to act.
SECTION 5.11 TREASURER. The Treasurer shall have the custody of and be
responsible for the corporate funds and securities, shall keep full and accurate
accounts of receipts and disbursements in the books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. He shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the Corporation and
he shall perform all other duties incident to the position of Treasurer, or as
may be prescribed by the Board of Directors or the President. If required by the
Board of Directors, he shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
SECTION 5.12 ASSISTANT TREASURERS. Each Assistant Treasurer shall have the
usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the
President or the Treasurer. The Assistant Treasurer or such other person
designated by the President shall exercise the power of the Treasurer during
that officer's absence or inability to act.
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SECTION 5.13 SUBORDINATE OFFICERS. The Board of Directors may (a) appoint
such other subordinate officers and agents as it shall deem necessary who shall
hold their offices for such terms, have such authority and perform such duties
as the Board of Directors may from time to time determine, or (b) delegate to
any committee or officer the power to appoint any such subordinate officers or
agents.
SECTION 5.14 SALARIES AND COMPENSATION. The salary or other compensation of
officers shall be fixed from time to time by the Board of Directors. The Board
of Directors may delegate to any committee or officer the power to fix from time
to time the salary or other compensation of subordinate officers and agents
appointed in accordance with the provisions of Section 5.12.
ARTICLE VI
Indemnification
SECTION 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was, at any time prior to or during which this
Article VI is in effect, a director, officer, employee or agent of the
Corporation, or is or was, at any time prior to or during which this Article VI
is in effect, serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan against reasonable expenses (including
attorneys' fees), judgments, fines, penalties, amounts paid in settlement and
other liabilities actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalents shall not, of itself, create a
presumption that such person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was, at any time prior to or during
which this Article VI is in effect, a director, officer, employee or agent of
the Corporation, or is or was, at any time prior to or during
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which this Article VI is in effect, serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees), actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; provided, that no indemnification shall be made
under this sub-section (b) in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the Corporation unless and
only to the extent that the Delaware Court of Chancery, or other court of
appropriate jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity of such expenses which the
Delaware Court of Chancery, or other court of appropriate jurisdiction, shall
deem proper.
(c) Any indemnification under sub-sections (a) or (b) (unless ordered by the
Delaware Court of Chancery or other court of appropriate jurisdiction) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of such person is proper in the circumstances
because he has met the applicable standard of conduct set forth in sub-sections
(a) and (b) . Such determination shall be made ( 1) by the Board of Directors by
a majority vote of a quorum consisting of directors not parties to such action,
suit or proceeding; or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel, in written opinion, selected by the Board of Directors; or (3) by the
Stockholders. In the event a determination is made under this sub-section (c)
that the director, officer, employee or agent has met the applicable standard of
conduct as to some matters but not as to others, amounts to be indemnified may
be reasonably prorated.
(d) Expenses incurred by a person who is or was a director or officer of the
Corporation in appearing at, participating in or defending any threatened,
pending or completed action, suit or proceeding. whether civil, criminal,
administrative or investigative, shall be paid by the Corporation at reasonable
intervals in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized by this Article VI.
(e) If a claim under this Article VI is not paid in full by the Corporation
within ninety days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to
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indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors; independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(f) It is the intention of the Corporation to indemnify the persons
referred to in this Article VI to the fullest extent permitted by law and with
respect to any action, suit or proceeding arising from events which occur at any
time prior to or during which this Article VI is in effect. The indemnification
and advancement of expenses provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be or become entitled under any law, the Certificate
of Incorporation, these Bylaws, agreement, the vote of Stockholders or
disinterested directors or otherwise, or under any policy or policies of
insurance purchased and maintained by the Corporation on behalf of any such
person, both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(g) The provisions of this Article VI are contract rights which (i) are for
the benefit of, and may be enforced by, each director or officer of the
Corporation the same as if set forth in their entirety in a written instrument
duly executed and delivered by the Corporation and each such director or officer
and (ii) constitute a continuing offer to all present and future directors or
officers of the Corporation. The Corporation, by its adoption of these Bylaws,
(i) acknowledges and agrees that each present and future director or officer of
the Corporation has relied upon and will continue to rely upon the provisions of
this Article VI in becoming, and serving as, a director or officer of the
Corporation or, if requested by the Corporation, a director, officer, employee,
agent, trustee or the like of another corporation or other enterprise, (ii)
waives reliance upon, and all notices of acceptance of, such provisions by such
directors or officers and (iii) acknowledges and agrees that no present or
future director or officer of the Corporation shall be prejudiced in his right
to enforce the provisions of this Article VI in accordance wit their terms by
any act or failure to act on the part of the Corporation. No amendment,
modification or repeal of this Article VI or any provision thereof shall in any
manner terminate, reduce or impair the right of any past, present or future
director or officer of the Corporation to be indemnified or advanced expenses by
the Corporation, nor the obligation of the Corporation to indemnify or advance
expenses to any such director or officer under and in accordance with the
provision of this Article VI as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior
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to such amendment, modification or repeal, regardless of when such claim may
arise or be asserted. The provision of this Article VI shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of
each director or officer of the Corporation and his or her heirs, legal
representatives and assigns.
(h) The indemnification provided by this Article VI shall be subject to all
valid and applicable laws, and, in the event this Article VI or any of the
provisions hereof or the indemnification contemplated hereby are found to be
inconsistent with or contrary to any such valid laws, the latter shall be deemed
to control and this Article VI shall be regarded as modified accordingly, and,
as so modified, to continue in full force and effect.
ARTICLE VII
Capital Stock
SECTION 7.1 CERTIFICATES OF STOCK. Certificates of stock shall be issued to
each Stockholder certifying the number of shares owned by him in the Corporation
and shall be in a form not inconsistent with the Certificate of Incorporation
and as approved by the Board of Directors. The certificates shall be signed by
the Chairman of the Board, the President or a Vice President and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer
and may be sealed with the seal of the Corporation or a facsimile thereof. Any
or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
If the Corporation shall be authorized to issue more than one (1) class of
stock or more than one (1) series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided by statute, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each Stockholder who so requests the
powers, designations. preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and or rights.
SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have
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been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the owner of such certificate, or his legal representative. When authorizing the
issuance of a new certificate, the Board of Directors may in its discretion, as
a condition precedent to the issuance thereof, require the owner, or his legal
representative, to give a bond in such form and substance with such surety as it
may direct, to indemnify the Corporation against any claim that may be made on
account of the alleged loss, theft or destruction of such certificate or the
issuance of such new certificate.
SECTION 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR
CERTAIN PURPOSES.
(a) In order that the Corporation may determine the Stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of capital stock or for the purpose of any other lawful action, the
Board of Directors may fix, in advance, a record date, which shall not be more
than sixty (60) days prior to the date of payment of such dividend or other
distribution or allotment of such rights or the date when any such rights in
respect of any change, conversion or exchange of stock may be exercised or the
date of such other action. In such a case, only Stockholders of record on the
date so fixed shall be entitled to receive any such dividend or other
distribution or allotment of rights or to exercise such rights or for any other
purpose, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
(b) If no record date is fixed, the record date for determining
Stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 7.4 DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, if any, and except as otherwise provided by law, the directors
may declare dividends upon the capital stock of the Corporation as and when they
deem it to be expedient. Such dividends may be paid in cash, in property or in
shares of the Corporation's capital stock. Before declaring any dividend there
may be set apart out of the funds of the Corporation available for dividends,
such sum or sums as the directors from time to time in their discretion think
proper for working capital or as a reserve fund to meet contingencies or for
equalizing dividends, or for such other purposes as the directors shall think
conducive to the interests of the Corporation and the directors may modify or
abolish any such reserve in the manner in which it was created.
SECTION 7.5 REGISTERED STOCKHOLDERS. Except as expressly provided by law,
the Certificate of Incorporation and these Bylaws, the Corporation shall be
entitled to treat registered Stockholders as the only holders and owners in fact
of the shares standing in their respective names and the Corporation shall not
be bound to recognize any equitable or other
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claim to or interest in such shares on the part of any other person, regardless
of whether it shall have express or other notice thereof.
SECTION 7.6 TRANSFER OF STOCK. Transfers of shares of the capital stock of
the Corporation shall be made only on the books of the Corporation by the
registered owners thereof, or by their legal representatives or their duly
authorized attorneys. Upon any such transfers the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock transfer books and ledgers, by whom they shall be cancelled and new
certificates shall thereupon be issued.
ARTICLE VIII
Miscellaneous Provisions
SECTION 8.1 CORPORATE SEAL. If one be adopted, the corporate seal shall have
inscribed thereon the name of the Corporation and shall be in such form as may
be approved by the Board of Directors. Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.
SECTION 8.2 FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 8.3 CHECKS, DRAFTS, NOTES. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner as shall from time to time be
determined by resolution (whether general or special) of the Board of Directors
or may be prescribed by any officer or officers, or any officer and agent
jointly, thereunto duly authorized by the Board of Directors.
SECTION 8.4 NOTICE AND WAIVER OF NOTICE. Whenever notice is required to be
given to any director or Stockholder under the provisions of applicable law, the
Certificate of Incorporation or of these Bylaws it shall not be construed to
only mean personal notice, rather, such notice may also be given in writing, by
mail, addressed to such director or Stockholder at his address as it appears on
the records of the Corporation, with postage thereon prepaid (unless prior to
the mailing of such notice he shall have filed with the Secretary of the
Corporation a written request that notices intended for him be mailed to some
other address in which case, such notice shall be mailed to the address
designated in the request), and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram, cable, facsimile transmission or other
form of recorded communication, by personal delivery or by telephone. Whenever
notice is required to be given under any provision of law, the Certificate of
Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable,
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facsimile transmission or other form of recorded communication, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at
a meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting at the beginning
of the meeting, to the transaction of any business on the ground that the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Stockholders, directors,.or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these Bylaws.
SECTION 8.5 EXAMINATION OF BOOKS AND RECORDS. The Board of Directors shall
determine from time to time whether, and if allowed, when and under what
conditions and regulations the accounts and books of the Corporation (except
such as may by statute be specifically opened to inspection) or any of them
shall be open to inspection by the Stockholders, and the Stockholders rights in
this respect are and shall be restricted and limited accordingly.
SECTION 8.6 VOTING UPON SHARES HELD BY THE CORPORATION. Unless otherwise
provided by law or by the Board of Directors, the Chairman of the Board of
Directors, if one shall be elected, or the President, if a Chairman of the Board
of Directors shall not be elected, acting on behalf of the Corporation, shall
have full power and authority to attend and to act and to vote at any meeting of
Stockholders of any corporation in which the Corporation may hold stock and, at
any such meeting, shall possess and may exercise any and all of the rights and
powers incident to the ownership of such stock which, as the owner thereof, the
Corporation might have possessed and exercised, if present. The Board of
Directors by resolution from time to time may confer like powers upon any person
or persons.
ARTICLE IX
Amendments
SECTION 9.1 AMENDMENT. Except as otherwise expressly provided in the
Certificate of Incorporation, the directors, by the affirmative vote of a
majority of the entire Board of Directors and without the assent or vote of the
Stockholders, may at any meeting, provided the substance of the proposed
amendment shall have been stated in the notice of the meeting, make, repeal,
alter, amend or rescind any of these Bylaws. The Stockholders shall not make,
repeal, alter, amend or rescind any of the provisions of these Bylaws except by
the holders of not less than a majority of the total voting power of all shares
of stock of the Corporation entitled to vote in the election of directors,
considered for purposes of this Article IX as one class, or as otherwise
provided in the Certificate of Incorporation.
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EXHIBIT 3.17
AMENDED AND RESTATED
BYLAWS
OF
JETFAX, INC.
Amended and Restated as of February 19, 1997
<PAGE>
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I - Offices......................................................... 1
Section 1.1 Principal Office....................................... 1
Section 1.2 Registered Office...................................... 1
Section 1.3 Other Offices.......................................... 1
ARTICLE II - Stockholders' Meetings........................................... 1
Section 2.1 Annual Meeting......................................... 1
Section 2.2 Special Meetings....................................... 1
Section 2.3 Notice of Meetings and Adjourned Meetings.............. 2
Section 2.4 Voting Lists........................................... 2
Section 2.5 Quorum................................................. 2
Section 2.6 Organization........................................... 3
Section 2.7 Voting................................................. 3
Section 2.8 Stockholders Entitled to Vote.......................... 3
Section 2.9 Order of Business...................................... 4
Section 2.10 Advance Notice of Stockholder Nominees................. 4
Section 2.11 Advance Notice of Stockholder Business................. 4
ARTICLE III - Directors....................................................... 4
Section 3.1 Management............................................. 4
Section 3.2 Number and Term........................................ 4
Section 3.3 Quorum and Manner of Action............................ 4
Section 3.4 Series A Preferred Stock Director Voting Rights........ 5
Section 3.5 Vacancies.............................................. 5
Section 3.6 Resignations........................................... 5
Section 3.7 Removals............................................... 5
Section 3.8 Annual Meetings........................................ 5
Section 3.9 Regular Meetings....................................... 6
Section 3.10 Special Meetings....................................... 6
Section 3.11 Organization of Meetings............................... 6
Section 3.12 Place of Meetings...................................... 6
Section 3.13 Compensation of Directors.............................. 6
Section 3.14 Action by Unanimous Written Consent.................... 6
Section 3.15 Participation in Meetings by Telephone................. 7
ARTICLE IV - Committees of the Board.......................................... 7
Section 4.1 Membership and Authorities............................. 7
Section 4.2 Minutes................................................ 7
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.3 Vacancies.............................................. 7
Section 4.4 Telephone Meetings..................................... 7
Section 4.5 Action Without Meeting................................. 8
ARTICLE V - Officers.......................................................... 8
Section 5.1 Number and Title....................................... 8
Section 5.2 Term of Office; Vacancies.............................. 8
Section 5.3 Removal of Elected Officers............................ 8
Section 5.4 Resignations........................................... 8
Section 5.5 The Chairman of the Board.............................. 9
Section 5.6 President.............................................. 9
Section 5.7 Chief Financial Officer................................ 9
Section 5.8 Vice President......................................... 9
Section 5.9 Secretary.............................................. 9
Section 5.10 Assistant Secretaries.................................. 10
Section 5.11 Treasurer.............................................. 10
Section 5.12 Assistant Treasurers................................... 10
Section 5.13 Subordinate Officers................................... 10
Section 5.14 Salaries and Compensation.............................. 10
ARTICLE VI - Indemnification.................................................. 11
Section 6.1 Indemnification of Directors and Officers.............. 11
ARTICLE VII - Capital Stock................................................... 14
Section 7.1 Certificates of Stock.................................. 14
Section 7.2 Lost Certificates...................................... 14
Section 7.3 Fixing Date for Determination of Stockholders of Record
for Certain Purposes................................... 14
Section 7.4 Dividends.............................................. 15
Section 7.5 Registered Stockholders................................ 15
Section 7.6 Transfer of Stock...................................... 15
ARTICLE VIII - Miscellaneous Provisions....................................... 16
Section 8.1 Corporate Seal......................................... 16
Section 8.2 Fiscal Year............................................ 16
Section 8.3 Checks, Drafts, Notes.................................. 16
Section 8.4 Notice and Waiver of Notice............................ 16
Section 8.5 Examination of Books and Records....................... 17
Section 8.6 Voting Upon Shares Held by the Corporation............. 17
ARTICLE IX - Amendments....................................................... 17
Section 9.1 Amendment.................................................... 17
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JETFAX, INC.
AMENDED AND RESTATED
B Y L A W S
ARTICLE I
Offices
SECTION 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall
be in the City of Menlo Park, California .
SECTION 1.2 REGISTERED OFFICE. The registered office of the Corporation
required to be maintained in the State of Delaware by the General Corporation
Laws of the State of Delaware, may be, but need not be, identical with the
Corporation's principal office, and the address of the registered office may be
changed from time to time by the Board of Directors.
SECTION 1.3 OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders' Meetings
SECTION 2.1 ANNUAL MEETING. The annual meeting of the holders of shares of
each class or series of stock as are entitled to notice thereof and to vote
thereat pursuant to applicable law and the Certificate of Incorporation for the
purpose of electing directors and transacting such other proper business as may
come before it shall be held in each year, commencing with the year 1989, at
such time, on such day and at such place, within or without the State of
Delaware, as may be designated by the Board of Directors.
SECTION 2.2 SPECIAL MEETINGS. A special meeting of the Stockholders may be
called at any time by the Board of Directors, or by the Chairman of the Board,
or by the President. No other person or persons are permitted to call a special
meeting. No business may be conducted at a special meeting other than the
business brought before the meeting by the Board of Directors or the Chairman of
the Board or the President.
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SECTION 2.3 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as otherwise
provided by law, written notice of any meeting of Stockholders shall be given
either by personal delivery or by mail to each Stockholder of record entitled to
vote thereat. Notice of each meeting shall be in such form as is approved by the
Board of Directors and shall state the date, place and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, such written notice shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. Except when a Stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
on the ground that the meeting is not lawfully called or convened, presence in
person or by proxy of a Stockholder shall constitute a waiver of notice of such
meeting. Further, a written waiver of any notice required by law or by these
Bylaws, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Except as otherwise
provided by law, the business that may be transacted at any such meeting shall
be limited to and consist of the purpose or purposes stated in such notice. If a
meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder of record entitled to vote at the meeting.
SECTION 2.4 VOTING LISTS. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten (10) days
before each meeting of the Stockholders, a complete list of Stockholders
entitled to vote at such meeting or any adjournment thereof? arranged in
alphabetical order with the address of each and the number of shares held by
each, which list, for a period of ten (10) days prior to such meeting, shall be
kept on file either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held, and such list shall be
subject to inspection by and Stockholders at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any Stockholder for the
duration of the meeting. The original stock transfer books shall be prima-facie
evidence as to who are the Stockholders entitled to examine such list or
transfer books or to vote at any meeting of Stockholders.
SECTION 2.5 QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the Corporation's
stock issued and outstanding and entitled to vote at a meeting, present in
person or represented by proxy, without regard to class or series, shall
constitute a quorum at all meetings of the Stockholders for the transaction of
business. If, however, such quorum shall not be present or represented at any
meeting of the Stockholders, the holders of a majority of such shares of stock,
present in person or represented by proxy, may adjourn any meeting from time to
time without notice other than announcement at the meeting, except as otherwise
required by these Bylaws, until
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a quorum shall be present or represented. At any such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
SECTION 2.6 ORGANIZATION. Meetings of the Stockholders shall be presided
over by the Chairman of the Board of Directors, if one shall be elected, or in
his absence, by the President or by any Vice President, or, in the absence of
any of such officers, by a chairman to be chosen by a majority of the
Stockholders entitled to vote at the meeting who are present in person or by
proxy. The Secretary, or, in his absence, any Assistant Secretary or any person
appointed by the individual presiding over the meeting, shall act as secretary
at meetings of the Stockholders.
SECTION 2.7 VOTING. Each Stockholder of record, as determined pursuant to
Section 2.8, who is entitled to vote in accordance with the terms of the
Certificate of Incorporation and in accordance with the provisions of these
Bylaws, shall be entitled to one vote, in person or by proxy, for each share of
stock registered in his name on the books of the Corporation. Every Stockholder
entitled to vote at any Stockholders' meeting may authorize another person or
persons to act for him by proxy duly appointed by instrument in writing
subscribed by such Stockholder and executed not more than three (3) years prior
to the meeting, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
so long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A Stockholder's attendance at any meeting, when such
Stockholder who may have theretofore given a proxy, shall not have the effect of
revoking such proxy unless such Stockholder shall in writing so notify the
Secretary of the meeting prior to the voting of the proxy. Unless otherwise
provided by law, no vote on the election of directors or any question brought
before the meeting need be by ballot unless the chairman of the meeting shall
determine that it shall be by ballot or the holders of a majority of the shares
of stock present in person or by proxy and entitled to participate in such vote
shall so demand. In a vote by ballot, each ballot shall state the number of
shares voted and the name of the Stockholder or proxy voting. Except as
otherwise provided by law, by the Certificate of Incorporation or these Bylaws,
all elections of directors and all other matters before the Stockholders shall
be decided by the vote of the holders of a majority of the shares of stock
present in person or by proxy at the meeting and entitled to vote in the
election or on the question. In the election of directors, votes may not be
cumulated.
SECTION 2.8 STOCKHOLDERS ENTITLED TO VOTE. The Board of Directors may fix a
date not more than sixty (60) days nor less than ten (10) days prior to the date
of any meeting of Stockholders, or, in the case of corporate action by written
consent in accordance with the terms of Section 2.10, not more than sixty (60)
days prior to such action, as a record date for the determination of the
Stockholders entitled to notice of and to vote at such meeting and any
adjournment thereof, or to act by written consent, and in such case such
Stockholders and only such Stockholders as shall be Stockholders of record on
the date so fixed shall be
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entitled to notice of and to vote at, such meeting and any adjournment thereof,
or to act by written consent, as the case may be, notwithstanding any transfer
of any stock on the books of the Corporation after such record date fixed as
aforesaid.
SECTION 2.9 ORDER OF BUSINESS. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting.
SECTION 2.10 ADVANCE NOTICE OF STOCKHOLDER NOMINEES. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of Stockholders by or at the discretion of the Board of Directors or by
any Stockholder of the Corporation entitled to vote in the election of directors
at the meeting who complies with the notice procedures set forth in this
Section. Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a Stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than twenty (20) days nor more than sixty (60) days prior
to the meeting; provided, however, that in the event less than thirty (30) days
notice or prior public disclosure of the date of the meeting is given or made to
Stockholders, notice by the Stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such Stockholder's notice shall set forth (a) as to each person, if any,
whom the Stockholder proposes to nominate for election or re-election as a
director: (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, (iv) any other information relating to such person that is required
by law to be disclosed in solicitations of proxies that is required by law to be
disclosed in solicitations of proxies for election of directors, and (v) such
person's written consent to being named as a nominee and to serving as a
director if elected; and (b) as to the Stockholder giving the notice: (i) the
name and address, as they appear on the Corporation's books, of such
Stockholder, and (ii) the class and number of shares of the Corporation which
are beneficially owned by such Stockholder, and (iii) a description of all
arrangements or understandings between such Stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the
nomination. At the request of the Board of Directors any person nominated by
the Board for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in the Stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section. The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting and
the defective nomination shall be disregarded.
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SECTION 2.11 ADVANCE NOTICE OF STOCKHOLDER BUSINESS. At the annual meeting
of the Stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be: (a) as specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
Stockholder. Business to be brought before an annual meeting by a Stockholder
shall not be considered properly brought if the Stockholder has not given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
Stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than twenty (20) nor
more than sixty (60) days prior to the meeting; provided, however, that in the
event that less than thirty (30) days notice or prior public disclosure of the
date of the meeting is given or made to Stockholders, notice by the Stockholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A Stockholder's notice to
the Secretary shall set forth as to each matter the Stockholder proposes to
bring before the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address of the Stockholder
proposing such business, (iii) the class and number of shares of the
Corporation, which are beneficially owned by the Stockholder, (iv) any material
interest of the Stockholder in such business, and (v) any other information that
is required by law to be provided by the Stockholder in his capacity as a
proponent of a Stockholder proposal. Notwithstanding anything in these Bylaws to
the contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section. The chairman of the
annual meeting shall, if the facts warrant, determine and declare at the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of this Section, and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
ARTICLE III
Directors
SECTION 3.1 MANAGEMENT. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all powers of the Corporation and do all lawful acts and
things as are not by law, by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the Stockholders.
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SECTION 3.2 NUMBER AND TERM. The number of directors shall consist of eight
(8) members who shall be elected annually by the Stockholders. Directors need
not be Stockholders. No decrease in the number of directors shall have the
effect of shortening the term of office of any incumbent director.
SECTION 3.3 QUORUM AND MANNER OF ACTION. At all meetings of the Board of
Directors a majority of the total number of directors holding office shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
law, by the Certificate of Incorporation or these Bylaws. When the Board of
Directors consists of one director, the one director shall constitute a majority
and a quorum. If at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum is obtained, and no further notice thereof need be
given other than by announcement at such adjourned meeting. Attendance by a
director at a meeting shall constitute a waiver of notice of such meeting except
where a director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
SECTION 3.4 [RESERVED].
SECTION 3.5 VACANCIES. Except as otherwise provided by law or the
Certificate of Incorporation, in the case of any increase in the authorized
number of directors or of any vacancy in the Board of Directors, however
created, the additional director or directors may be elected, or, as the case
may be, the vacancy or vacancies may be filled by majority vote of the directors
remaining on the whole Board of Directors although less than a quorum, or by a
sole remaining director. In the event one or more directors shall resign,
effective at a future date, such vacancy or vacancies shall be filled by a
majority of the directors who will remain on the whole Board of Directors,
although less than a quorum, or by a sole remaining director. Any director
elected or chosen as provided herein shall serve until the sooner of (i) the
unexpired term of the directorship to which he is appointed or (ii) until his
successor is elected and qualified; or (iii) until his earlier resignation or
removal.
SECTION 3.6 RESIGNATIONS. A director may resign at any time upon written
notice of resignation to the Corporation. Any resignation shall be effective
immediately unless a certain effective date is specified therein, in which event
it will be effective upon such date and acceptance of any resignation shall not
be necessary to make it effective.
SECTION 3.7 REMOVALS. Any director or the entire Board of Directors may be
removed, with or without cause, and another person or persons may be elected to
serve for the remainder of his or their term by the holders of a majority of the
shares of the Corporation entitled to vote in the election of directors. In case
any vacancy so created shall not be filled
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by the Stockholders at such meeting, such vacancy may be filled by the directors
as provided in Section 3.5.
SECTION 3.8 ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held, if a quorum be present, immediately following each annual meeting
of the Stockholders at the place such meeting of Stockholders took place, for
the purpose of organization and transaction of any other business that might be
transacted at a regular meeting thereof, and no notice of such meeting shall be
necessary. If a quorum is not present, such annual meeting may be held at any
other time or place that may be specified in a notice given in the manner
provided in Section 3.10 for special meetings of the Board of Directors or in a
waiver of notice thereof.
SECTION 3.9 REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such places and times as shall be determined from time
to time by resolution of the Board of Directors. Except as otherwise provided by
law, any business may be transacted at any regular meeting of the Board of
Directors.
SECTION 3.10 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called (i) by any two directors, (ii) by the President, or (iii) by the
Secretary on the written request of one-third (1/3) of the members of the whole
Board of Directors stating the purpose or purposes of such meeting. Notices of
special meetings, if mailed, shall be mailed to each director not later than two
(2) days before the day the meeting is to be held or if otherwise given in the
manner permitted by the Bylaws, not later than the day before such meeting.
Neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in any notice or written waiver of notice unless so
required by the Certificate of Incorporation or by the Bylaws and, unless
limited by law, the Certificate of Incorporation or by these Bylaws, any and all
business may be transacted at a special meeting.
SECTION 3.11 ORGANIZATION OF MEETINGS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as such Board
of Directors may from time to time determine, and all matters shall be
determined by the vote of a majority of the directors present at any meeting at
which there is a quorum, except as otherwise provided by these Bylaws or
required by law.
SECTION 3.12 PLACE OF MEETINGS. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
outside the State of Delaware, at any office or offices of the Corporation, or
at any other place as they may from time to time by resolution determine.
SECTION 3.13 COMPENSATION OF DIRECTORS. Directors shall not receive any
stated salary for their services as directors, but by resolution of the Board of
Directors a fixed honorarium or fees and expenses, if any, of attendance may be
allowed for attendance at
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each meeting. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
SECTION 3.14 ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise
restricted by law, the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if prior to such action all
members of the Board of Directors or of such committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or the committee.
SECTION 3.15 PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors or of any committee thereof may participate in a meeting of
such Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting in such manner shall
constitute presence in person at such meeting.
ARTICLE IV
Committees of the Board
SECTION 4.1 MEMBERSHIP AND AUTHORITIES. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one ( 1 ) or more Directors to constitute an Executive Committee and
such other committees as the Board of Directors may determine, each of which
committees to the extent provided in said resolution or resolutions or in these
Bylaws, shall have and may exercise all the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except in those
cases where the authority of the Board of Directors is specifically denied to
the Executive Committee or such other committee or committees by law, the
Certificate of Incorporation or these Bylaws, and may authorize the seal of the
Corporation to be affixed to all papers that may require it. The designation of
an Executive Committee or other committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed upon it or him by law.
SECTION 4.2 MINUTES. Each committee designated by the Board of Directors
shall keep regular minutes of its proceedings and report the same to the Board
of Directors when required.
SECTION 4.3 VACANCIES. The Board of Directors may designate one (1) or more
of its members as alternate members of any committee who may replace any absent
or disqualified
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member at any meeting of such committee. If no alternate members have been
appointed, the committee member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. The Board of
Directors shall have the power at any time to fill vacancies in, to change the
membership of, and to dissolve, any committee.
SECTION 4.4 TELEPHONE MEETINGS. Members of any committee designated by the
Board of Directors may participate in or hold a meeting by use of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section 4.4 shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
SECTION 4.5 ACTION WITHOUT MEETING. Any action required or permitted to be
taken at a meeting of any committee designated by the Board of Directors may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the committee and filed with the minutes
of the committee proceedings. Such consent shall have the same force and effect
as a unanimous vote at a meeting.
ARTICLE V
Officers
SECTION 5.1 NUMBER AND TITLE. The elected officers of the Corporation shall
be chosen by the Board of Directors and shall be a President, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose a Chairman of the Board, who must be a Board member of the Board
of Directors, and additional Vice Presidents, Assistant Secretaries and or
Assistant Treasurers. One person may hold any two or more of these offices.
SECTION 5.2 TERM OF OFFICE; VACANCIES. So far as is practicable, all elected
officers shall be elected by the Board of Directors at the annual meeting of the
Board of Directors in each year, and except as otherwise provided in this
Article V, shall hold office until the next such meeting of the Board of
Directors in the subsequent year and until their respective successors are
elected and qualified or until their earlier resignation or removal. All
appointed officers shall hold office at the pleasure of the Board of Directors.
If any vacancy shall occur in any office, the Board of Directors may elect or
appoint a successor to fill such vacancy for the remainder of the term.
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SECTION 5.3 REMOVAL OF ELECTED OFFICERS. Any elected officer may be removed
at any time, with or without cause, by affirmative vote of a majority of the
whole Board of Directors, at any regular meeting or at any special meeting
called for such purpose.
SECTION 5.4 RESIGNATIONS. Any officer may resign at any time upon written
notice of resignation to the President, Secretary or Board of Directors of the
Corporation. Any resignation shall be effective immediately unless a date
certain is specified for it to take effect. in which event it shall be effective
upon such date, and acceptance of any resignation shall not be necessary to make
it effective, irrespective of whether the resignation is tendered subject to
such acceptance.
SECTION 5.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
shall be elected, shall preside at all meetings of the Stockholders and Board of
Directors. In addition, the Chairman of the Board shall perform whatever duties
and shall exercise all powers that are given to him by the Board of Directors.
SECTION 5.6 PRESIDENT. The President shall be the chief executive officer of
the Corporation; shall (in the absence of the Chairman of the Board, if one be
elected) preside at meetings of the Stockholders and Board of Directors; shall
be ex officio a member of all standing committees; shall have general and active
management of business of the corporation; shall implement the general
directives, plans and policies formulated by the Board of Directors; and shall
further have such duties, responsibilities and authorities as may be assigned to
him by the Board of Directors. He may sign, with any other proper officer,
certificates for shares of the Corporation and any deeds, bonds, mortgages,
contracts and other documents which the Board of Directors has authorized to be
executed, except where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors or these Bylaws, to some other officer or agent of the
Corporation. In the absence of the President, his duties shall be performed and
his authority may be exercised by a Vice President of the Corporation as may
have been designated by the President with the right reserved to the Board of
Directors to designate or supersede any designation so made.
SECTION 5.7 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have
such powers and duties as may be assigned to him by these Bylaws, any of the
powers and duties coextensively with the Treasurer as provided in Section 5.11,
and as may from time to time be assigned to him by the Board of Directors and
may sign, with any other proper officer, certificates for shares of the
Corporation.
SECTION 5.8 VICE PRESIDENT. The Vice President shall have such powers and
duties as may be assigned to him by these Bylaws, and as may from time to time
be assigned to him by the Board of Directors and may sign, with any other proper
officer, certificates for shares of the Corporation.
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SECTION 5.9 SECRETARY. The Secretary, if available, shall attend all
meetings of the Board of Directors and all meetings of the Stockholders and
record the proceedings of the meetings in a book to be kept for that purpose and
shall perform like duties for any committee of the Board of Directors as shall
designate him to serve. He shall give, or cause to be given, notice of all
meetings of the Stockholders and meetings of the Board of Directors and
committees thereof and shall perform such other duties incident to the office of
secretary or as may be prescribed by the Board of Directors or the President,
under whose supervision he shall be. He shall have custody of the corporate seal
of the Corporation and he, or any Assistant Secretary, or any other person whom
the Board of Directors may designate, shall have authority to affix the same to
any instrument requiring it, and when so affixed it may be attested by his
signature or by the signature of any Assistant Secretary or by the signature of
such other person so affixing such seal.
SECTION 5.10 ASSISTANT SECRETARIES. Each Assistant Secretary shall have the
usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the
President or the Secretary. The Assistant Secretary or such other person as may
be designated by the President shall exercise the powers of the Secretary during
that officer's absence or inability to act.
SECTION 5.11 TREASURER. The Treasurer shall have the custody of and be
responsible for the corporate funds and securities, shall keep full and accurate
accounts of receipts and disbursements in the books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. He shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the Corporation and
he shall perform all other duties incident to the position of Treasurer, or as
may be prescribed by the Board of Directors or the President. If required by the
Board of Directors, he shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
SECTION 5.12 ASSISTANT TREASURERS. Each Assistant Treasurer shall have the
usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the
President or the Treasurer. The Assistant Treasurer or such other person
designated by the President shall exercise the power of the Treasurer during
that officer's absence or inability to act.
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SECTION 5.13 SUBORDINATE OFFICERS. The Board of Directors may (a) appoint
such other subordinate officers and agents as it shall deem necessary who shall
hold their offices for such terms, have such authority and perform such duties
as the Board of Directors may from time to time determine, or (b) delegate to
any committee or officer the power to appoint any such subordinate officers or
agents.
SECTION 5.14 SALARIES AND COMPENSATION. The salary or other compensation of
officers shall be fixed from time to time by the Board of Directors. The Board
of Directors may delegate to any committee or officer the power to fix from time
to time the salary or other compensation of subordinate officers and agents
appointed in accordance with the provisions of Section 5.12.
ARTICLE VI
Indemnification
SECTION 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was, at any time prior to or during which this
Article VI is in effect, a director, officer, employee or agent of the
Corporation, or is or was, at any time prior to or during which this Article VI
is in effect, serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan against reasonable expenses (including
attorneys' fees), judgments, fines, penalties, amounts paid in settlement and
other liabilities actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalents shall not, of itself, create a
presumption that such person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was, at any time prior to or during
which this Article VI is in effect, a director, officer, employee or agent of
the Corporation, or is or was, at any time prior to or during
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which this Article VI is in effect, serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees), actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; provided, that no indemnification shall be made
under this sub-section (b) in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the Corporation unless and
only to the extent that the Delaware Court of Chancery, or other court of
appropriate jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity of such expenses which the
Delaware Court of Chancery, or other court of appropriate jurisdiction, shall
deem proper.
(c) Any indemnification under sub-sections (a) or (b) (unless ordered by the
Delaware Court of Chancery or other court of appropriate jurisdiction) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of such person is proper in the circumstances
because he has met the applicable standard of conduct set forth in sub-sections
(a) and (b) . Such determination shall be made ( 1) by the Board of Directors by
a majority vote of a quorum consisting of directors not parties to such action,
suit or proceeding; or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel, in written opinion, selected by the Board of Directors; or (3) by the
Stockholders. In the event a determination is made under this sub-section (c)
that the director, officer, employee or agent has met the applicable standard of
conduct as to some matters but not as to others, amounts to be indemnified may
be reasonably prorated.
(d) Expenses incurred by a person who is or was a director or officer of the
Corporation in appearing at, participating in or defending any threatened,
pending or completed action, suit or proceeding. whether civil, criminal,
administrative or investigative, shall be paid by the Corporation at reasonable
intervals in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized by this Article VI.
(e) If a claim under this Article VI is not paid in full by the Corporation
within ninety days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to
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indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors; independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(f) It is the intention of the Corporation to indemnify the persons
referred to in this Article VI to the fullest extent permitted by law and with
respect to any action, suit or proceeding arising from events which occur at any
time prior to or during which this Article VI is in effect. The indemnification
and advancement of expenses provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be or become entitled under any law, the Certificate
of Incorporation, these Bylaws, agreement, the vote of Stockholders or
disinterested directors or otherwise, or under any policy or policies of
insurance purchased and maintained by the Corporation on behalf of any such
person, both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(g) The provisions of this Article VI are contract rights which (i) are for
the benefit of, and may be enforced by, each director or officer of the
Corporation the same as if set forth in their entirety in a written instrument
duly executed and delivered by the Corporation and each such director or officer
and (ii) constitute a continuing offer to all present and future directors or
officers of the Corporation. The Corporation, by its adoption of these Bylaws,
(i) acknowledges and agrees that each present and future director or officer of
the Corporation has relied upon and will continue to rely upon the provisions of
this Article VI in becoming, and serving as, a director or officer of the
Corporation or, if requested by the Corporation, a director, officer, employee,
agent, trustee or the like of another corporation or other enterprise, (ii)
waives reliance upon, and all notices of acceptance of, such provisions by such
directors or officers and (iii) acknowledges and agrees that no present or
future director or officer of the Corporation shall be prejudiced in his right
to enforce the provisions of this Article VI in accordance wit their terms by
any act or failure to act on the part of the Corporation. No amendment,
modification or repeal of this Article VI or any provision thereof shall in any
manner terminate, reduce or impair the right of any past, present or future
director or officer of the Corporation to be indemnified or advanced expenses by
the Corporation, nor the obligation of the Corporation to indemnify or advance
expenses to any such director or officer under and in accordance with the
provision of this Article VI as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior
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to such amendment, modification or repeal, regardless of when such claim may
arise or be asserted. The provision of this Article VI shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of
each director or officer of the Corporation and his or her heirs, legal
representatives and assigns.
(h) The indemnification provided by this Article VI shall be subject to all
valid and applicable laws, and, in the event this Article VI or any of the
provisions hereof or the indemnification contemplated hereby are found to be
inconsistent with or contrary to any such valid laws, the latter shall be deemed
to control and this Article VI shall be regarded as modified accordingly, and,
as so modified, to continue in full force and effect.
ARTICLE VII
Capital Stock
SECTION 7.1 CERTIFICATES OF STOCK. Certificates of stock shall be issued to
each Stockholder certifying the number of shares owned by him in the Corporation
and shall be in a form not inconsistent with the Certificate of Incorporation
and as approved by the Board of Directors. The certificates shall be signed by
the Chairman of the Board, the President or a Vice President and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer
and may be sealed with the seal of the Corporation or a facsimile thereof. Any
or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
If the Corporation shall be authorized to issue more than one (1) class of
stock or more than one (1) series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided by statute, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each Stockholder who so requests the
powers, designations. preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and or rights.
SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have
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been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the owner of such certificate, or his legal representative. When
authorizing the issuance of a new certificate, the Board of Directors may in
its discretion, as a condition precedent to the issuance thereof, require the
owner, or his legal representative, to give a bond in such form and substance
with such surety as it may direct, to indemnify the Corporation against any
claim that may be made on account of the alleged loss, theft or destruction of
such certificate or the issuance of such new certificate.
SECTION 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR
CERTAIN PURPOSES.
(a) In order that the Corporation may determine the Stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of capital stock or for the purpose of any other lawful action, the
Board of Directors may fix, in advance, a record date, which shall not be more
than sixty (60) days prior to the date of payment of such dividend or other
distribution or allotment of such rights or the date when any such rights in
respect of any change, conversion or exchange of stock may be exercised or the
date of such other action. In such a case, only Stockholders of record on the
date so fixed shall be entitled to receive any such dividend or other
distribution or allotment of rights or to exercise such rights or for any other
purpose, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
(b) If no record date is fixed, the record date for determining
Stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 7.4 DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, if any, and except as otherwise provided by law, the directors
may declare dividends upon the capital stock of the Corporation as and when they
deem it to be expedient. Such dividends may be paid in cash, in property or in
shares of the Corporation's capital stock. Before declaring any dividend there
may be set apart out of the funds of the Corporation available for dividends,
such sum or sums as the directors from time to time in their discretion think
proper for working capital or as a reserve fund to meet contingencies or for
equalizing dividends, or for such other purposes as the directors shall think
conducive to the interests of the Corporation and the directors may modify or
abolish any such reserve in the manner in which it was created.
SECTION 7.5 REGISTERED STOCKHOLDERS. Except as expressly provided by law,
the Certificate of Incorporation and these Bylaws, the Corporation shall be
entitled to treat registered Stockholders as the only holders and owners in fact
of the shares standing in their respective names and the Corporation shall not
be bound to recognize any equitable or other
16
<PAGE>
claim to or interest in such shares on the part of any other person, regardless
of whether it shall have express or other notice thereof.
SECTION 7.6 TRANSFER OF STOCK. Transfers of shares of the capital stock of
the Corporation shall be made only on the books of the Corporation by the
registered owners thereof, or by their legal representatives or their duly
authorized attorneys. Upon any such transfers the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock transfer books and ledgers, by whom they shall be cancelled and new
certificates shall thereupon be issued.
ARTICLE VIII
Miscellaneous Provisions
SECTION 8.1 CORPORATE SEAL. If one be adopted, the corporate seal shall have
inscribed thereon the name of the Corporation and shall be in such form as may
be approved by the Board of Directors. Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.
SECTION 8.2 FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 8.3 CHECKS, DRAFTS, NOTES. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner as shall from time to time be
determined by resolution (whether general or special) of the Board of Directors
or may be prescribed by any officer or officers, or any officer and agent
jointly, thereunto duly authorized by the Board of Directors.
SECTION 8.4 NOTICE AND WAIVER OF NOTICE. Whenever notice is required to be
given to any director or Stockholder under the provisions of applicable law, the
Certificate of Incorporation or of these Bylaws it shall not be construed to
only mean personal notice, rather, such notice may also be given in writing, by
mail, addressed to such director or Stockholder at his address as it appears on
the records of the Corporation, with postage thereon prepaid (unless prior to
the mailing of such notice he shall have filed with the Secretary of the
Corporation a written request that notices intended for him be mailed to some
other address in which case, such notice shall be mailed to the address
designated in the request), and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram, cable, facsimile transmission or other
form of recorded communication, by personal delivery or by telephone. Whenever
notice is required to be given under any provision of law, the Certificate of
Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable,
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facsimile transmission or other form of recorded communication, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at
a meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting at the beginning
of the meeting, to the transaction of any business on the ground that the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Stockholders, directors,.or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these Bylaws.
SECTION 8.5 EXAMINATION OF BOOKS AND RECORDS. The Board of Directors shall
determine from time to time whether, and if allowed, when and under what
conditions and regulations the accounts and books of the Corporation (except
such as may by statute be specifically opened to inspection) or any of them
shall be open to inspection by the Stockholders, and the Stockholders rights in
this respect are and shall be restricted and limited accordingly.
SECTION 8.6 VOTING UPON SHARES HELD BY THE CORPORATION. Unless otherwise
provided by law or by the Board of Directors, the Chairman of the Board of
Directors, if one shall be elected, or the President, if a Chairman of the Board
of Directors shall not be elected, acting on behalf of the Corporation, shall
have full power and authority to attend and to act and to vote at any meeting of
Stockholders of any corporation in which the Corporation may hold stock and, at
any such meeting, shall possess and may exercise any and all of the rights and
powers incident to the ownership of such stock which, as the owner thereof, the
Corporation might have possessed and exercised, if present. The Board of
Directors by resolution from time to time may confer like powers upon any person
or persons.
ARTICLE IX
Amendments
SECTION 9.1 AMENDMENT. Except as otherwise expressly provided in the
Certificate of Incorporation, the directors, by the affirmative vote of a
majority of the entire Board of Directors and without the assent or vote of the
Stockholders, may at any meeting, provided the substance of the proposed
amendment shall have been stated in the notice of the meeting, make, repeal,
alter, amend or rescind any of these Bylaws. The Stockholders shall not make,
repeal, alter, amend or rescind any of the provisions of these Bylaws except by
the holders of not less than a majority of the total voting power of all shares
of stock of the Corporation entitled to vote in the election of directors,
considered for purposes of this Article IX as one class, or as otherwise
provided in the Certificate of Incorporation.
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EXHIBIT 10.1
JETFAX, INC.
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement ("Agreement") is made as of __________,
1997, by and between JETFAX, INC., a Delaware corporation (the "Company"), and
____________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or com pleted action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action or proceeding if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe Indemnitee's conduct
was unlawful. The termination of any action or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---------------
shall not, of itself, create a presumption that (i) Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably believed to be in or not
opposed to the best interests of the
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Company, or (ii) with respect to any criminal action or proceeding, Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company and its shareholders, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have been
finally adjudicated by court order or judgment to be liable to the Company in
the performance of Indemnitee's duty to the Company and its shareholders unless
and only to the extent that the court in which such action or proceeding is or
was pending shall determine upon application that, in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for expenses and then only to the extent that the court shall
determine.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action or proceeding referenced in Section
1(a) or (b) hereof (but not amounts actually paid in settlement of any such
action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or will be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the date
postmarked if sent by domestic certified or registered mail, properly addressed;
otherwise notice shall be deemed received when such notice shall actually be
received by the
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Company. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 2 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 12 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action or proceeding in advance of its final disposition)
that Indemnitee has not met the standards of conduct which make it permissible
under applicable law for the Company to indemnify Indemnitee for the amount
claimed, but the burden of proving such defense shall be on the Company and
Indemnitee shall be entitled to receive interim payments of expenses pursuant to
Subsection 2(a) unless and until such defense may be finally adjudicated by
court order or judgment from which no further right of appeal exists. It is the
parties' intention that if the Company contests Indemnitee's right to
indemnification, the question of Indemnitee's right to indemnification shall be
for the court to decide, and neither the failure of the Company (including its
Board of Directors, any committee or subgroup of the Board of Directors,
independent legal counsel, or its shareholders) to have made a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 2(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which
approval shall not be unreasonably withheld, upon the delivery to Indemnitee
of written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by
the Company, the Company will not be liable to Indemnitee under this Agreement
for any fees of counsel subsequently incurred by Indemnitee with
3
<PAGE>
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ his counsel in any such proceeding at Indemnitee's expense;
and (ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense, or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute or rule
which expands the right of a Delaware corporation to indemnify a member of its
Board of Directors, an officer or other corporate agent, such changes shall be
ipso facto, within the purview of Indemnitee's rights and Company's obligations,
under this Agreement. In the event of any change in any applicable law, statute
or rule which narrows the right of a Delaware corporation to indemnify a member
of its Board of Directors, an officer or other corporate agent, such changes, to
the extent not otherwise required by such law, statute or rule to be applied to
this Agreement shall have no effect on this Agreement or the parties' rights and
obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of shareholders or disinterested Directors, the Corporation Law of the
State of Delaware, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
5. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands
4
<PAGE>
and acknowledges that the Company has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
6. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or main tain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.
7. SEVERABILITY. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
8. EXCEPTIONS. Any other provision herein to the contrary
-----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or omissions
-------------
or transactions from which a director may not be relieved of liability under the
applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to
5
<PAGE>
indemnification under this Agreement or any other statute or law or otherwise
as required under Section 145 of the Delaware Corporation Law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors has approved the initiation or
bringing of such suit; or
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(e) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
9. CONSTRUCTION OF CERTAIN PHRASES.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a con stituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Agreement.
6
<PAGE>
10. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
12. ATTORNEYS' FEES. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all costs and expenses, including reasonable attorneys' fees, incurred
by Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
13. NOTICE. All notices, requests, demands and other communications under
-------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and acknowledged in writing as received by the addressee, on
the date of such receipt, or (ii) if mailed by domestic certified or registered
mail with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of this
Agreement, or as subsequently modified by written notice.
14. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
------------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
15. CHOICE OF LAW. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
16. SUBROGATION. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable to
corporation effectively to bring suit to enforce such rights.
17. CONTINUATION OF INDEMNIFICATION. All agreements and obligations of
-------------------------------
the Company contained herein shall continue during the period that Indemnitee is
a director, officer or agent of the
7
<PAGE>
Company and shall continue thereafter so long as Indemnitee shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal, arbitrational, administrative or
investigative, by reason of the fact that Indemnitee was serving in the
capacity referred to herein.
18. AMENDMENT AND TERMINATION. Subject to Section 17, no amendment,
-------------------------
modification, termination or cancellation of this Agreement shall be effective
unless in writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JETFAX, INC.
By: _______________________________
Rudy Prince
President and Chief Executive Officer
Address: 1376 Willow Road
Menlo Park, CA 94025
AGREED TO AND ACCEPTED:
INDEMNITEE:
______________________________
Signature of Indemnitee
Address: ___________________
___________________
8
<PAGE>
EXHIBIT 10.2
HYBRID FAX, INC.
1989 STOCK OPTION PLAN
I. PURPOSE OF THE PLAN
The Hybrid Fax, Inc. 1989 Stock Option Plan (the "Plan") is intended to
provide a means whereby directors, key employees, consultants and advisors of
Hybrid Fax, Inc., a Delaware corporation (the "Company"), who have been or will
be given responsibility for the management or administration of the business
affairs of the Company, or provide business advice to the Company, may develop a
sense of proprietorship and personal involvement in the development and
financial success of the Company, and to encourage them to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its shareholders. Accordingly, the Company may
grant to directors, key employees, consultants and advisors ("Optionees") the
option (the "Option") to purchase shares of Common Stock, par value $.01 per
share (the "Stock"), of the Company, as hereinafter set forth.
II. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company or
such committee of members of the Board as the Board may appoint (the
"Committee"); however, if the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934 ("1934 Act"), the members of
the Committee shall be "disinterested persons" within the meaning of paragraph
(d)(3) of Rule 16b-3 which has been adopted by the Securities and Exchange
Commission under the 1934 Act, as such Rule or its equivalent is then in effect.
Committee members may resign at any time by delivering written notice to the
Board of Directors. Vacancies in the Committee, however caused, shall be filled
by the Board of Directors. The Committee shall have sole authority to select the
persons who are to be granted Options from among those eligible hereunder and to
establish the number of shares which may be issued under each Option. The
Committee is authorized to interpret the Plan and may from time-to-time adopt
such rules and regulations, not inconsistent with the provisions of the Plan, as
it may deem advisable to carry out the Plan. The Committee shall act by a
majority of its members in office and the Committee may act either by vote at a
telephonic or other meeting or by a memorandum or other written instrument
signed by all of the members of the Committee. All decisions made by the
Committee in selecting the persons to whom Options shall be granted, in
establishing the number of shares which may be issued under each Option, and in
construing the provisions of the Plan shall be final. In its absolute
discretion, the Board of Directors may at any time and from time-to-time
exercise any and all rights and duties of the Committee under the Plan.
Members of the Committee shall not receive compensation for their services as
members but all expenses and liabilities they incur in connection with the
administration of the Plan
<PAGE>
shall be borne by the Company. The Committee may employ attorneys,
consultants, accountants, appraisers, brokers or other persons. The Committee,
the Company and the officers and Directors of the Company shall be entitled to
rely upon the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Committee shall
be final and binding upon all Optionees, the Company and all others personally
liable for any action, determination or interpretation made with respect to
the Plan or the Options, and all members of the Committee shall be fully
protected by the Company with respect to any such action, determination or
interpretation.
III. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are either directors (whether
or not an employee), key employees (including officers who are also key
employees) of the Company or any parent or subsidiary corporation (as defined in
section 425 of the Internal Revenue Code of 1986 ( the "Code") of the Company at
the time the Option is granted. Options may also be granted to persons or
entities which render business or professional advice, or substantial marketing
or operational services, to the Company which, in the judgment of the Committee,
is of a material benefit to the Company. Options may be granted to the same
individual on more than one occasion. In no event shall any employee, advisor or
consultant or his legal representatives, heirs, legatees, distributees or
successors have any right to participate in the Plan except to such extent, if
any, as the Committee shall determine.
IV. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted under
the Plan shall not exceed 200,000 shares of Stock. Such shares may consist of
authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding options at the termination of the Plan shall
cease to be subject to the Plan, but until termination of the Plan, the Company
shall at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan. The aggregate number of shares
which may be issued under Options granted under the Plan shall be subject to
adjustment as provided in Paragraph VIII hereof. Exercise of an Option in any
manner shall result in a decrease in the number of shares of Stock which may
thereafter be available for purposes of the Plan by the number of shares as to
which the Option is exercised.
V. OPTION AGREEMENTS
Each Option shall be evidenced by a written agreement (an "Option Agreement")
executed by the Optionee and an authorized officer of the Company, which shall
contain such terms, conditions and restrictions, and may be exercisable at such
times and for such periods, as may be
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<PAGE>
approved by the Committee; provided, however, that no Option may be exercised
to any extent after, and every Option shall expire no later than, the
expiration of ten years and one month from the date the Option was granted.
Options that are granted shall be evidenced by Option Agreements in the form
approved by the Board. The terms, conditions and restrictions of separate
Option Agreements need not be identical.
The purchase price of Stock issued under each Option shall be determined by
the Committee and may be greater or less than the fair market value of a share
of Stock on the day of grant of the Option. For the purposes of the Plan and any
Option Agreement, the determination of the fair market value of a share of Stock
on a particular date shall be made in good faith by the Committee and such
determination shall be binding for all purposes.
The Committee may accelerate the exercisability of any Option in its sole
discretion and also may modify an outstanding Option, including reducing the
exercise price of the Option, or cancel an outstanding Option in exchange for
the grant of a new Option with such terms and conditions that are in accordance
with the Plan at the time of such grant.
VI. EXERCISE OF OPTIONS
During the lifetime of the Optionee, only the Optionee (or if incapacitated,
his duly authorized representative) may exercise an Option granted to him, or
any portion thereof. After the death of the Optionee, any exercisable portion of
an Option may, prior to the time when such portion becomes unexercisable
pursuant to Paragraph V, be exercised by his personal representative or by any
person empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
At any time and from time-to-time prior to the time when any exercisable
Option or exercisable portion thereof expires or becomes unexercisable pursuant
to Paragraph V, such exercisable Option or exercisable portion thereof may be
exercised in whole or in part; provided however, that the Company shall not be
required to issue fractional shares and the Committee may, in the Option
Agreement, require any partial exercise to be made with respect to a specified
minimum number of shares.
An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary of the Company of all of the following prior
to the time when such Option becomes unexercisable:
(a) notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion thereof, stating that such
Option or portion thereof is exercised; and
-3-
<PAGE>
(b) full payment of the option price (in cash or by check, bank draft
or money order payable to the Company or, with the consent of the
Committee, by delivery of shares of Stock with an aggregate fair market
value equal to the option price, plus cash, if necessary) for the shares
of Stock with respect to which such Option or portion thereof is thereby
exercised, together with payment or arrangement for payment of any
federal income or other tax required to be withheld by the Company with
respect to such exercise, which arrangement, with the consent of the
Committee, may include the withholding of shares of Stock acquired upon
such Option exercise; and
(c) such representations and documents as the Committee reasonably
deems necessary or advisable to effect compliance with all applicable
provisions of the Securities Act of 1933, and any other federal, state or
foreign securities laws or regulations; the Committee, in its absolute
discretion, also may take whatever additional actions it deems appropriate
to effect such compliance, including, without limitation, placing legends
on share certificates and issuing stop-transfer orders to transfer agents
and registrars; and
(d) in the event that the Option or portion thereof shall be
exercised pursuant to this Paragraph VI by any person or persons other than
the Optionee, appropriate proof of the right of such person or persons to
exercise the Option or portion thereof.
VII. TRANSFERABILITY OF OPTIONS AND STOCK
No Option or interest or right therein shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means, whether such disposition be voluntary or involuntary or by operation of
law or by judgment, levy, attachment garnishment or any other legal or equitable
proceeding (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Paragraph VII shall prevent transfers by will or by the applicable laws of
descent and distribution.
The Committee, in its absolute discretion, may impose such restrictions on the
transferability of the Stock purchasable upon the exercise of an Option as it
deems appropriate, including without limitation the right to exercise a right of
first refusal in the event of an offer to purchase the Stock from the Optionee
or any transferee of the Optionee, and any such restriction shall be set forth
or incorporated by reference in the respective Option Agreement and may be
referred to on the certificates evidencing such Stock.
VIII. RECAPITALIZATION, REORGANIZATION OR CHANGE IN CONTROL
(a) The existence of the Plan and the Options granted hereunder shall
not affect in any way the right or power of the Board of Directors or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
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<PAGE>
issue of debt or equity securities ahead of or affecting Stock or the
rights thereof, the dissolution or liquidation of the Company or any sale
or transfer of all or any part of its assets or business or any other
corporate act or proceeding.
(b) The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever, prior to
the termination of the Plan or the expiration of an Option theretofore
granted, the Company shall effect a subdivision or consolidation of
shares of Stock or the payment of a stock dividend on Stock without
receipt of consideration by the Company, the remaining shares of Stock
available under the Plan and the number of shares of Stock with respect
to which any Option may thereafter be exercised (i) in the event of an
increase in the number of outstanding shares, shall be proportionately
increased, and the purchase price per share under an outstanding Option
shall be proportionately reduced, and (ii) in the event of a reduction in
the number of outstanding shares, shall be proportionately reduced, and
the purchase price per share under an outstanding Option shall be
proportionately increased.
(c) Except as may otherwise be expressly provided in the Plan, the
issuance by the Company of shares of stock of any class or securities
convertible into shares of stock of any class for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of Stock
subject to Options theretofore granted or the purchase price per share.
(d) If the Company recapitalizes or otherwise changes its capital
structure, or merges, consolidates, sells all of its assets or dissolves
(each of the foregoing a "Fundamental Change") then thereafter upon any
exercise of an Option theretofore granted the Optionee shall be entitled to
purchase under such Option, in lieu of the number of shares of Stock as to
which such Option shall then be exercisable (but remaining subject to such
vesting requirements as are provided in the applicable Option Agreement),
the number and class of shares of stock and securities to which the
Optionee would have been entitled pursuant to the terms of the Fundamental
Change if, immediately prior to such Fundamental Change, the Optionee had
been the holder of record of the number of shares of Stock as to which such
Option is then exercisable.
(e) If (i) the Company shall not be the surviving entity in any
merger or consolidation (or survives only as a subsidiary of another
entity), (ii) the Company sells all or substantially all of its assets to
any other person or entity (other than a wholly-owned subsidiary), (iii)
any person or entity (including a "group" as contemplated by Section
13(d)(3) of the 1934 Act) acquires or gains ownership or control of
(including, without limitation, power to vote) more than 50% of the
outstanding shares of Stock, (iv) the
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<PAGE>
Company is to be dissolved and liquidated or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event in clauses (i) through (v) above
is referred to herein as a "Corporate Change"), then, effective as of a
date selected at the sole option of the Committee, which date shall be
(a) in the event of a merger, consolidation, sale of assets or
dissolution no later than a date determined by the Committee to be far
enough in advance of the date of such event to permit each Optionee to
exercise such Optionee's Options and participate therewith in such
merger, consolidation, sale of assets or dissolution or (b) in the event
of the occurrence of an event specified in clause (iii) or (v) above, no
later than thirty days after such event, the Committee (which for
purposes of the Corporate Changes described in (iii) and (v) above shall
be either the Committee as constituted prior to the occurrence of such
Corporate Change or, if no Committee had been appointed, the Board of
Director as constituted prior to the occurrence of such Corporate change)
may act in its sole discretion and election without the consent or
approval of any Optionee, to effect one or more of the following
alternatives or combination of alternatives with respect to all
outstanding Options (which alternatives may be made conditional on the
occurrence of any of the Corporate Changes specified in clause (i)
through (v) above and which may vary among individual Optionees): (l) in
the case of a Corporate Change specified in clauses (i), (ii) or (iv),
accelerate the time at which Options then outstanding may be exercised so
that such Options may be exercised in full for a limited period of time
on or before a specified date fixed by the Committee, after which
specified date all unexercised Options and all rights of Optionees
thereunder shall terminate, (2) accelerate the time at which Options then
outstanding may be exercised so that such Options may be exercised in
full for their then remaining term or (3) require the mandatory surrender
to the Company of outstanding Options held by such Optionees
(irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date, before or not later than sixty days
after such Corporate Change, specified by the Committee, and in such
event the Committee shall thereupon cancel such Options and the Company
shall pay to each Optionee an amount of cash equal to the excess of the
fair market value of the aggregate shares subject to such Option over the
aggregate option price of such shares; provided, however, the Committee
shall not select an alternative (unless consented to by the Optionee)
such that if an Optionee exercised his accelerated Options pursuant to
alternative 1 or 2 and participated in a transaction specified in clause
(i), (ii) or (iv) or received cash pursuant to alternative 3 which would
result in the Optionee's owing any money by virtue of operation of
Section 16(b) of the 1934 Act. If all such alternatives have such a
result, the Committee shall take such action, which is hereby authorized,
to put such Optionees in as close to the same position as such Optionee
would have been in had alternative 1, 2 or 3 been selected but without
resulting in any payment by such Optionee pursuant to Section 16(b) of
the 1934 Act. Notwithstanding the foregoing, (I) with the consent of the
Optionee, the Committee may in lieu of the foregoing make such provision
with respect to any Corporate Change as it deems appropriate, and (II) in
the event that a Corporate change described in clauses (i) or (ii)
occurs, but such Corporate change does not result in any effective change
in ownership, the
-6-
<PAGE>
Committee shall make such adjustments in the designation and number of
unpurchased shares subject to this Plan, the number of shares subject to
options outstanding under this Plan, the exercise price specified in
options outstanding under this plan, and such other terms and provisions
of the options outstanding under this plan as it may determine to be
appropriate and equitable.
(f) Any adjustment provided for above shall be subject to any
shareholder action required by applicable Delaware corporate law.
IX. OPTIONEE RIGHTS LIMITED
Nothing in this Plan or in any Option Agreement hereunder shall confer upon
any Optionee any right to continue in the employ of the Company or any
subsidiary or shall interfere with or restrict in any way the rights of the
Company and its subsidiaries, which are hereby expressly reserved, to discharge
any Optionee at any time for any reason whatsoever, with or without good cause.
The holders of Options shall not be, nor have any of the rights or privileges
of, shareholders of the Company in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such shares have been issued by the Company to such holders.
XI. TERM OF PLAN
The Plan shall be effective upon the date specified by the Board of Directors
in its adoption of the Plan. Except with respect to Options then outstanding, if
not sooner terminated under the other provisions hereof, the Plan shall
terminate upon and no further Options shall be granted after the expiration of
three years from the date of its adoption by the Board of Directors. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company or any subsidiary to grant or assume
options otherwise than under this Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business stock or assets of any corporation,
firm or association.
X. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors in its discretion may terminate the Plan at any time
with respect to any shares for which Options have not theretofore been granted.
The Board of Directors shall have the right to alter or amend the Plan or any
part thereof from time-to-time; provided, that no change in any Option
theretofore granted may be made which would impair the rights of the Optionee
without the consent of such Optionee; and provided, further, that the Board of
Directors
-7-
<PAGE>
of the Committee may not make any alterations or amendment which would
materially increase the benefits accruing to Optionees under the Plan, increase
the aggregate number of shares which may be issued pursuant to the provisions of
the Plan, change the class of employees eligible to receive Options under the
Plan or extend the term of the Plan, without the approval of the shareholders of
the Company.
Adopted effective as of May 1, 1989.
HYBRID FAX, INC.
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<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
JETFAX, INC.
INCENTIVE STOCK OPTION AGREEMENT
Agreement made effective the __________ day of __________, 19 __, between
JetFax, Inc., a Delaware corporation (the "Company"), and ____________________
("Optionee").
To carry out the purposes of the JetFax, Inc. 1989 Stock Option Plan (the
"Plan"), to which this Agreement is expressly subject and a copy of which is
attached hereto as Exhibit A, by affording Optionee the opportunity to purchase
shares of Common Stock, S-01 per share par value, of the Company ("Stock"), and
in consideration of the mutual agreements and other matters set forth herein and
in the Plan, the Company and Optionee hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee the right and option
(the "Option") to purchase all or any part of an aggregate of ______________
shares of Stock, on the terms and conditions set forth herein and in the Plan,
which Plan is incorporated herein by reference as a part of this Agreement. The
Option is intended to constitute an "incentive stock option" within the meaning
of section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
The Option, if not previously exercised, shall expire and not be exercisable
after ___________________ unless earlier terminated as provided below.
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant to the
exercise of the Option shall be ____________ per share which has been determined
to be not less than the fair market value of the Stock at the date of grant of
the Option. For all purposes of this Agreement, fair market value of the Stock
shall be determined in accordance with the provisions of the Plan.
3. EXERCISE OF OPTION. Subject to the earlier expiration of the Option as
herein provided, the Option may be exercised, by written notice to the Company
at its principal executive office addressed to the attention of the Secretary of
the Company, at any time and from time-to-time (including consecutive exercises
using Stock received from an immediately prior exercise to pay the exercise
price) after the date of grant hereof, such exercise to be effective at the time
of receipt of such written notice at the Company's principal executive office
during normal business hours, but
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<PAGE>
any exercise (or series of immediately successive exercises) of the Option
must be for a minimum of 100 shares of Stock and the Option shall not be
exercisable (taking into account all prior exercises) for more than a
percentage of the aggregate number of shares offered by the Option determined
by the number of full months from _________________ (the "Vesting Start Date")
to the date of such exercise, in accordance with the following schedule:
Percentage of
Number of Full Months Shares that May
From Vesting Start Date Be Purchased
- ---------------------------------- -------------------
Less than 12 Months None
After 12 Months 1/48th of the stock
for each month
employed after the
Vesting Start Date
After 48 Months All
Optionee (or the person permitted to exercise the Option in the event of
Optionee's death) shall be and have all of the rights and privileges of a
shareholder of record of the Company with respect to shares acquired upon an
exercise of the Option, effective upon such exercise. Notwithstanding anything
in this Agreement to the contrary, however, the Committee may condition the
effectiveness of any exercise notice on Optionee becoming a party to a
shareholder agreement as provided in paragraph 8.
4. PAYMENT OF EXERCISE PRICE. The purchase price of shares as to which the
Option is exercised shall be paid in full at the time of exercise (a) in cash
(by a check acceptable to the Company), or (b) with the consent of the
Committee, either by delivering to the Company shares of Stock having a fair
market value equal to the purchase price or a combination of cash and Stock.
However, no fraction of a share of Stock shall be issued by the Company upon
exercise of the Option or accepted by the Company in payment of the exercise
price thereof; rather, Optionee shall provide a cash payment and/or shares of
Stock for such amount as is necessary to effect the issuance and acceptance of
only whole shares of Stock.
5. TRANSFERABILITY. The Option evidenced hereby is not transferable
separately and may not be transferred by Optionee otherwise than by will or the
laws of descent and distribution. The Option may be exercised only by Optionee
during Optionee's lifetime and while Optionee remains an employee of the
Company, except that:
a. If Optionee's employment with the Company terminates for cause, the
Option shall immediately terminate and shall no longer be exercisable. For
purposes of this Agreement, "cause"
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<PAGE>
shall mean Optionee's willful misconduct in performance of the duties of his
employment, or Optionee's final conviction of a felony or of a misdemeanor
involving moral turpitude.
b. If Optionee's employment with the Company terminates for any reason
other than death or as provided in (a) above, the Option may be exercised by
Optionee at any time during the period of three months following such
termination (seven months if the Optionee is subject to Section 16(b) of the
Securities Exchange Act of 1934 ("Section 16(b)"), or by Optionee's estate (or
the person who acquires the Option by bequest or inheritance or by reason of the
death of Optionee) during a period of one year following Optionee's death if
Optionee dies during such three-month or seven-month period, as the case may be,
but in each case only as to the number of shares as to which Optionee was
entitled to as of the date Optionee's employment so terminates; provided that if
such termination was by reason of Optionee's total and permanent disability or
his retirement at or after age 65, the Option may be exercised in full during
such period without regard to the extent exercisable at his termination of
employment.
c. If Optionee dies while in the employ of the Company, Optionee's
estate, or the person who acquires the Option by bequest or inheritance or by
reason of the death of Optionee, may exercise the Option in full, without regard
to the extent exercisable at Optionee's death, at any time during the period of
one year following the date of Optionee's death.
6. WITHHOLDING OF TAX. To the extent that the exercise of the Option
results in compensation income to Optionee for federal or state income tax
purposes, Optionee shall pay to the Company at the time of such exercise (or
such other time as the law permits if Optionee is subject to Section 16(b)) such
amount of money (or with the consent of the Committee, either full shares of
Stock already owned by the Optionee or full shares of Stock acquired pursuant to
the exercise of the Option) as the Company may require to meet its obligation
under applicable tax laws or regulations, and, if Optionee fails to do so, the
Company is authorized to withhold from any cash remuneration then or thereafter
payable to Optionee any tax required to be withheld by reason of such resulting
compensation income or otherwise refuse to issue or transfer any shares
otherwise required to be issued pursuant to the terms hereof.
7. STATUS OF STOCK. Until the shares of Stock acquirable upon the exercise
of the Option have been registered or qualified for issuance under the
Securities Act of 1933, as amended (the "Act") and applicable state securities
laws, the Company will not issue such shares unless the Optionee provides the
Company with a written opinion of legal counsel, who shall be satisfactory to
the Company, addressed to the Company and satisfactory in form and substance to
the Company's counsel, to the effect that the proposed issuance of such shares
to the holder of the Option may be made without registration under the Act or
qualification under applicable state securities laws. If exemption from
registration or qualification under the Act and applicable state securities laws
is available upon an exercise of the Option, Optionee (or the person permitted
to exercise of this option in the event of Optionee's death or incapacity), if
requested by the Company to do so, will execute
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<PAGE>
and deliver to the Company in writing an agreement containing such provisions
as the Company may require to assure compliance with applicable securities
laws.
Unless the offering, sale and delivery of shares of Stock acquirable
upon exercise of the Option have been registered or qualified and continue to
be so at the date of exercise hereof under the Act and applicable state
securities laws, Optionee agrees that the shares of stock which Optionee
acquires by exercising the Option shall be acquired for investment without a
view to distribution, within the meaning of the Act, and shall not be sold,
transferred, assigned, pledged or hypothecated in the absence of an effective
registration statement for the shares under the Act and applicable state
securities laws or an applicable exemption from the registration or
qualification requirements of the Act and any applicable state securities
laws. Optionee also agrees that the shares of Stock which Optionee may acquire
by exercising the Option will not be sold or disposed of in any manner which
would constitute a violation of any other applicable securities laws, whether
federal or state.
In addition, Optionee agrees (A) that the certificates representing the
shares of Stock issued under this Agreement may bear such legend or legends as
the Committee deems appropriate in order to assure compliance with applicable
securities laws and/or to reflect the restrictions reflected by the agreement(s)
referred to herein, and (B) that the Company may give instruction to its
transfer agent, if any, to stop transfer of the shares of Stock issued under
this Agreement on the stock transfer records of the Company, if such proposed
transfer would in the opinion of counsel satisfactory to the Company constitute
a violation of any applicable securities law or any such agreements.
Optionee further agrees that the Option granted herein shall be subject
to the requirement that, if at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to such Option upon any securities exchange or under any state of
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue or
purchase or issuance of shares hereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
reasonably acceptable to the Board.
8. RESTRICTIONS ON STOCK. Stock acquired upon an exercise of the Option
shall be subject to the terms, conditions, rights and restrictions applicable to
Stock contained in any shareholder agreement relating to the Company to which
Optionee and the Company are parties. For this purpose, each such shareholder
agreement is incorporated herein by this reference.
9. LOCKUP AGREEMENT. Optionee agrees that for a period of 180 days
commencing with the date of any effective registration statement under the Act
relating to an offering of Stock wherein the aggregate net proceeds to the
Company and/or selling stockholders, Optionee will not dispose of any shares of
Stock received upon exercise of the Option (whether the Option is exercised
during or prior to such 180-day period).
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<PAGE>
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee. This Agreement and all actions taken shall be governed by and
construed in accordance with the laws of the State of Delaware. In the event of
conflict between this Agreement and the Plan, the terms of the Plan shall
control. The Committee shall have authority to construe the terms of this
Agreement, and the Committee's determinations shall be final and binding on
Optionee and the Company.
11. MERGER OR CONSOLIDATION. In the event of: (1) a dissolution or
liquidation of the Company; (2) a merger or consolidation in which the Company
is not the surviving corporation; or (3) a reverse merger in which the Company
is the surviving corporation but the shares of the Company's Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise then to the
extent permitted by applicable law: (i) any surviving corporation shall assume
any Options outstanding under the Plan or shall substitute similar Options for
those outstanding under the Plan, or (ii) such Options shall continue in full
force and effect. In the event any such surviving corporation refuses to assume
or continue such options, such options shall become immediately exercisable in
full (without regard to the then applicable vesting schedule) and shall
terminate, if not earlier exercised, upon the effectiveness of such event.
12. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, Optionee shall
be considered to be in the employment of the Company as long as Optionee remains
an employee of either the Company, a parent or subsidiary corporation (as
defined in section 424 of the Code) of the Company, or a corporation or a parent
or subsidiary of such corporation assuming or substituting a new agreement for
this Agreement. Any question as to whether and when there has been a termination
of such employment, for purposes of this Agreement, and the cause of such
termination, for purposes of this Agreement, shall be determined by the
Committee, and its determination shall be final.
13. DISCLAIMER. NOTHING IN THIS OPTION AGREEMENT OR THE PLAN HEREUNDER
SHALL CONFER UPON ANY OPTIONEE ANY RIGHT TO CONTINUE IN THE EMPLOY OF THE
COMPANY OR ANY SUBSIDIARY OR SHALL INTERFERE WITH OR RESTRICT IN ANY WAY THE
RIGHTS OF THE COMPANY AND ITS SUBSIDIARIES, WHICH ARE HEREBY EXPRESSLY RESERVED,
TO DISCHARGE ANY OPTIONEE AT ANY TIME FOR ANY REASON WHATSOEVER, WITH OR WITHOUT
GOOD CAUSE.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and Optionee has executed this agreement as of the day and year first
above written.
JETFAX, INC.
By:______________________________
OPTIONEE
_________________________________
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<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
---------- -----------------------
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's ancestors,
descendants, or spouse; or to a transferee by a trustee or custodian for the
account of the transferee or the transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such securities is not in
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or Subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or Subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in either
such case, such person (i) discloses to potential purchasers at the sale that
transfer of the securities is restricted under this rule, (ii) delivers to each
purchaser a copy of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification requirement by subdivision (f) of
Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
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<PAGE>
NOTICE OF EXERCISE
JetFax, Inc. Date of
Attn: Corporate Secretary Exercise: _______________
978 Hamilton Court (i.e., the date JetFax
Menlo Park, CA 94025 receives this notice)
Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below:
Stock option dated: ___________________________
Number of shares as to which
which option is exercised (A): ___________________________
Certificate to be issued
in name of: ___________________________
Total exercise price: ___________________________
Cash payment delivered herewith: ___________________________
Value of _________shares of
JetFax, Inc. common stock
delivered herewith (B): ___________________________
By this exercise, I agree (i) to provide such additional documents as you may
require pursuant to the terms of the JetFax, Inc. 1989 Stock Option Plan, (ii)
to provide for the payment by me to you (in the manner designated by you) of
your tax withholding obligations, if any, relating to the exercise of this
option, and (iii) if this exercise relates to an incentive stock option, to
notify you in writing within fifteen (15) days after the date of any disposition
of any of the shares of Common Stock issued upon exercise of this option that
occurs within two (2) years after the date of grant of this option or within one
(1) year after such shares of Common Stock are issued upon exercise of this
option.
Very truly yours,
___________________________
NOTES:
- ------
(A) The minimum number of shares that can be exercised is 100.
(B) Payment of the purchase price in JetFax stock can only be made with the
agreement of the Company's Stock Option Committee.
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<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
JETFAX, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Agreement made effective the _________ day of ________, 19__, between
JetFax, Inc., a Delaware corporation (the "Company"), and ("Optionee").
To carry out the purposes of the JetFax, Inc. 1989 Stock Option Plan
(the "Plan"), to which this Agreement is expressly subject and a copy of which
is attached hereto as Exhibit A, by affording Optionee the opportunity to
purchase shares of Common Stock, $.01 per share par value, of the Company
("Stock"), and in consideration of the mutual agreements and other matters set
forth herein and in the Plan, the Company and Optionee hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee the right and option
(the ''Option") to purchase all or any part of an aggregate of ___________
shares of Stock, on the terms and conditions set forth herein and in the Plan,
which Plan is incorporated herein by reference as a part of this Agreement.
The Option is not intended to constitute an "incentive stock option within the
meaning of section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code").
The Option, if not previously exercised, shall expire and not be
exercisable after _________________ unless earlier terminated as provided below.
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant to the
exercise of the Option shall be $_______ per share which has been determined
to be not less than eighty-five percent (85%) of the fair market value of the
Stock at the date of grant of the Option. For all purposes of this Agreement,
fair market value of the Stock shall be determined in accordance with the
provisions of the Plan.
3. EXERCISE OF OPTION. Subject to the earlier expiration of the Option as
herein provided, the Option may be exercised, by written notice to the Company
at its principal executive office addressed to the attention of the Secretary
of the Company, at any time and from time-to-time (including consecutive
exercises using Stock received from an immediately prior exercise to pay the
exercise price) after the date of grant hereof, such exercise to be effective
at the time of receipt of such written notice at the Company's principal
executive office during normal business hours, but any exercise (or series of
immediately successive exercises) of the Option must be for a minimum of 100
shares of Stock and the Option shall not be exercisable (taking into account
all prior exercises) for more than a percentage of the aggregate number of
shares offered by the Option
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<PAGE>
determined by the number of full months from __________________ (the "Vesting
Start Date") to the date of such exercise, in accordance with the following
schedule:
Percentage of
Number of Full Months Shares that May
From Vesting Start Date Be Purchased
- --------------------------------- -------------------
Less than 12 Months None
After 12 Months 1/48th of the stock
for each month
employed after the
Vesting Start Date
After 48 Months All
Optionee (or the person permitted to exercise the Option in the event of
Optionee's death) shall be and have all of the rights and privileges of a
shareholder of record of the Company with respect to shares acquired upon an
exercise of the Option, effective upon such exercise. Notwithstanding anything
in this Agreement to the contrary, however, the Committee may condition the
effectiveness of any exercise notice on Optionee becoming a party to a
shareholder agreement as provided in paragraph 8.
4. PAYMENT OF EXERCISE PRICE. The purchase price of shares as to which the
Option is exercised shall be paid in full at the time of exercise (a) in cash
(by a check acceptable to the Company), or (b) with the consent of the
Committee, either by delivering to the Company shares of Stock having a fair
market value equal to the purchase price or a combination of cash and Stock.
However, no fraction of a share of Stock shall be issued by the Company upon
exercise of the Option or accepted by the Company in payment of the exercise
price thereof; rather, Optionee shall provide a cash payment and/or shares of
Stock for such amount as is necessary to effect the issuance and acceptance of
only whole shares of Stock.
5. TRANSFERABILITY. The Option evidenced hereby is not transferable separately
and may not be transferred by Optionee otherwise than by will or the laws of
descent and distribution. The Option may be exercised only by Optionee during
Optionee's lifetime and while Optionee remains an employee of the Company,
except that:
a. If Optionee's employment with the Company terminates for cause, the
Option shall immediately terminate and shall no longer be exercisable. For
purposes of this Agreement, "cause" shall mean Optionee's willful misconduct in
performance of the duties of his employment, or Optionee's final conviction of a
felony or of a misdemeanor involving moral turpitude.
b. If Optionee's employment with the Company terminates for any reason
other than death or as provided in (a) above, the Option may be exercised by
Optionee at any time during the period of three months following such
termination (seven months if the Optionee is subject to Section 16(b) of the
Securities Exchange Act of 1934 ("Section 16(b)"), or by Optionee's estate (or
the person who acquires the Option by bequest or inheritance or by reason of the
death of Optionee)
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<PAGE>
during a period of one year following Optionee's death if Optionee dies during
such three-month or seven-month period, as the case may be, but in each case
only as to the number of shares as to which Optionee was entitled to as of the
date Optionee's employment so terminates; provided that if such termination
was by reason of Optionee's total and permanent disability or his retirement
at or after age 65, the Option may be exercised in full during such period
without regard to the extent exercisable at his termination of employment.
c. If Optionee dies while in the employ of the Company, Optionee's
estate, or the person who acquires the Option by bequest or inheritance or by
reason of the death of Optionee, may exercise the Option in full, without regard
to the extent exercisable at Optionee's death, at any time during the period of
one year following the date of Optionee's death.
6. WITHHOLDING OF TAX. To the extent that the exercise of the Option
results in compensation income to Optionee for federal or state income tax
purposes, Optionee shall pay to the Company at the time of such exercise (or
such other time as the law permits if Optionee is subject to Section 16(b)) such
amount of money (or with the consent of the Committee, either full shares of
Stock already owned by the Optionee or full shares of Stock acquired pursuant to
the exercise of the Option) as the Company may require to meet its obligation
under applicable tax laws or regulations, and, if Optionee fails to do so, the
Company is authorized to withhold from any cash remuneration then or thereafter
payable to Optionee any tax required to be withheld by reason of such resulting
compensation income or otherwise refuse to issue or transfer any shares
otherwise required to be issued pursuant to the terms hereof.
7. STATUS OF STOCK. Until the shares of Stock acquirable upon the exercise
of the Option have been registered or qualified for issuance under the
Securities Act of 1933, as amended (the "Act") and applicable state securities
laws, the Company will not issue such shares unless the Optionee provides the
Company with a written opinion of legal counsel, who shall be satisfactory to
the Company, addressed to the Company and satisfactory in form and substance to
the Company's counsel, to the effect that the proposed issuance of such shares
to the holder of the Option may be made without registration under the Act or
qualification under applicable state securities laws. If exemption from
registration or qualification under the Act and applicable state securities laws
is available upon an exercise of the Option, Optionee (or the person permitted
to exercise of this option in the event of Optionee's death or incapacity), if
requested by the Company to do so, will execute and deliver to the Company in
writing an agreement containing such provisions as the Company may require to
assure compliance with applicable securities laws.
Unless the offering, sale and delivery of shares of Stock acquirable
upon exercise of the Option have been registered or qualified and continue to be
so at the date of exercise hereof under the Act and applicable state securities
laws, Optionee agrees that the shares of stock which Optionee acquires by
exercising the Option shall be acquired for investment without a view to
distribution, within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged or hypothecated in the absence of an effective registration
statement for the shares under the Act and applicable state securities laws or
an applicable exemption from the registration or qualification requirements of
the Act and any applicable state securities laws. Optionee also agrees that the
shares of Stock which
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<PAGE>
Optionee may acquire by exercising the Option will not be sold or disposed of
in any manner which would constitute a violation of any other applicable
securities laws, whether federal or state.
In addition, Optionee agrees (A) that the certificates representing the
shares of Stock issued under this Agreement may bear such legend or legends as
the Committee deems appropriate in order to assure compliance with applicable
securities laws and/or to reflect the restrictions reflected by the
agreement(s) referred to herein, and (B) that the Company may give instruction
to its transfer agent, if any, to stop transfer of the shares of Stock issued
under this Agreement on the stock transfer records of the Company, if such
proposed transfer would in the opinion of counsel satisfactory to the Company
constitute a violation of any applicable securities law or any such
agreements.
Optionee further agrees that the Option granted herein shall be subject
to the requirement that, if at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to such Option upon any securities exchange or under any state of
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue or
purchase or issuance of shares hereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
reasonably acceptable to the Board.
8. RESTRICTIONS ON STOCK. Stock acquired upon an exercise of the Option
shall be subject to the terms, conditions, rights and restrictions applicable to
Stock contained in any shareholder agreement relating to the Company to which
Optionee and the Company are parties. For this purpose, each such shareholder
agreement is incorporated herein by this reference.
9. LOCKUP AGREEMENT. Optionee agrees that for a period of 180 days
commencing with the date of any effective registration statement under the Act
relating to an offering of Stock wherein the aggregate net proceeds to the
Company and/or selling stockholders, Optionee will not dispose of any shares of
Stock received upon exercise of the Option (whether the Option is exercised
during or prior to such 180-day period).
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee. This Agreement and all actions taken shall be governed by and
construed in accordance with the laws of the State of Delaware. In the event of
conflict between this Agreement and the Plan, the terms of the Plan shall
control. The Committee shall have authority to construe the terms of this
Agreement, and the Committee's determinations shall be final and binding on
Optionee and the Company.
11. MERGER OR CONSOLIDATION. In the event of: (1) a dissolution or
liquidation of the Company; (2) a merger or consolidation in which the Company
is not the surviving corporation; or (3) a reverse merger in which the Company
is the surviving corporation but the shares of the Company's Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise then to the
extent permitted by applicable law: (i) any surviving corporation shall assume
any Options outstanding under the Plan or shall substitute similar Options for
those outstanding under the Plan, or (ii) such Options shall
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<PAGE>
continue in full force and effect. In the event any such surviving corporation
refuses to assume or continue such options, such options shall become
immediately exercisable in full (without regard to the then applicable vesting
schedule) and shall terminate, if not earlier exercised, upon the
effectiveness of such event.
12. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, Optionee shall be
considered to be in the employment of the Company as long as Optionee remains
an employee of either the Company, a parent or subsidiary corporation (as
defined in section 424 of the Code) of the Company, or a corporation or a
parent or subsidiary of such corporation assuming or substituting a new
agreement for this Agreement. Any question as to whether and when there has
been a termination of such employment, for purposes of this Agreement, and the
cause of such termination, for purposes of this Agreement, shall be determined
by the Committee, and its determination shall be final.
13. DISCLAIMER. NOTHING IN THIS OPTION AGREEMENT OR THE PLAN HEREUNDER SHALL
CONFER UPON ANY OPTIONEE ANY RIGHT TO CONTINUE IN THE EMPLOY OF THE COMPANY OR
ANY SUBSIDIARY OR SHALL INTERFERE WITH OR RESTRICT IN ANY WAY THE RIGHTS OF
THE COMPANY AND ITS SUBSIDIARIES, WHICH ARE HEREBY EXPRESSLY RESERVED, TO
DISCHARGE ANY OPTIONEE AT ANY TIME FOR ANY REASON WHATSOEVER, WITH OR WITHOUT
GOOD CAUSE.
-21-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and Optionee has executed this agreement as of the day and year first
above written.
JETFAX, INC.
By:___________________________________
OPTIONEE
______________________________________
-22-
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
---------- -----------------------
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's ancestors,
descendants, or spouse; or to a transferee by a trustee or custodian for the
account of the transferee or the transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such securities is not in
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or Subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or Subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in either
such case, such person (i) discloses to potential purchasers at the sale that
transfer of the securities is restricted under this rule, (ii) delivers to each
purchaser a copy of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification requirement by subdivision (f) of
Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
-23-
<PAGE>
NOTICE OF EXERCISE
JetFax, Inc. Date of
Attn: Corporate Secretary Exercise: _______________
978 Hamilton Court (i.e., the date JetFax
Menlo Park, CA 94025 receives this notice)
Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below:
Stock option dated: ________________________________
Number of shares as to which
which option is exercised (A): ________________________________
Certificate to be issued
in name of: ________________________________
Total exercise price: ________________________________
Cash payment delivered herewith: ________________________________
Value of _________shares of
JetFax, Inc. common stock
delivered herewith (B): ________________________________
By this exercise, I agree (i) to provide such additional documents as you may
require pursuant to the terms of the JetFax, Inc. 1989 Stock Option Plan, (ii)
to provide for the payment by me to you (in the manner designated by you) of
your tax withholding obligations, if any, relating to the exercise of this
option, and (iii) if this exercise relates to an incentive stock option, to
notify you in writing within fifteen (15) days after the date of any disposition
of any of the shares of Common Stock issued upon exercise of this option that
occurs within two (2) years after the date of grant of this option or within one
(1) year after such shares of Common Stock are issued upon exercise of this
option.
Very truly yours,
--------------------------------
NOTES:
- ------
(A) The minimum number of shares that can be exercised is 100.
(B) Payment of the purchase price in JetFax stock can only be made with the
agreement of the Company's Stock Option Committee.
-24-
<PAGE>
EXHIBIT 10.3
JETFAX, INC.
1995 STOCK PLAN
(AS AMENDED SEPTEMBER 19, 1996 AND FEBRUARY 19, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions
-----------
shall apply:
"Administrator" means the Board or any of its Committees
(a) -------------
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Jetfax, Inc., a Delaware corporation.
-------
(g) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render consultative or
advisory services and is compensated for such services, and any director of the
Company whether compensated for such services or not provided that if and in the
event the Company registers any class of any equity security pursuant to the
Exchange Act, the term Consultant shall thereafter not include directors who are
not compensated for their services or are paid only a director's fee by the
Company.
(h) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: sick leave, military leave or any other leave of absence
approved by the Board, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or in the case of transfers between
locations of the Company or between the Company, its Subsidiaries or its
successor.
<PAGE>
(i) "Employee" means any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended.
(k) "Fair Market Value" means, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market
Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported, as quoted on such system or exchange for
the last market trading day prior to the time of determination) as
reported in the Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean between the high and low asked
prices for the Common Stock; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(l) "Incentive Stock Option" means an Option intended to
----------------------
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
------
(o) "Optioned Stock" means the Common Stock subject to an
--------------
Option.
(p) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(q) "Parent" means a "parent corporation", whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
-2-
<PAGE>
(r) "Plan" means this 1995 Stock Plan, as amended from time to
----
time.
(s) "Purchaser" means an Employee or Consultant who exercises a
---------
Stock Purchase Right.
(t) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(u) "Stock Purchase Right" means the right to purchase
--------------------
Restricted Stock granted pursuant to Section 11 of the Plan.
(v) "Subsidiary" means a "subsidiary corporation", whether now
----------
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
-------------------------
Section 13 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 3,400,000 Shares of Common Stock. The shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options or Stock Purchase Rights to Employees who are also
officers or directors of the Company, the Plan shall be administered by the
Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or a
Committee designated by the Board to administer the Plan, which Committee shall
be constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
-3-
<PAGE>
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options or Stock Purchase Rights to
- ---------
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which Committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
---------------------------
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(j) of the Plan;
(ii) to select the officers, Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to the share price and any restriction or limitation,
based in each case on such factors as the Administrator shall determine,
in its sole discretion);
(vii) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and
-4-
<PAGE>
(viii) to make any other such determinations with respect to
awards under the Plan as it shall deem appropriate.
(c) Effect of Committee's Decision. All decisions,
------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and Purchasers and any other holders of any Options or
Rights.
5. Eligibility for Options.
-----------------------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the
------------
earlier to occur of its adoption by the Board of Directors or its approval by
the stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term
--------------
stated in the Option Agreement; provided, however, that in the case of any Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
-5-
<PAGE>
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall be no
less than 85% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of cash, check, other
Shares which (x) in the case of Shares acquired upon exercise of an Option
either have been owned by the Optionee for more than six months on the date of
surrender or were not acquired, directly or indirectly, from the Company, and
(y) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised,
authorization for the Company to retain from the total number of Shares as to
which the Option is exercised that number of Shares having a Fair Market Value
on the date of exercise equal to the exercise price for the total number of
Shares as to which the Option is exercised, delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds required to pay the
exercise price, by delivering an irrevocable subscription agreement for the
Shares which irrevocably obligates the option holder to take and pay for the
Shares not more
-6-
<PAGE>
than twelve months after the date of delivery of the subscription agreement,
any combination of the foregoing methods of payment, or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company (Section 409 of
the California General Corporation Law).
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination
-------------------------
of an Optionee's consulting relationship or Continuous Status as an Employee
with the Company (as the case may be), such Optionee may, but only within ninety
(90) days after the date of such termination (or, in the case of a Nonstatutory
Stock Option, such other period as is set out by the Administrator in the Option
Agreement, but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
that Optionee was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise
-7-
<PAGE>
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
----------------------
Section 9(b) above, in the event of termination of an Optionee's Consulting
relationship or Continuous Status as an Employee as a result of his disability
(as determined by the Board in accordance with the policies of the Company),
Optionee may, but only within six (6) months from the date of such termination
(or in the case of a Nonstatutory Stock Option, such other longer period as is
set out by the Administrator in the Option Agreement, but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee,
-----------------
the Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
10. Non-Transferability of Options. The Option may not be sold,
------------------------------
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase Restricted Stock. Stock Purchase Rights may
be issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer, which shall in no event exceed one-
hundred twenty (120) days from the date of grant of the Stock Purchase
-8-
<PAGE>
Right. For these purposes, the price to be paid shall be no less than 85% of
fair market value on the date of grant of the Stock Purchase Right or, in the
case of a greater than 10% stockholder, no less than 100% of the fair market
value on the date of grant. The offer shall be accepted by execution of a
Restricted Stock agreement in the form determined by the Administrator. Shares
purchased pursuant to the grant of a Stock Purchase Right shall be referred to
herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines other
-----------------
wise, the Restricted Stock agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the Purchaser's
employment with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock
agreement shall be the original price paid by the Purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option with respect to the Restricted Stock shall lapse at such rate as the
Committee may determine, but in no event as to less than 20% of the total shares
granted annually.
(c) Other Provisions. The Restricted Stock agreement shall contain
----------------
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion. In addition, the
provisions of Restricted Stock agreements need not be the same with respect to
each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
-----------------------
exercised, the Purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the Stock Purchase Right is exercised, except as provided in Section
13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees or Purchasers may satisfy withholding
obligations as provided in this paragraph. When an Optionee or Purchaser incurs
tax liability in connection with an Option or Stock Purchase Right, which tax
liability is subject to tax withholding under applicable tax laws, and the
Optionee or Purchaser is obligated to pay the Company an amount required to be
withheld under applicable tax laws, the Optionee or Purchaser may satisfy the
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option, or the Shares to be issued in
connection with the Stock Purchase Right, if any, that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee or Purchaser to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Administrator
and shall be subject to the following restrictions:
-9-
<PAGE>
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee or Purchaser and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the Optionee or
Purchaser shall receive the full number of Shares with respect to which the
Option or Stock Purchase Right is exercised but such Optionee or Purchaser shall
be unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger. Subject to
----------------------------------------------------
any required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option or Stock Purchase Right, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option or Stock Purchase Right, as well as the price per share of Common
Stock covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the
Company, or of a merger in which the successor corporation does not agree to
assume the Option or Stock Purchase Right or substitute an equivalent Option or
Stock Purchase Right, the Board shall notify Optionees and Purchasers at least
fifteen (15) days prior to such proposed action. To the extent it has not been
previously exercised, the
-10-
<PAGE>
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
14. Time of Granting Options. The date of grant of an Option shall,
------------------------
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
or Purchaser under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options and Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee or Purchaser and the Board, which
agreement must be in writing and signed by the Optionee or Purchaser and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
-11-
<PAGE>
17. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be
----------
evidenced by written agreements in such form as the Board shall approve from
time to time.
19. Stockholder Approval. Continuance of the Plan shall be subject
--------------------
to approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the degree and manner required under applicable state and federal
law.
20. Compliance with Section 162(m) of the Code. The following
------------------------------------------
limitations shall apply to grants of Options to Employees:
(a) No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 200,000 shares.
(b) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13 above.
(c) If an Option is canceled (other than in connection with a
transaction described in Section 13), the canceled Option will be counted
against the limit set forth in Section 20(a). For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
-12-
<PAGE>
JETFAX, INC.
1995 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option, consisting of the Stock Option
Agreement attached hereto as Exhibit A and this Notice of Stock Option Grant
(together, the "Option") to purchase Common Stock of JETFAX, INC. (the
"Company") as follows:
Date of Grant
----------------------------------
Vesting Date
----------------------------------
Option Price Per Share $
----------------------------------
Total Number of Shares Granted
----------------------------------
Total Price of Shares Granted $
----------------------------------
Type of Option __ Incentive Stock Option
__ Nonqualified Stock Option
Term/Expiration Date
----------------------------------
Exercise Schedule:
- -----------------
This Option may be exercised, in whole or in part, in accordance
with the Vesting Schedule set out below.
Vesting Schedule
----------------
Date of Vesting Number of Shares
--------------- ----------------
First Annual Anniversary
of Vesting Date(_______) 25%(______ shares)
Thereafter, monthly on the _____ day of each month, 1/48
(_____) of the total number of Shares until fully vested.
In the event of fractional Shares, the monthly number of
Shares shall be adjusted accordingly to the nearest whole
Share.
-13-
<PAGE>
Termination Period:
------------------
Option may be exercised for 90 days after termination of employment or
consulting relationship except as set out in Sections 7 and 8 of the Stock
Option Agreement (but in no event later than the Expiration Date).
Exercise of this Option shall be on a form of Exercise Notice provided by the
Company.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THIS OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1995 STOCK PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain
information related to it and represents that he or she is familiar with the
terms and provisions of the Plan and this Option. Optionee accepts this Option
subject to all such terms and provisions. Optionee has reviewed the Plan and
this Option in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option and fully understands all provisions of
the Option.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the 1995 STOCK PLAN and the
[Incentive/Nonstatutory] Stock Option Agreement, all of which are attached and
made a part of this document.
OPTIONEE: JETFAX, INC., a Delaware
corporation
By
- ------------------------------- -------------------------------
Signature
Title
- ------------------------------- ------------------------------
Print Name
-14-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option, the undersigned hereby agrees to be irrevocably
bound by the terms and conditions of the Plan and this Option and further agrees
that any community property interest shall be similarly bound. The undersigned
hereby appoints the undersigned's spouse as attorney-in-fact for the undersigned
with respect to any amendment or exercise of rights under the Plan or this
Option.
---------------------------------------
Spouse of Optionee
-15-
<PAGE>
JETFAX, INC.
1995 STOCK PLAN
EXHIBIT A TO NOTICE OF GRANT
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. JETFAX, INC., a Delaware corporation (the
---------------
"Company"), hereby grants to the Optionee (the "Optionee") named in the Notice
of Grant, an option (the "Option") to purchase a number of Shares, as set forth
in the Notice of Grant, at the exercise price per share set forth in the Notice
of Grant (the "Exercise Price"), subject to the terms, conditions and
definitions of the 1995 Stock Plan (the "Plan") adopted by the Company, which is
incorporated herein by reference. In the event of a conflict between the terms
and conditions of the Plan and the terms and conditions of this Option
Agreement, the terms and conditions of the Plan shall prevail. Unless otherwise
defined herein, the terms defined in the Plan shall have the same defined
meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option,
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term
-----------------
in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of
------------------
an exercise notice, in the form provided by the Company (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as to the holder's investment intent
with respect to the Exercised Shares as may be required by the Company pursuant
to the provisions of the Plan. The Exercise Notice shall be signed by the
Optionee and, if the Optionee is married, by the Optionee's spouse, and shall be
delivered in person or by certified mail to the Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.
-16-
<PAGE>
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares are then
listed. Assuming such compliance, for income tax purposes the Exercised Shares
shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price
-----------------
shall be by any of the following, or a combination thereof, at the election of
the Optionee:
(a) cash; or
(b) check; or
(c) such other consideration as is indicated on the Notice of
Grant.
4. Optionee's Representations. In the event the Shares
--------------------------
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his
Investment Representation Statement in the form attached hereto as Exhibit B,
and shall read the applicable rules of the Commissioner of Corporations attached
to such Investment Representation Statement.
5. Restrictions on Exercise. This Option may not be exercised
------------------------
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation
G") as promulgated by the Federal Reserve Board. As a condition to the exercise
of this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
---------------------------
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
-17-
<PAGE>
7. Disability of Optionee. Notwithstanding the provisions of
----------------------
Section 6 above, in the event of termination of Optionee's Continuous Status as
an Employee as a result of disability (as determined by the Board in accordance
with the policies of the Company), Optionee may, but only within six (6) months
from the date of termination of employment (but in no event later than the date
of expiration of the term of this Option as set forth in Section 10 below),
exercise the Option to the extent otherwise so entitled at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee,
-----------------
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the date of expiration of the term of
this Option as set forth in Section 10 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee could exercise the Option at the date of
death.
9. Non-Transferability of Option. This Option may not be
-----------------------------
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by him.
The terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within
--------------
the term set out in the Notice of Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option. The limitations
set out in Section 7 of the Plan regarding Option terms and Options granted to
more than ten percent (10%) shareholders shall apply to this Option.
11. Tax Consequences. Some of the federal and California tax
----------------
consequences relating to this Option, as of the date of this Option, are set
forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Nonqualified Stock Option ("NSO"). If this Option does not
---------------------------------
qualify as an ISO, the Optionee may incur regular federal income tax and
California income tax liability upon exercise. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
employee, the Company will be required to withhold from his or her compensation
or collect from Optionee and
-18-
<PAGE>
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(ii) Incentive Stock Option ("ISO"). If this Option qualifies as an
------------------------------
ISO, the Optionee will have no regular federal income tax or California income
tax liability upon its exercise, although the excess, if any, of the fair market
value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to alternative minimum tax
in the year of exercise.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one year, any
---
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise AND two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the LESSER OF the difference
between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE and
the aggregate Exercise Price, or the difference between the SALE PRICE of such
Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of the date two years after the grant date, or
the date one year after the exercise date, the Optionee shall immediately notify
the Company in writing of such disposition. The Optionee agrees that he or she
may be subject to income tax withholding by the Company on the compensation
income recognized from such early disposition of ISO Shares by payment in cash
or out of the current earnings paid to the Optionee.
-19-
<PAGE>
JETFAX, INC.
1995 STOCK PLAN
EXHIBIT B TO NOTICE OF GRANT
INVESTMENT REPRESENTATION STATEMENT
-----------------------------------
OPTIONEE :
COMPANY : JETFAX, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a
-20-
<PAGE>
legend which prohibits the transfer of the Securities unless they are registered
or such registration is not required in the opinion of counsel satisfactory to
the Company, a legend prohibiting their transfer without the consent of the
Commissioner of Corporations of the State of California and any other legend
required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of exercise of the Option by the Optionee, such exercise will be
exempt from registration under the Securities Act. In the event the Company
later becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, ninety (90) days thereafter the securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including among other things: (1) the
sale being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the resale occurring not less than two years after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a non-
affiliate who has held the securities less than three years, (2) the
availability of certain public information about the Company, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934), and (4) the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.
(d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by Optionee (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration, and
-21-
<PAGE>
(2) further agrees to execute any agreement reflecting (1) above as may be
requested by the underwriters at the time of the public offering; provided
--------
however that the officers and directors of the Company who own the stock of the
- -------
Company also agree to such restrictions.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
(f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Signature of Optionee:
----------------------------------------
Date:________________, 19__
-22-
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security
---------- -----------------------
upon which a restriction on transfer has been imposed pursuant to Sections
260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113
or 25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or Subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
-23-
<PAGE>
JETFAX, INC.
1995 STOCK PLAN
EXERCISE NOTICE FOR VESTED SHARES
---------------------------------
JETFAX
1376 Willow Road
Menlo Park, CA 94025-1430
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 19__,
------------------
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "Shares") of Jetfax, Inc.
(the "Company") under and pursuant to the Company's 1995 Stock Plan, as amended
(the "Plan"), and the Notice of Grant and [ ] Incentive [ ] Nonqualified Stock
Option Agreement dated ________ (together, the "Option").
2. Representations of Optionee. Optionee acknowledges that Optionee
---------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions. Optionee represents
that Optionee is purchasing the Shares for Optionee's own account for investment
and not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws; Federal Restrictions on Transfer.
-----------------------------------------------------------------
Optionee has read and executed the Investment Representation Statement attached
as Exhibit B to the Notice of Grant. Optionee represents that he or she
understands the matters set forth in the Investment Representation Statement and
that he or she is purchasing the Shares subject to the restrictions and
limitations set forth in that document.
4. Right of First Refusal. Before any Shares held by Optionee or any
----------------------
transferee (either being sometimes referred to herein as the "Holder") may be
sold or otherwise transferred (including transfer by gift or operation of law),
the Company or its assignee(s) shall have a right of first refusal to purchase
the Shares on the terms and conditions set forth in this Section (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Sale Notice") stating: the
Holder's bona
-24-
<PAGE>
fide intention to sell or otherwise transfer such Shares; the name of each
proposed purchaser or other transferee ("Proposed Transferee"); the number of
Shares to be transferred to each Proposed Transferee; and the bona fide cash
price or other consideration for which the Holder proposes to transfer the
Shares (the "Offered Price"), and the Holder shall offer the Shares at the
Offered Price to the Company or its assignee(s).
(b) Bona Fide Transfer. Within ten (10) days after receipt of the
------------------
Sale Notice, the Company shall determine the bona fide nature of the proposed
voluntary transfer and give the Optionee written notice of the Company's
determination. If the proposed transfer is deemed not to be bona fide, the
Optionee shall be responsible for providing additional information to the
Company to show the bona fide nature of the proposed transfer. The Company
shall have the right to demand further assurances from the Optionee and the
Proposed Transferee (in a form satisfactory to the Company) that the Sale Notice
fully and accurately sets forth all of the terms and conditions of the proposed
transfer, including, without limitation, assurance that the Sale Notice fully
and accurately sets forth the consideration actually to be paid for the Shares
and all transactions, directly or indirectly, between the parties which may have
affected the price the Proposed Transferee was willing to pay for the Shares.
(c) Exercise of Right of First Refusal by Company. In the event that
---------------------------------------------
the proposed transfer is deemed to be bona fide, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in accordance
with subsection (c) below. Such written notice may be given within thirty (30)
days after receipt of the Sale Notice.
(d) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(e) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), by cancellation of all or a portion of
any outstanding indebtedness of the Holder to the Company (or, in the case of
repurchase by an assignee, to the assignee), or by any combination thereof
within sixty (60) days after receipt of the Sale Notice, in the manner and at
the times set forth in such notice.
(f) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company
-25-
<PAGE>
and/or its assignee(s), then the Holder may sell or otherwise transfer such
Shares to that Proposed Transferee at the Offered Price or at a higher price,
provided that such sale or other transfer is consummated within one hundred
twenty (120) days after the date of the Notice and provided further that any
such sale or other transfer is effected in accordance with any applicable
securities laws and the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Shares in the hands of
such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(g) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(h) Transfers Not Subject to the Right of First Refusal. The Right of
---------------------------------------------------
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option if such transfer is in connection with a
Change in Capitalization, as described in Section 13 of the Plan. If the
consideration received pursuant to such transfer or exchange consists of stock
of a Parent or Subsidiary, such consideration shall remain subject to the Right
of First Refusal unless the provisions of paragraph 4(j) result in a termination
of the Right of First Refusal.
(i) Assignment of the Right of First Refusal. The Company shall have
----------------------------------------
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer, to one or more persons as may be selected by
the Company.
(j) Early Termination of the Right of Refusal. The other provisions
-----------------------------------------
of this paragraph 4 notwithstanding, the Right of First Refusal shall terminate,
and be or no further force and effect upon (i) a merger of the Company or
transaction in which over 80% of the voting power of the Company is transferred
and following which the shareholders of the Company have less than 20% of the
voting power or the resulting or combined entity and shall not apply with
respect to shares sold in such offering or acquisition , or (ii) the existence
of a public market for the class of shares subject to the Right of First
Refusal. A "public market" shall be deemed to
-26-
<PAGE>
exist if (x) such stock is listed on a national securities exchange (as that
term is used in the Exchange Act) or (y) such stock is traded on the over-the-
counter market and prices therefor are published daily on business days in a
recognized financial journal.
5. Rights as Shareholder. Subject to the terms and conditions of this
---------------------
Agreement, Optionee shall have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Optionee delivers full
payment of the Exercise Price until such time as Optionee disposes of the Shares
or the Company and/or its assignee(s) exercises the Right of First Refusal
hereunder. Upon such exercise, Optionee shall have no further rights as a holder
of the Shares so purchased except the right to receive payment for the Shares so
purchased in accordance with the provisions of this Agreement, and Optionee
shall forthwith cause the certificate(s) evidencing the Shares so purchased to
be surrendered to the Company for transfer or cancellation.
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
-27-
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to the Investment Representation Statement (Exhibit B
to the Notice of Grant).
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Market Standoff Agreement. Optionee hereby agrees that if so
-------------------------
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any securities of the Company under the
1933 Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the 1933 Act; provided,
however, that such restriction shall only apply to the first two registration
statements of the Company to become effective under the 1933 Act which include
securities to be sold on behalf of the Company to the public in an underwritten
public offering under the 1933 Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
-28-
<PAGE>
9. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
10. Interpretation. Any dispute regarding the interpretation of
--------------
this Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
11. Governing Law; Severability. This Agreement shall be governed
---------------------------
by and construed in accordance with the laws of the State of California
excluding that body of law pertaining to conflicts of law. Should any provision
of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
12. Notices. Any notice required or permitted hereunder shall be
-------
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
13. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
14. Delivery of Payment. Optionee herewith delivers to the Company
-------------------
the full Exercise Price for the Shares.
-29-
<PAGE>
15. Entire Agreement. The Plan and Notice of Grant/Option Agreement
----------------
are incorporated herein by reference. This Agreement, the Plan and the Notice
of Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and is governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: JETFAX, INC., a Delaware
corporation
By
- -------------------------------- --------------------------------
(Signature)
Its
-------------------------------
Address Address
1376 Willow Road
- --------------------------------
Menlo Park, CA 94025-1430
-30-
<PAGE>
EXHIBIT 10.4
JETFAX, INC.
1997 DIRECTORS' STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available individuals to serve as
Outside Directors of the Company and to encourage their continued service on the
Board. All options granted hereunder shall be "nonstatutory stock options" for
United States federal income tax purposes.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means JetFax, Inc., a Delaware corporation.
-------
(e) "Continuous Status as a Director" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
--------
(g) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(i) "Option" means a stock option granted pursuant to the Plan.
------
(j) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(k) "Optionee" means an Outside Director who receives an Option.
--------
(l) "Outside Director" means a member of the Board who is not also
----------------
employed by the Company.
(m) "Plan" means this 1997 Directors' Stock Option Plan.
----
(n) "Rule 16b-3" means Rule 16b-3 promulgated under Section 16 of the
----------
Exchange Act or any successor rule thereto.
(o) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
<PAGE>
For purposes of the Plan, the masculine pronoun wherever used shall be read
to include the feminine pronoun.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 270,000 Shares of Common Stock. The Shares may be authorized,
but unissued, or reacquired Common Stock.
4. Administration of and Grants of Options Under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
Automatic Option Grants. Automatic Option Grants shall be made in accordance
with subsection (c) hereof.
(c) Automatic Option Grants. All grants of Options under this
-----------------------
subsection shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number
of Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director as of April __, 1997 shall be
automatically granted an Initial Option to purchase 20,000 Shares on
April ___, 1997. Thereafter, each Outside Director shall be
automatically granted an Initial Option to purchase 20,000 Shares upon
the date (on or after April __. 1997) on which such person first
becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a
vacancy.
(iii) Each Outside Director shall automatically receive, upon
his re-election annually to the Board, an Annual Option to purchase
5,000 Shares.
(iv) The terms of each Option granted hereunder shall be as
follows:
(A) the term of the option shall be ten (10) years;
(B) the Option shall be exercisable only while the Outside
Director remains a Director or within thirty (30) days of the date the
Director's Continuous Status as a Director terminates, except as set
forth in Section 8(b);
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<PAGE>
(C) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Option;
(D) stock subject to an Initial Option granted pursuant to
subsection 4(c)(ii) above shall vest as to 5,000 Shares on the one
year anniversary of the date of grant of such Option and 5,000 Shares
shall vest on the same date each year thereafter until all 20,000
Shares subject to such Initial Option have vested, provided, however,
that if the Optionee ceases to serve as a Director for any reason,
vesting shall cease as of the date of such termination; provided,
further that Initial Options granted pursuant to subsection 4(c)(ii)
above shall not be exercisable unless and until the stockholders of
the Company approve the Plan;
(E) stock subject to an Annual Option granted pursuant to
subsection 4(c)(iii) above shall vest as to 5,000 Shares on the date
of the fourth year anniversary of the date of grant of such Option;
provided, however, that if the Optionee ceases to serve as a Director
for any reason, vesting shall cease as of the date of such
termination; and
(F) all Options shall be exercisable in accordance with the
applicable vesting schedule set out in subsection (D) or (E) above.
(d) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority: (i) to determine, upon review
of the relevant information and in accordance with Section 7(b) of the Plan, the
fair market value of the Common Stock; and (ii) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted hereunder.
(e) Effect of Board's Decision. All determinations of the Board shall
--------------------------
be final and binding on all Optionees and any other holders of any Options
granted under the Plan.
5. Eligibility. Options may be granted only to Outside Directors in
-----------
accordance with the terms set forth in Section 4(c) above.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier of (a)
------------
its adoption by the Board or (b) its approval by the stockholders of the Company
as described in Section 16 of the Plan; provided, however, that if a later date
is set for implementation by the Board after adoption and/or approval has
occurred, the Plan shall not become effective
-3-
<PAGE>
until such later date. The Plan shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 12.
7. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to Options granted hereunder shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the
closing price of the Common Stock in the over-the-counter market on the date of
grant, as reported in The Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System) or, in the event the Common Stock is traded on the
NASDAQ National Market System or listed on a stock exchange, the fair market
value per Share shall be the closing price on such system or exchange on the
date of grant of the Option, as reported in The Wall Street Journal.
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of: (i)
cash, (ii) check, (iii) other Shares which (x) in the case of Shares acquired
directly or indirectly from the Company, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a fair market
value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall reasonably require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until such
stockholder approval of the Plan as is required by the applicable corporate,
securities and stock exchange rules has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person titled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7(c) of the Plan. Until the
-4-
<PAGE>
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the number
of Shares so acquired shall be issued to the Optionee as soon as practicable
after exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director - Death or
---------------------------------------------------------
Disability. If an Outside Director's Continuous Status as a Director terminates
- ----------
as a result of death or Disability, he (or, in the event of death, his estate or
a person who acquires the right to exercise the Option by bequest or
inheritance) may, but only within six (6) months after the date of such
termination of Continuous Status as a Director (but in no event after the
Option's expiration date), exercise his Option. To the extent that the Option
is not exercised within the time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
-------------------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization or Merger.
-----------------------------------------------------
(a) Subject to any required action by the stockholders of the Company,
the number of shares of Common Stock covered by each outstanding Option, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price or shares of Common Stock subject to an
Option.
-5-
<PAGE>
(b) In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action.
(c) In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation refuses to
assume the Option or to substitute an equivalent Option, the Board shall, in
lieu of such assumption or substitution, provide that there will be no vesting
restrictions on the Optioned Stock, including Shares as to which the vesting
restrictions would otherwise not lapse. If the Board lifts such vesting
restrictions in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee and shall provide that the
Option shall be exercisable for a period of fifteen (15) days from the date of
such notice. The Option will terminate upon the expiration of such period.
11. Time of Granting Options. The date of grant of an Option shall be the
-------------------------
date determined in accordance with Section 4 hereof. Notice of the grant shall
be given to each Outside Director to whom an Option is so granted within a
reasonable time after the date of such grant.
12. Amendment and Termination of the Plan.
--------------------------------------
(a) Amendment and Termination. The Board may amend, alter, suspend or
--------------------------
discontinue the Plan, but no amendment, suspension or discontinuation shall be
made which would impair the rights of any Optionee under any grant theretofore
made, without his or her consent. The Company shall obtain stockholder approval
of any Plan amendment or option grant in such manner and to such a degree as may
be required to comply with Rule 16b-3.
(b) Limitation on Amendments. Notwithstanding Section 12(a), the
-------------------------
exercise price, vesting schedule, term, timing of grants, number of Shares
subject to option and other material terms of options granted hereunder, and
Plan provisions relating to such material terms, may not be amended more than
once every six months, other than to comply with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended ("ERlSA") or their
applicable rules or regulations.
(c) Effect of Amendment or Termination. Any such amendment or
-----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the board, which agreement must be in writing and signed by the Optionee and the
Company.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
-----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery
-6-
<PAGE>
of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, state securities
laws and the requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such representation is required by any of the
aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
----------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
-----------------
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject to
---------------------
approval by the stockholders of the Company at the time of or subsequent to the
adoption of the Plan by the Board. If such stockholder approval is obtained a
duly held stockholders' meeting, it may be obtained by the affirmative vote of
the holders of a majority of the outstanding bares of the Company present or
represented and entitled to vote thereon.
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<PAGE>
JETFAX, INC.
1997 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
You have been granted an option, consisting of the Stock Option Agreement
attached hereto as Exhibit A and this Notice of Stock Option Grant (together,
the "Option") to purchase Common Stock of JETFAX, INC. (the "Company") as
follows:
<TABLE>
<CAPTION>
<S> <C>
Date of Grant/Vesting Date ?
Option Price Per Share $ ?
Total Number of Shares Granted ?
Total Price of Shares Granted $ ?
Type of Option __ Initial Stock Option
__ Annual Stock Option
Term/Expiration Date ? years/ ?
</TABLE>
Exercise Schedule: This Option may be exercised, in whole or in part, in
-----------------
accordance with the Vesting Schedule set out below:
<TABLE>
<CAPTION>
Vesting Schedule:
----------------
<S> <C>
DATE OF NUMBER OF
VESTING SHARES
? ?
</TABLE>
Termination Period:
------------------
This Option may be exercised for thirty (30) days after termination of
Optionee's Continuous Status as a Director, except as set out in Sections 6 and
7 of the Stock Option
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<PAGE>
Agreement (but in no event later than the Expiration Date).
Method of Exercise:
------------------
Exercise of this Option shall be on a form of Exercise Notice provided by
the Company.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the 1997 Director's Stock Option Plan and the Director's
Stock Option Agreement, both of which are attached and made a part of this
document.
OPTIONEE: JETFAX, INC.
a Delaware corporation
- ----------------------------------- By:------------------------------
Signature
?
- ----------------------------------- Title:---------------------------
Print Name
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<PAGE>
JETFAX, INC.
1997 DIRECTORS' STOCK OPTION PLAN
EXHIBIT A TO NOTICE OF GRANT
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. JETFAX, INC., a corporation incorporated in Delaware
----------------
(the "Company"), hereby grants to the Optionee (the "Optionee") named in the
Notice of Grant, an option (the "Option") to purchase a number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms, conditions and
definitions of the 1997 Director's Stock Option Plan (the "Plan") adopted by the
Company, which is incorporated herein by reference. In the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Option Agreement, the terms and conditions of the Option Agreement shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
2. Exercise of Option.
-------------------
(a) Right to Exercise. This Option shall vest in accordance with the
------------------
Vesting Schedule set out in the Optionee's Notice of Grant.
(b) Method of Exercise. This Option is exercisable by delivery of an
-------------------
exercise notice, in the form provided by the Company (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as to the holder's investment intent
with respect to the Exercised Shares as may be required by the Company pursuant
to the provisions of the Plan. The Exercise Notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The Exercise Notice shall be accompanied by payment of the
aggregate Exercise Price as to all Exercised Shares. This option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares are then listed.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
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<PAGE>
3. Method of Payment. Payment of the aggregate Exercise Price shall be
------------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) other Shares which (x) in the case of Shares acquired directly or
indirectly from the Company, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (y) have a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(d) delivery of a properly executed exercise notice together with such
other documentation as the Company and the broker, if applicable, shall
reasonably require to effect an exercise of the Option and delivery to the
Company of the sale or loan proceeds required to pay the exercise price; or
(e) any combination of the foregoing methods of payment.
4. Restrictions on Exercise. This Option may not be exercised until
-------------------------
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as"
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
5. Termination of Status as a Director. If Optionee ceases to serve as a
------------------------------------
Director, he may exercise this Option during the Termination Period set out in
the Notice of Grant. To the extent that Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
6. Disability of Optionee. Notwithstanding the provisions of Section 6
-----------------------
above, in the event of termination of Optionee's Status as a Director as a
result of Disability, Optionee may, but only within six (6) months from the date
of termination (but in no event later than the date of expiration of the term of
this Option as set forth in the Notice of Grant below), exercise the Option to
the extent otherwise so entitled at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
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<PAGE>
7. Death of Optionee. In the event of the death of Optionee, the Option
------------------
may be exercised at any time within six (6) months following the date of death
(but in no event later than the date of expiration of the term of this Option as
set forth in the Notice of Grant below), by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Optionee could exercise the Option at the date of death.
8. Non-Transferability of Option. This Option may not be transferred in
------------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
9. Term of Option. This Option may be exercised only within the term set
---------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
10. Tax Consequences. Optionee understands that the tax consequences of
-----------------
receiving and exercising an option are governed by the laws of the country in
which the Optionee resides. EACH OPTIONEE SHOULD CONSULT WITH HIS LOCAL TAX
ADVISORS REGARDING THE TAX CONSEQUENCES OF RECEIVING AND EXERCISING THIS OPTION
PRIOR TO PURCHASING ANY STOCK HEREUNDER.
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<PAGE>
EXHIBIT 10.5
JETFAX, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of Jetfax ,
-------
Inc. and its Designated Subsidiaries with an opportunity to purchase Common
Stock of Jetfax, Inc. through accumulated payroll deductions. It is the
intention of Jetfax, Inc. to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions.
-----------
(a) "Board" means the Board of Directors of Jetfax, Inc. or, if
-----
applicable, the committee designated by the Board to administer the Plan.
(b) "Code" means the U.S. Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of Jetfax, Inc.
------------
(d) "Company" means Jetfax, Inc., a Delaware corporation and (where
-------
the context so requires), its Designated Subsidiaries.
(e) "Compensation" means all regular straight time earnings, and all
------------
payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses, commissions or other compensation.
(f) "Designated Subsidiaries" means the Subsidiaries which have been
-----------------------
formally designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" means any individual who is an employee of the
--------
Company for purposes of U.S. income tax withholding under the Code whose
customary employment with the Company is at least twenty (20) hours per week and
more than five months in any calendar year. For purposes of the Plan, the
employment relationship shall be treated as continuing intact while the
individual is on sick leave or other leave of absence approved by the Company.
Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
(h) "Exercise Date" means the date one (1) day prior to the date six
(6) months after the Offering Date of each Offering Period.
(i) "Offering Date" means the first day of each Offering Period of
the Plan.
<PAGE>
(j) "Offering Period" means a period of six (6) months at the end of
---------------
which options granted pursuant to the Plan shall be automatically exercised.
(k) "Plan" means this 1997 Employee Stock Purchase Plan.
----
(l) "Subsidiary" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by Jetfax, Inc. or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by Jetfax, Inc. or a Subsidiary.
(m) "Trading Day" means a day on which national stock exchanges and
-----------
the National Market System of the National Association of Securities Dealers
Automated Quotation (NASDAQ) System are open for trading.
3. Eligibility.
-----------
(a) Any Employee as defined in Section 2 who shall be employed by
the Company on the date his or her participation in the Plan is effective shall
be eligible to participate in the Plan, subject to limitations imposed by
Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary of the Company, or which permits his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive six
----------------
(6) month Offering Periods with a new Offering Period commencing on January 1
and July 1 of each year. Notwithstanding the previous sentence, the first
Offering Period shall be a long Offering Period, commencing on the effective
date of the Company's initial public offering (__________, 1997) and ending on
January 31, 1997. The Plan shall continue thereafter until terminated in
accordance with Section 19 hereof. Subject to the requirements of Section 19,
the Board shall have the power to change the duration of Offering Periods with
respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected.
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<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in such form
permitted by the Company and filing it with the Company's payroll office at
least 5 business days prior to the applicable Offering Date, unless a later time
for filing the subscription agreement is set by the Board for all eligible
Employees with respect to a given offering.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date for which a subscription agreement has been
filed and shall end when participation in the Plan has been terminated by the
participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each payday
during the Offering Period in an amount not exceeding 10% nor less than one
percent of his or her Compensation. The aggregate of such payroll deductions
during any Offering Period shall not exceed 10% of his or her aggregate
Compensation during said Offering Period.
(b) All payroll deductions made by a participant shall be credited
to his or her account under the Plan and will be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or may decrease (but not increase) the rate or
amount of his or her payroll deductions during the Offering Period (within the
limitations of Section 6(a)) by completing and filing with the Company a new
subscription agreement authorizing a decrease in the rate or amount of payroll
deductions; provided, however, that a participant may not decrease the rate or
amount of his or her payroll deductions more than once in any one month. The
change in rate shall be effective 15 days following the Company's receipt of the
new authorization or such shorter period as may be permitted by the Company.
Subject to the limitations of Section 6(a), a participant's subscription
agreement shall remain in effect for successive Offering Periods unless revised
as provided herein or withdrawn as provided in Section 10.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions shall be automatically decreased to zero percent at such time
during any Offering Period which is scheduled to end during the current calendar
year that the aggregate of all payroll deductions accumulated with respect to
such Offering Period and any other Offering Period ending within the same
calendar year equal $21,250. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the
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<PAGE>
beginning of the first Offering Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in
Section 10.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
Compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option.
---------------
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Exercise Date during such Offering Period (at the per share
option price) up to a number of shares of the Company's Common Stock determined
by dividing such Employee's payroll deductions accumulated prior to such
Exercise Date and retained in the Participant's account as of the Exercise Date
by the lower of 85% of the fair market value of a share of the Company's Common
Stock on the Offering Date or 85% of the fair market value of a share of the
Company's Common Stock on the Exercise Date; provided, however, that the maximum
number of shares an Employee may purchase during each Offering Period shall be
determined at the Offering Date by dividing 25,000 by the fair market value of a
share of the Company's Common Stock on the Offering Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of each option during the Offering Period shall
occur as provided in Section 8, unless the participant has withdrawn pursuant to
Section 10, and each option shall expire at midnight on the last day of the
applicable Offering Period. Fair market value of a share of the Company's Common
Stock shall be determined as provided in Section 7(b) herein.
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: 85% of the fair market value of a share
of the Common Stock of the Company on the Offering Date; or 85% of the fair
market value of a share of the Common Stock of the Company on the Exercise Date.
The fair market value of the Company's Common Stock on a given date shall be
determined by the Board in its discretion; provided, however, that where there
is a public market for the Common Stock, the fair market value per share shall
be the closing price of the Common Stock for such date, as reported by the
NASDAQ National Market System, or, in the event the Common Stock is listed on a
stock exchange, the fair market value per share shall be the closing price on
such exchange on such date, as reported in the Wall Street Journal. In the event
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<PAGE>
the Offering Date or the Exercise Date occurs on a weekend or legal holiday, the
fair market value shall be based on the closing bid price on the next Trading
Day.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10, his or her option for the purchase of shares will be
exercised automatically on each Exercise Date of the Offering Period, and the
maximum number of full shares subject to option shall be purchased for such
participant at the applicable option price with the accumulated payroll
deductions in his or her account. No fractional shares will be purchased and
any amount remaining in the participant's account after an Exercise Date shall
be held in the account until the Exercise Date of the subsequent Offering
Period, unless the Offering Period has been oversubscribed or the Plan has
terminated with such Exercise Date, in which case such amount shall be refunded
to the participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after the Exercise Date of each
--------
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option. Any cash remaining to the credit of a participant's account
under the Plan after a purchase by him or her of shares at the termination of
each Offering Period which is insufficient to purchase a full share of Common
Stock of the Company shall be applied to the participant's account for the next
Offering Period, unless the participant has elected not to participate in such
Offering Period prior to the Offering Date.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
any manner prescribed by the Company for such notice. All of the participant's
payroll deductions credited to his or her account will be paid to such
participant as promptly as practicable after receipt of notice of withdrawal and
such participant's remaining option or options for the Offering Period will be
automatically terminated, and no further payroll deductions for the purchase of
shares will be made during the Offering Period. If a participant withdraws from
an Offering Period, payroll deductions will not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) Upon a participant's ceasing to be an Employee prior to an
Exercise Date for any reason, including retirement or death, or upon termination
of a participant's employment relationship (as described in Section 2(g)), the
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option will be returned to such
participant or, in the case of his or her death, to the person
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<PAGE>
or persons entitled thereto under Section 14, and such participant's remaining
option or options will be automatically terminated.
(c) In the event an Employee fails to remain an Employee of the
Company for 20 or more hours per week during an Offering Period in which the
Employee is a participant, he or she will be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to his or her account will be
returned to such participant and such participant's remaining option or options
terminated.
(d) A participant's withdrawal from an Offering Period will not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 500,000 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
Section 18. If on a given Exercise Date the number of shares with respect to
which options are to be exercised exceeds the number of shares then available
under the Plan (after deduction of all shares for which options have been
exercised or are then outstanding), the Company shall make a pro rata allocation
of the shares remaining available for option grant in as uniform a manner as
shall be practicable and as it shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of payroll deductions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration. The Plan shall be administered by the Board of
--------------
Directors of the Company or a committee appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall,
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<PAGE>
to the full extent permitted by law, be final and binding upon all parties.
Members of the Board who are eligible Employees are permitted to participate in
the Plan.
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
the Offering Period but prior to delivery to him or her of such shares and cash.
In addition, a participant may file a written designation of a beneficiary who
is to receive any cash from the participant's account under the Plan in the
event of such participant's death prior to the Exercise Date of the Offering
Period.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10.
16. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees
annually, which statements will set forth the amounts of payroll deductions, the
per share purchase price, the number of shares purchased and the remaining cash
balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
------------------------------------------
action by the stockholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not
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<PAGE>
yet been placed under option (collectively, the "Reserves") as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of any conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issue by Jetfax, Inc. of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of Jetfax,
Inc., the Offering Period will terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Board. In the event
of a proposed sale of all or substantially all of the assets of Jetfax, Inc., or
the merger of Jetfax, Inc. with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, to shorten the Offering Period then in
progress by setting a new Exercise Date (the "New Exercise Date"). If the Board
shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
each participant in writing prior to the New Exercise Date, that the Exercise
Date for his or her option has been changed to the New Exercise Date and that
his or her option will be exercised automatically on the New Exercise Date,
unless prior to such date he or she has withdrawn from the Offering Period as
provided in Section 10. For purposes of this paragraph, an option granted under
the Plan shall be deemed to be assumed if, following the sale of assets or
merger the option confers the right to purchase, for each share of option stock
subject to the option immediately prior to the sale of assets or merger the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the sale of assets or
merger.
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<PAGE>
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
Jetfax, Inc. effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of Jetfax, Inc. being consolidated with or merged into
any other corporation.
19. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 18, no such termination can affect
options previously granted. Except as provided in Section 18, no amendment may
make any change in any option theretofore granted which adversely affects the
rights of any participant. To the extent necessary to comply with Section 423 of
the Code (or any successor rule or provision or any other applicable law or
regulation), the Company shall obtain stockholder approval in such a manner and
to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board shall be entitled to change the duration of Offering Periods and adopt
exercise periods with respect thereto, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
in order to adjust for delays or mistakes in the Company's processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Common Stock for each participant
properly correspond with amounts withheld from the participant's Compensation,
and establish such other limitations or procedures as the Board determines in
its sole discretion advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof. All notices or
other communications by the Company to a participant under or in connection with
the Plan shall be deemed to have been duly given when mailed to the participant
at the last address provided by the participant to the Company.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated
-9-
<PAGE>
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue unless and until terminated under Sections 18 or 19
hereof.
-10-
<PAGE>
EXHIBIT A
---------
JETFAX, INC.
FORM OF
SUBSCRIPTION AGREEMENT
[_] Original Application Offering Date:
[_] Decrease in Payroll Deduction Rate
[_] Change of Beneficiary
1. ____________________________ hereby elects to participate in the Jetfax,
Inc. 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
__% of my Compensation on each payday (not to be less than one percent and
not to exceed 10%) during the Offering Period in accordance with the Stock
Purchase Plan. (Please note that no fractional percentages are permitted).
Such deductions are to continue for succeeding Offering Periods under the
Stock Purchase Plan until I give written instructions for a decrease in or
termination of such deductions.
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price
determined in accordance with the Stock Purchase Plan. I further
understand that, except as otherwise set forth in the Stock Purchase Plan,
shares will be purchased for me automatically on each Exercise Date of the
Offering Period unless I otherwise withdraw from the Stock Purchase Plan by
giving written notice to the Company for such purpose.
4. Shares purchased for me under the Stock Purchase Plan should be issued in
the name(s) of:
----------------------------------------------------------
-------------------------------------------------------------------------
------------------------------------------------------------------------.
5. I acknowledge that, under the Internal Revenue Code, there are special tax
"holding period" rules that govern the tax consequences of buying and
selling shares under the Stock Purchase Plan. I understand that if I
dispose of shares purchased under the Plan within two years of the Offering
Date (i.e., the first day of the Offering Period) or within one year of the
Exercise Date (i.e., the date the shares are purchased), I will be treated
for federal income tax purposes as having received ordinary income at the
time of the sale equal to the difference between my purchase price and the
market value of the stock on the Exercise Date. Any amount in excess of
--------------------
that difference will be treated as capital gain. I hereby agree to notify
the Company in writing within 30 days after the date of any such
disposition.
I further understand that if I hold the shares for both the two-year and
one-year holding periods described above, at the time I dispose of the
shares I will be treated for federal income tax purposes as having received
ordinary income in an amount equal only to the lesser of (1) the difference
between my purchase price and the market value of the stock on the Offering
---------------
Date or (2) the difference between my purchase price and the actual sale
----
price for my stock. Any additional gain I receive on the sale will be
treated as capital gain.
<PAGE>
6. I have received a copy of the Company's most recent prospectus which
describes the Stock Purchase Plan and a copy of the complete "Jetfax, Inc.
1997 Employee Stock Purchase Plan." I understand that my participation in
the Stock Purchase Plan is in all respects subject to the terms of the
Plan.
7. I hereby agree to be bound by the terms of the Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Stock
Purchase Plan:
NAME (Please print):
-----------------------------------------------------------
(First) (Middle) (Last)
- --------------------------- ----------------------------------------------
Relationship
----------------------------------------------
(Address)
NAME (Please print):
----------------------------------------------------------
(First) (Middle) (Last)
- --------------------------- ----------------------------------------------
Relationship
----------------------------------------------
(Address)
Employee's Social Security Number:
---------------------------------------------
Employee's Address:
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
------------------------ -------------------------------------------
Signature of Employee
-2-
<PAGE>
EXHIBIT B
---------
JETFAX, INC.
FORM OF
NOTICE OF WITHDRAWAL
I hereby notify the Company that I withdraw from the Offering Period of the
Jetfax, Inc. 1997 Employee Stock Purchase Plan which began on ________ __, 199_.
I hereby directs the Company to pay to me as promptly as possible all the
payroll deductions credited to my account with respect to such Offering Period.
I understand and agrees that my remaining option for such Offering Period will
be automatically terminated. I hereby instructs the Company that no further
payroll deductions may be made for the purchase of shares in the current
Offering Period. I acknowledge that I will participate in succeeding Offering
Periods only by delivering a new Subscription Agreement to the Company.
Name and Address of Participant
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
Signature
-----------------------------------------------
Date:
-----------------------------------------
<PAGE>
EXHIBIT C
---------
JETFAX, INC.
FORM OF NOTICE OF SALE OR OTHER DISPOSITION
To: Jetfax, Inc.
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
This notice is to inform the Company of sales or other dispositions of
stock acquired under the 1997 Employee Stock Purchase Plan, so that the Company
can fulfill its tax reporting obligations. This form must be completed and
submitted to the Company whenever you sell stock acquired under the Plan, even
if you no longer are employed by the Company. IF YOU NEED ASSISTANCE IN
COMPLETING THIS FORM, CONTACT THE HUMAN RESOURCES DEPARTMENT.
1. Employee Name:
-----------------------------------------------------------
2. Number of Shares Sold or Disposed of:
------------------------------------
3. Date(s) these Shares were purchased under the Plan:
----------------------
- -------------------------------------------------------------------------------
4. Date of Sale or other Disposition:
---------------------------------------
5. Type of Disposition: Sale __ Gift __ Other (describe) __
- -------------------------------------------------------------------------------
6. Stock Price per Share at Sale or Disposition: $
---------------------------
7. Amount Received on Sale or Disposition: $
---------------------------------
-----------------------------------------------
Employee Signature
<PAGE>
EXHIBIT 10.6
LEASE AGREEMENT
BASIC LEASE INFORMATION
LEASE DATE: December 1, 1992
LESSOR: LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through
LINCOLN PROPERTY COMPANY N.C., INC.,
As Manager and Agent for Owner
OWNER: LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership
LESSOR'S ADDRESS: 101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
LESSEE: Jetfax, Inc.,
A Delaware Corporation
LESSEE'S ADDRESS: 1376 Willow Road
Menlo Park, California 94025
LOT: The tax parcel on which the Building is located
PREMISES: Approximately 26,000 square feet as shown on
Exhibit A
---------
PREMISES ADDRESS: 1376 Willow Road
Menlo Park, California 94025
Building: M-1, M-2 of Phase I
Lot: M-1, M-2 of Phase I
Park: Willow Park
TERM: February 9, 1993 ("Commencement Date"), through
February 8, 1998
BASE RENT: See Addendum 1
SECURITY DEPOSIT: Nine thousand eight hundred eighty and no/100
dollars ($9,880.00)
LESSEE'S SHARE OF OPERATING EXPENSES: 15% of Phase 1
LESSEE'S SHARE OF TAX EXPENSE: 50% of Parcel M-1, M-2
LESSEE'S SHARE OF UTILITY EXPENSES: 15% of Phase 1
LESSEE'S SHARE OF BUILDING UTILITY EXPENSES: 50% of Building M-l, M-2
PERMITTED USES: GENERAL OFFICE, RESEARCH AND DEVELOPMENT, LIGHT
ASSEMBLY, STORAGE AND DISTRIBUTION OF FACSIMILE
MACHINES AND OTHER OFFICE AND COMPUTER EQUIPMENT,
AND RELATED ACTIVITIES.
INSURANCE AMOUNT: Bodily injury limit of not less than $1 million
dollars per occurrence. Property damage limit of
not less than $1 million dollars per occurrence.
PARKING SPACES: Thirty-nine (39)
EXHIBITS: Exhibit A - Premises
<PAGE>
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - CC&Rs
Addenda: Addendum 1: Adjustments to Rent
Addendum 2: Effectiveness of Lease
Addendum 3: Option to Extend the Lease
DATE: This Lease is made and entered into as of the Lease Date defined
on Page 1. The Basic Lease information set forth on Page 1 and
this Lease are and shall be construed as a single instrument.
1. PREMISES: Lessor hereby leases to Lessee upon the terms and conditions
--------
contained herein the Premises.
2. COMMENCEMENT DATE: The Commencement Date will be at least twenty (20)
-----------------
days after the full execution by Lessor and Liposome Technology, Inc. of a Lease
covering the Premises located at 976-978 Hamilton Court, Menlo Park, California.
In the event that Lessor permits Lessee to occupy the Premises prior to the
Commencement Date, such occupancy shall be subject to all the provisions of this
Lease.
3. RENT: Lessee agrees to pay Lessor, without prior notice or demand, the
----
Base Rent described on Page l, payable in advance at Lessor's address shown on
Page 1 on the first day of each month throughout the term of the Lease. In
addition to the Rent set forth on Page 1, Rent also includes Lessee's share of
Operating Expenses and Tax Expenses and Utilities as specified in Paragraphs
6.A. 6.B. and 7 of this Lease, and the term "Rent" whenever used herein refers
to all these amounts.
4. SECURITY DEPOSIT: Upon Lessee's execution of this Lease, Lessee shall
----------------
deposit with Lessor as a Security Deposit for the performance by Lessee of its
obligations under this Lease the amount described on Page 1. If Lessee is in
default under this Lease as described in Paragraph 20 of this Lease, Lessor may
use the Security Deposit, or any portion thereof, to cure such default or to
compensate Lessor for all damage sustained by Lessor resulting from such
default. Lessee shall immediately on demand pay to Lessor a sum equal to the
portion of the Security Deposit so applied so as to maintain the Security
Deposit in the sum initially deposited with Lessor. As soon as practicable after
the expiration or termination of this Lease but in no event later than forty-
five (45) days thereafter, Lessor shall return the Security Deposit to Lessee,
less such amounts as are reasonably necessary to remedy Lessee's defaults under
this Lease as described in Paragraph 20 of this Lease. Lessor shall not be
required to keep the Security Deposit separate from other funds, and, unless
otherwise required by law, Lessee shall not be entitled to interest on the
Security Deposit.
5. TENANT IMPROVEMENTS: Lessor shall install the improvements ("Tenant
-------------------
Improvements") on the Premises as described and in accordance with the criteria
set forth in Exhibit B, attached and incorporated herein by this reference.
6. EXPENSES:
--------
A. OPERATING EXPENSES: In addition to the Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on page 1, of all
operating expenses. "Operating Expenses" are defined as the total amounts paid
or payable by the Lessor in connection with the ownership, maintenance, repair
and operation of the Premises, the Building and the Lot, or where applicable, of
the Park referred to on Page 1. These Operating Expenses may include, but are
not limited to:
(a) Lessor's cost of non-structural repairs to and
maintenance of the roof and exterior walls of the Building;
(b) Lessor's cost of maintaining the outside paved area,
landscaping and other common areas for the Park;
-2-
<PAGE>
(c) Lessor's annual cost of all risk and other insurance
including earthquake endorsements for the Building and the Lot and rental
loss insurance;
(d) Lessor's cost of modifications to the Building
occasioned by any rules, laws or regulation effective subsequent to the
commencement of the Lease;
(e) Lessor's cost of modifications to the Building
occasioned by any rules, laws or regulations arising from Lessee's use of
the Premises regardless of when such rules, laws or regulations became
effective;
(f) Lessor's cost of preventative maintenance contracts
including, but not limited to, contracts for elevator systems and heating,
ventilation and air conditioning systems, with bi-monthly service;
(g) Lessor's cost of security and fire protection services
for the Project, if in Lessor's sole discretion such services are provided;
and
(h) As compensation to Lessor for accounting and management
services rendered, an additional amount equal to ten (10%) of the sum of
(i) the total cost and expenses described in Paragraphs 6.A. above and 6.B.
below, and (ii) all common area utility costs for the Project.
Notwithstanding anything to the contrary contained in this Lease, in
no event shall Operating Expenses include the following (collectively "Costs"):
(a) Cost relating to repairs, alterations, improvements,
equipment and tools which would be properly capitalized under generally
accepted accounting principals, except to the extent that Lessee's share of
such cost of the capital item in question;
(b) Costs incurred by Lessor to the extent that Lessor is
reimbursed by insurance proceeds or otherwise:
(c) Costs, including permit, license and inspection costs,
incurred with respect to the installation of improvements made for tenants
or other occupants in the Building or incurred with respect to the
installation of improvements made for tenants or other occupants in the
Building or incurred in renovating or otherwise improving, decorating,
painting or redecoration vacant space for tenants or other occupants of the
Building;
(d) Depreciation, amortization and interest payments, except
to the extent provided herein pursuant to paragraph (b) above, and except
on materials, tools, supplies and vendor-type equipment purchased by Lessor
to enable Lessor to supply services Lessor might otherwise contract for
with a third party where such depreciation, amortization and interest
payments would otherwise have been included in the charge for such third
party's services, all as determined in accordance with generally accepted
accounting principles, consistently applied (as applied to commercial real
estate), and when depreciation or amortization is permitted or required,
the item shall be amortized over its reasonably anticipated useful life (as
reasonably determined by Lessor);
(e) Leasing commissions, attorneys' fees, space planning
costs, and other costs and expenses in connection with negotiations with
present or prospective tenants or other occupants of the Building;
(f) Expenses in connection with services or other benefits
which are not offered to Lessee or for which Lessee is charged directly but
which are provided to another tenant or occupant of the Building;
-3-
<PAGE>
(g) Overhead and profit increments paid to Lessor or to
subsidiaries or affiliates of Lessor for goods and/or services to the
extent the same exceed the costs of such goods and/or services rendered by
unaffiliated third parties on a competitive basis;
(h) Costs (including in connection therewith all attorneys'
fees and costs of settlement, judgment and payments in lieu thereof),
arising from claims, disputes or potential disputes (other than claims or
disputes, including, but not limited to, tax disputes where tenants of the
Building would receive benefits if Lessor prevails) in connection with
potential or actual claims, litigation or arbitrations pertaining to Lessor
and/or the Building; and
(i) Any expense not an Operating Expense as defined under
GAAP.
B. TAX EXPENSES: In addition to the Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on Page 1, of all real
property taxes applicable to the land and improvements included within the Lot.
The term "Tax Expense" includes any form of tax and assessment (general,
special, ordinary or extraordinary), commercial rental tax, payments under any
improvement bond or bonds, license, rental tax, transaction tax, levy, or
penalty imposed by authority having the direct or indirect power of tax
(including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement district thereof) as
against any legal or equitable interest of Lessor in the Premises, Lot or Park,
as against Lessor's right to rent or other income therefrom, or as against
Lessor's business of leasing the Premises or the occupancy of Lessee or any
other tax, fee, or excise, however described, other than inheritance or estate
taxes, including any value added tax, or any tax imposed in substitution,
partially or totally, of any tax previously included within the definition of
real property taxes, or any additional tax the nature of which was previously
included within the definition of real property tax. The term "Tax Expenses"
excludes income, franchise and transfer taxes.
C. PAYMENT OF EXPENSES: Lessor shall estimate the Operating
Expense and Tax Expense for the calendar year in which the Lease commences.
Commencing on the Commencement Date, one-twelfth (1/12th) of this estimate shall
be paid by Lessee to Lessor on the first day of each month of the remaining
months of the calendar year. Thereafter, Lessor may estimate such expenses as of
the beginning of each calendar year and require Lessee to pay one-twelfth
(1/12th) of such estimated amount as additional Rent hereunder on the first day
of each month. Not later than March 31 of the following calendar year, or as
soon thereafter as reasonably possible, including the year following the year in
which this Lease terminates, Lessor shall endeavor to furnish Lessee with a true
and correct accounting of actual Operating Expenses and Tax Expenses, and within
thirty (30) days of Lessor's delivery of such accounting, Lessee shall pay to
Lessor the amount of any underpayment. Lessor shall keep full, accurate and
separate books of account for this Park; and furnish Lessee with all
documentation reasonably required by Lessee. Notwithstanding the foregoing,
failure by Lessor to give such accounting by such date shall not constitute a
waiver of Lessor of its right to collect Lessee's share of any underpayment.
Lessor shall credit the amount of any overpayment by Lessee toward the next
estimated monthly installment(s) falling due, or where the term of the Lease has
expired, refund the amount of overpayment to Lessee. Lessee shall have the
right, upon reasonable notice and at Lessee's expense, to audit Lessor's books
of account with respect to the amounts underlying the Expenses described in
Paragraphs 6 and 7.
7. UTILITIES: Lessee shall pay the cost of all water, sewer use and
---------
connection fees, gas, heat, electricity, telephone and other utilities billed or
metered separately to Lessee. For utility fees or use charges that are not
billed separately to Lessee, Lessee shall pay the amount which is attributable
to Lessee's use of the Premises. In addition, Lessee shall within fifteen (15)
days after receiving a bill from Lessor pay Lessor its share, which is described
on Page 1, of any common area utility costs.
8. LATE CHARGES: Lessee acknowledges that late payment by Lessee to
------------
Lessor of Rent, Lessee's share of Operating Expenses, Tax Expenses, utility
costs or other sums due hereunder, will cause Lessor to incur costs not
contemplated by this Lease and the exact amount of such costs are extremely
difficult and impracticable to fix. Such costs, include, without limitation,
processing and
-4-
<PAGE>
accounting charges, and late charges that may be imposed on Lessor by the terms
of any note secured by any encumbrance against the Premises. Therefore, if any
installment of Rent or other sums due from Lessee is not received by Lessor
within five (5) business days of when due, Lessee shall pay to Lessor a sum
equal to ten percent (10%) of such overdue amount as a late charge. The parties
agree that this late charge represents a fair and reasonable estimate of the
costs that Lessor will incur by reason of late payment by Lessee. Acceptance of
any late charge shall not constitute a waiver of Lessee's default with respect
to the overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies available to Lessor.
9. USE OF PREMISES: The Premises are to be used for the uses stated on
---------------
Page 1 and for no other purposes without Lessor's prior written consent.
Lessee shall not do or permit improper, unlawful, or ultrahazardous
activity in or about the Premises nor keep or bring any improper, unlawful or
ultrahazardous materials in or about the Premises which will in any way
substantially increase the existing rate of or materially or adversely affect
any policy of fire or other insurance upon the Building or any of its contents,
or cause a cancellation of any insurance policy. Lessee shall not do or permit
anything to be done in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or other
buildings in the Project or injure or annoy other tenants or use or allow the
Premises to be used for any improper, unlawful or objectionable purpose, nor
shall Lessee cause, maintain or permit any nuisance in, on or about the
Premises. Lessee shall not damage or deface or otherwise commit or suffer to be
committed any waste in or upon the Premises. Lessee shall honor the terms of all
recorded covenants, conditions and restrictions relating to the property on
which the Premises are located. Lessee shall honor the rules and regulations
attached to and made a part of this Lease and any other reasonable regulations
of the Lessor related to parking and the operation of the Building.
10. ALTERATIONS AND ADDITIONS: Lessee shall not install any signs,
-------------------------
fixtures or improvements to the Premises without the prior written consent of
Lessor, which consent shall not be unreasonably withheld. Lessee shall be
permitted to add or install tenant fixtures within the Premises up to a value of
four thousand dollars ($4,000) per year without Lessor's prior written consent.
Lessee shall keep the Premises and the property on which the Premises are
situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by or on behalf of Lessee. As a condition to
Lessor's consent to the installation of any fixtures or improvements, Lessor may
require Lessee to post a completion bond for up to 150% of the cost of the work.
Upon termination of this Lease, Lessee shall remove all signs, fixtures,
furniture and furnishings and if requested by Lessor, remove any improvements
made by Lessee and repair any damage caused by the installation or removal of
such signs, fixtures, furniture, furnishings and improvements and leave Premises
in as good condition as they were in at the time of the commencement of this
Lease, excepting for reasonable wear and tear. Lessor and Lessee agree that
Lessee shall be allowed to install a small directional sign at the southwest
corner of the Building, the appearance and size of which shall subject to prior
written approval by Lessor which shall not be unreasonably withheld. The content
of the sign shall be the location of "Jetfax Visitor Parking."
11. REPAIRS AND MAINTENANCE: Except as otherwise set forth in this Lease,
-----------------------
Lessee shall, at Lessee's sole cost and expense, maintain the Premises and
adjacent areas in good, clean and safe condition and repair to the satisfaction
of the Lessor any damage caused by Lessee or its employees, agents, invitees,
licensees or contractors. Without limiting the generality of the foregoing, and
except as otherwise set forth in this Lease, Lessee shall be solely responsible
for maintaining and repairing all plumbing, electrical wiring and equipment,
lighting and interior wall, to the extent such are within the perimeter walls of
the Building. Lessor may repair the heating, ventilation and air conditioning
systems servicing the Building as deemed necessary by Lessor and Lessee shall
pay the cost of such repairs. Notwithstanding anything to the contrary contained
herein, any capital improvements mandated by law shall be prorated over the life
of the improvement, as determined by GAAP, and prorated over Lessee's remaining
Lease term.
-5-
<PAGE>
Except for repairs rendered necessary by the negligence of Lessee, its
agents, customers, employees and invitees, Lessor agrees, at Lessor's sole cost
and expense, to keep in good repair the structural portions of the roof,
foundations and exterior walls of the Premises (exclusive of glass and exterior
doors) and underground utility and sewer pipes outside the exterior walls of the
Building. Lessor agrees that repair costs of the roof membrane in excess of one
thousand five hundred dollars ($1,500) per year shall be at Lessor's cost and
expense.
Except for normal maintenance and repair of the items outlined above,
Lessee shall have no right of access to or install any device on the roof of the
Building nor make any penetrations of the roof of the Building without the
express prior written consent of Lessor.
12. INSURANCE: Lessee shall at all times during the term of this Lease,
---------
and at its sole cost and expense, maintain workers compensation insurance and
comprehensive general liability insurance against liability for bodily injury
and property damage with liability limits as set forth on Page 1 with such
insurance naming Lessor and Owner as an additional insured and including such
endorsements as may be required by Lessor. In no event shall the limits of said
policy or policies be considered as limiting the liability of Lessee under this
Lease.
All insurance shall be with companies licensed to do business with the
Insurance Commissioner of the State of California. A certificate of all such
insurance shall be delivered to the Lessor prior to the Commencement Date of
this Lease, and annually thereafter over the term of the Lease, which shall
certify that the policy names Lessor and the Owner as an additional insured and
that the policy shall not be cancelled or altered without thirty (30) days prior
written notice to Lessor.
Lessor shall at all times during the term of this Lease maintain a
policy or policies of fire and property damage insurance on the Building in so-
called "fire and extended coverage" (which includes liability coverage) form in
an amount equal to not less than eighty percent (80%) of the full replacement
value of the Building.
13. LIMITATION OF LIABILITY AND INDEMNITY: Except for damage resulting
-------------------------------------
from the negligence or willful misconduct of Lessor or its authorized
representatives, Lessee agrees to save and hold Lessor harmless and indemnify
Lessor from and against all liabilities, charges and expenses (including
reasonable attorneys' fees, costs of court and expenses necessary in the
prosecution or defense of any litigation) by reason of injury to person or
property, from whatever cause, while in or on the Premises, or in any way
connected with the Premises or with the improvements or personal property
therein, including any liability for injury to person or property of Lessee, its
agents or employees or third party persons.
Except for damage resulting from the negligence or willful misconduct
of Lessor or its authorized representatives, Lessor shall not be liable to
Lessee for any damage to Lessee or Lessee's property, for any injury to or loss
of Lessee's business or for any damage or injury to any person from any cause.
14. ASSIGNMENT AND SUBLEASING: Lessee shall not assign or transfer this
-------------------------
Lease nor sublet all or any portion of the Premises without the written consent
of Lessor, which consent shall not be unreasonably withheld, provided, however,
that no such consent shall be necessary for any assignment to any successor in
interest to Lessee in connection with any sale or transfer of all or
substantially all of its assets or upon any merger or consolidation. If Lessee
seeks to sublet or assign all or any portion of the Premises, a copy of the
proposed sublease or assignment agreement and all agreements collateral thereto,
shall be delivered to Lessor at least thirty (30) days prior to the commencement
of the sublease or assignment (the "Proposed Effective Date").
Each permitted assignee or sublessee shall assume and be deemed to assume this
Lease and shall be and remain liable jointly and severally with Lessee for
payment of Rent and for the due performance of, and compliance with all the
terms, covenants, conditions and agreements herein contained on Lessee's part to
be performed or complied with, for the term of this Lease. In the event of any
-6-
<PAGE>
sublease or assignment of all or any portion of the Premises where the rent
reserved in the sublease or assignment exceeds the rent or pro rata portion of
the rent, as the case may be, for such space reserved in the Lease, Lessee shall
pay the Lessor monthly, as additional Rent, at the same time as the monthly
installments of Rent hereunder, one-half (l/2) of the excess of the Rent
reserved in the sublease over the Rent reserved in this Lease applicable to the
sublease space.
15. SUBROGATION: Subject to the approval of their respective insurers,
-----------
Lessor and Lessee hereby mutually waive their respective rights of recovery
against each other from any insured loss. Each party shall obtain any special
endorsements, if required by their insurer, to evidence compliance with the
aforementioned waiver.
16. AD VALOREM TAXES: Lessee shall pay before delinquent all taxes
----------------
assessed against the personal property of the Lessee and all taxes attributable
to any leasehold improvements made by Lessee.
17. SUBORDINATION: Lessee shall, upon request of the Lessor, execute any
-------------
instrument necessary or desirable to subordinate this Lease and all its rights
contained hereunder to any and all encumbrances now or hereafter in force
against the Lot and the Building, provided, that in the event of foreclosure of
any such encumbrances, so long as Lessee is not in default, the holder thereof
shall agree to recognize Lessee's rights under this Lease as long as Lessee pays
rent and observes and performs all the provisions of this Lease to be observed
and performed by Lessee.
In the event any proceedings are brought for foreclosure or in the
event of the exercise of the power of sale under any deed of trust made by
Lessor covering the Premises or a deed in lieu of foreclosure thereunder, Lessee
shall attorn to the purchaser upon any such foreclosure or sale and recognize as
the Lessor under this Lease any such purchaser or such transferee who acquires
the Premises by deed in lieu of foreclosure.
18. RIGHT OF ENTRY: Lessee grants Lessor or its agents the right to enter
--------------
the Premises at all reasonable times and upon reasonable advance notice of no
less than twenty-four (24) hours (provided that no notice is required in the
event of an emergency) for purposes of inspection, exhibition, repair or
alteration. Lessor shall at all times have and retain a key with which to unlock
all the doors in, upon and about the Premises, excluding Lessee's vaults and
safes, and Lessor shall have the right to use any and all means Lessor deems
necessary to enter the Premises in an emergency. Lessor shall also have the
right to place "for rent" and/or "for sale" signs on the outside of the Premises
during the last three (3) months of the Lease term. Lessee hereby waives any
claim from damages or for any injury or inconvenience to or interference with
Lessee's business resulting from such entry, or any other loss occasioned
thereby except for any claim for any of the foregoing arising out of the
negligent acts or omissions or willful misconduct of Lessor or its authorized
representatives.
19. ESTOPPEL CERTIFICATE: Lessee shall execute and deliver to Lessor, upon
--------------------
not less than ten (10) days prior written notice, a statement in writing
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification) and the date to which the
Rent and other charges are paid in advance, if any, and acknowledging that there
are not, to Lessee's knowledge, any uncured defaults on the part of Lessor
hereunder or specifying such defaults as are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises. Lessee's failure to deliver such statement within such time shall be
conclusive upon the Lessee that (1) this Lease is in full force and effect,
without modification except as may be represented by Lessor; (2) there are no
uncured defaults in the Lessor's performance; and (3) not more than one month's
rent has been paid in advance.
20. LESSEE'S DEFAULT: The occurrence of any one or more of the following
----------------
events shall constitute a default and breach of this Lease by Lessee:
(a) The abandonment of the Premises by the Lessee.
-7-
<PAGE>
(b) The failure by Lessee to make any payment of Rent or any other
payment required hereunder within three (3) business days of written notice
therefore given after the date said payment is due. Notwithstanding the
foregoing, any notice delivered by Lessor including the written notice
referenced herein to Lessee of such default shall satisfy and be in accordance
with all laws and statutes under California Law.
(c) The failure of Lessee to observe, perform or comply or have
commenced to and continue to observe, perform or comply with any of the
conditions or provisions of this Lease for a period, unless otherwise noted
herein, of ten (10) days after written notice.
(d) The Lessee becoming the subject of any bankruptcy (including
reorganization or arrangement proceedings pursuant to any bankruptcy act) or
insolvency proceeding whether voluntary or involuntary.
(e) The Lessee using or storing Hazardous Materials on the Premises
other than as permitted by the provisions of paragraph 29 below.
21. REMEDIES FOR LESSEE'S DEFAULT: In the event of Lessee's default or
-----------------------------
breach of the Lease, Lessor may terminate Lessee's right to possession of the
Premises by any lawful means in which case this Lease shall terminate and Lessee
shall immediately surrender possession of the Premises to Lessor. In addition,
the Lessor shall have the immediate right of re-entry, and if this right of re-
entry is exercised following abandonment of the Premises by Lessee, Lessor may
consider any personal property belonging to Lessee and left on the Premises to
also have been abandoned.
If Lessee breaches this Lease and abandons the property before the end
of the term, or if Lessee's right to possession is terminated by Lessor because
of a breach of the Lease, then in either such case, Lessor may recover from
Lessee all damages suffered by Lessor as a result of Lessee's failure to perform
its obligations hereunder, including, but not restricted to, the worth at the
time of the award (computed in accordance with paragraph (3) of Subdivision (a)
of Section 1951.2 of the California Civil Code) of the amount by which the Rent
then unpaid hereunder for the balance of the Lease term exceeds the amount of
such loss of Rent for the same period which the Lessee proves could be
reasonably avoided by Lessor and in such case, Lessor prior to the award, may
relet the Premises for the purpose of mitigating damages suffered by Lessor
because of Lessee's failure to perform its obligations hereunder; provided,
however, that even though Lessee has abandoned the Premises following such
breach, this Lease shall nevertheless continue in full force and effect for as
long as the Lessor does not terminate Lessee's right of possession, and until
such termination, Lessor may enforce all its rights and remedies under this
Lease, including the right to recover the Rent from Lessee as it becomes due
hereunder. The "worth at the time of the award" within the meaning of
Subparagraphs (a)(1) and (a)(2) of Section 1951.2 of the California Civil Code
shall be computed by allowing interest at the rate of ten percent (10%) per
annum.
The foregoing remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law or to any equitable
remedies Lessor may have, and to any remedies Lessor may have under bankruptcy
laws or laws affecting creditor's rights generally.
The waiver by Lessor of any breach of any term of this Lease shall not
be deemed a waiver of such term or of any subsequent breach thereof.
22. HOLDING OVER: If Lessee holds possession of the Premises after the
------------
term of this Lease with Lessor's consent, Lessee shall become a tenant from
month to month upon the terms specified at a monthly Rent of 115 % of the Rent
due on the last month of the Lease term, payable in advance on or before the
first day of each month. All options, if any, granted under the terms of this
Lease shall be deemed terminated and be of no effect during said month to month
tenancy. Lessee shall continue in possession until such tenancy shall be
terminated by either Lessor or Lessee giving written notice of termination to
the other party at least thirty (30) days prior to the effective date of
termination.
-8-
<PAGE>
23. LESSOR'S DEFAULT: Lessee agrees to give any holder of a deed of trust
----------------
encumbering the Premises ("Trust Deed Holders"), by certified mail, a copy of
any notice of default served upon the Lessor by Lessee, provided that prior to
such notice Lessee has been notified in writing (by way of Notice of Assignment
of Rents and Leases, or otherwise) of the address of such Trust Deed Holder.
Lessee further agrees that if Lessor shall have failed to cure such default
within the time, if any, provided for in this Lease, then the Trust Deed Holders
shall have an additional thirty (30) days within which to cure such default or
if such default cannot be cured within that time, then such additional time as
may be necessary, if within such thirty (30) days, the Trust Deed Holder has
commenced and is diligently pursuing the remedies necessary to cure such default
(including but not limited to commencement of foreclosure proceedings, if
necessary to effect such cure), in which event this Lease shall not be
terminated while such remedies are being so diligently pursued.
24. PARKING: Lessee shall have the use of the number of undesignated
-------
parking spaces set forth on Page 1. Lessor shall exercise its best efforts to
insure that such spaces are available to Lessee for its use, but Lessor shall
not be required to enforce Lessee's right to use the same.
25. SALE OF PREMISES: In the event of any sale of the Premises by Lessor,
----------------
Lessor shall be and is hereby released from its obligation to perform under this
Lease to the extent such obligations arise from and after the date of such sale;
and the purchaser, at such sale or any subsequent sale of the Premises shall be
deemed, without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of the Lessor
under this Lease.
26. WAIVER: No delay or omission in the exercise of any right or remedy of
------
Lessor or Lessee on any default by Lessee or Lessor shall impair such a right of
remedy or be construed as a waiver.
The subsequent acceptance of Rent by Lessor after breach by Lessee of
any covenant or term of this Lease shall not be deemed a waiver of such breach,
other than a waiver of timely payment for the particular Rent payment involved,
and shall not prevent Lessor from maintaining an unlawful detainer or other
action based on such breach.
No payment by Lessee or receipt by Lessor of a lesser amount than the
monthly Rent and other sums due hereunder shall be deemed to be other than on
account of the earliest Rent or other sums due, nor shall any endorsement or
statement on any check or accompanying any check or payment be deemed an accord
and satisfaction; and Lessor may accept such check or payment without prejudice
to Lessor's right to recover the balance of such Rent or other sum or pursue any
other remedy provided in this Lease.
27. CASUALTY DAMAGE: If the Premises or any part thereof shall be damaged
---------------
by fire or other casualty, Lessee shall give prompt written notice thereof to
Lessor. In case the Building shall be so damaged by fire or other casualty that
substantial alteration or reconstruction of the Building shall, in Lessor's
reasonable opinion, be required (whether or not the Premises shall have been
damaged by such fire or other casualty), Lessor may, at its option, terminate
this Lease by notifying Lessee in writing of such termination within sixty (60)
days after the date of such damage, in which event the Rent shall be abated as
of the date of such damage. If Lessor does not elect to terminate this Lease or
substantial alteration or reconstruction of the Building is not required, Lessor
shall within sixty (60) days after the date of such damage commence to repair
and restore the Building and shall proceed with reasonable diligence to restore
the Building (except that Lessor shall not be responsible for delays outside its
control) to substantially the same condition in which it was immediately prior
to the happening of the casualty, except that Lessor shall not be required to
rebuild, repair, or replace any part of Lessee's furniture, furnishings or
fixtures and equipment removable by Lessee or any improvements installed by
Lessee under the provisions of this Lease. If the Premises are substantially
damaged or impaired by fire or other casualty as reasonably determined by
Lessor, and the Premises cannot be restored within one hundred eighty (180) days
after the date of such damage, Lessee may terminate the Lease. Lessor shall not
in any event be required to spend for such work an amount in excess of the
insurance proceeds, without regard to any deductible actually received by Lessor
as a result of the fire or other casualty, unless caused by the gross negligence
or willful
-9-
<PAGE>
misconduct of Lessor or Lessor's representative. Lessor shall not be liable for
any inconvenience or annoyance to Lessee, injury to the business of Lessee, loss
of use of any part of the Premises by the Lessee or loss of Lessee's personal
property resulting in any way from such damage or the repair thereof, except
that, subject to the provisions of the next sentence, Lessee's Rent and all
other payment obligations hereunder shall be proportionately reduced based upon
the extent to which damages or repairs prevent Lessee from the conduct of its
business at the Premises, as reasonably determined by Lessor. If the Premises or
any other portion of the Building be damaged by fire or other casualty resulting
from the fault or negligence of Lessee or any of Lessee's agents, employees, or
invitees, the Rent shall not be diminished during the repair of such damage and
Lessee shall be liable to Lessor for the cost and expense of the repair and
restoration of the Building caused thereby to the extent such cost and expense
is not covered by insurance proceeds.
Except as otherwise provided in this Paragraph 27, Lessee hereby
waives the provisions of Sections 1932(2.), 1933(4.), 1941 and 1942 of the
California Civil Code.
28. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
------------
taken for any public or quasi-public purpose of any lawful governmental power or
authority or sold to a governmental entity to prevent such taking, the Lessee or
the Lessor may terminate this Lease as of the date when physical possession of
the Premises is taken by the taking authority. Lessee shall not because of such
taking assert any claim against the Lessor or the taking authority for any
compensation because of such taking, and Lessor shall be entitled to receive the
entire amount of any award provided, however, Lessee shall receive from the
award a sum equal to its reasonable removal and relocation costs without
deduction for any estate of interest or interest of Lessee. If a substantial
portion of the Building or the Lot is so taken, Lessor at its option may
terminate this Lease. lf Lessor does not elect to terminate this Lease, Lessor
shall, if necessary, promptly proceed to restore the Premises or the Building to
substantially its same condition prior to such partial taking, allowing for the
reasonable effects of such taking, and a proportionate allowance shall be made
to Lessee for the Rent and other payments hereunder corresponding to the time
during which, and to the part of the Premises of which, Lessee is deprived on
account of such taking and restoration. Lessor shall not be required to spend
funds for restoration in excess of the amount received by Lessor as compensation
awarded.
29. HAZARDOUS MATERIALS: Subject to the remaining provisions of this
-------------------
paragraph, Lessee shall be entitled to use and store only those Hazardous
Materials (defined below), that are necessary for Lessee's business, provided
that such usage and storage is in full compliance with all applicable local,
state and federal statutes, orders, ordinances, rules and regulations (as
interpreted by judicial and administrative decisions). Lessor shall have the
right at all times during the term of this Lease, upon reasonable advanced
notice, to (i) inspect the Premises, (ii) conduct tests and investigations to
determine whether Lessee is in compliance with the provisions of this paragraph,
and (iii) request lists of all Hazardous Materials used, stored or located on
the Premises; the cost of all such inspections, tests and investigations to be
borne by Lessee, if Lessor finds violations of environmental laws and
regulations. Lessee shall give to Lessor immediate verbal and follow-up written
notice of any spills, releases or discharges of Hazardous Materials on the
Premises, or in any common areas or parking lots (if not considered part of the
Premises), caused by the acts or omissions of Lessee, or its agents, employees,
representatives, invitees, licensees, subtenants, customers or contractors.
Lessee covenants to investigate, clean up and otherwise remediate any spill,
release or discharge of Hazardous Materials caused by the acts or omissions of
Lessee, or its agents, employees, representatives, invitees, licensees,
subtenants, customers or contractors at Lessee's cost and expense; such
investigation, clean up and remediation to be performed after Lessee has
obtained Lessor's written consent, which shall not be unreasonably withheld;
provided, however, that Lessee shall be entitled to respond immediately to an
emergency without first obtaining Lessor's written consent. Lessee shall
indemnify, defend and hold Lessor harmless from and against any and all claims,
judgments, damages, penalties, fines, liabilities, losses, suits, administrative
proceedings and costs (including, but not limited to, attorneys' and consultant
fees) arising from or related to the use, presence, transportation, storage,
disposal, spill, release or discharge of Hazardous Materials on or about the
Premises caused by the acts or omissions of Lessee, its agents, employees,
representatives, invitees, licensees, subtenants, customers or contractors.
Lessee shall not be entitled
-10-
<PAGE>
to install any tanks under, on or about the Premises for the storage of
Hazardous Materials without the express written consent of Lessor, which may be
given or withheld in Lessor's sole discretion. As used herein, the term
Hazardous Materials shall mean (i) any hazardous or toxic wastes, materials or
substances, and other pollutants or contaminants, which are or become regulated
by all applicable local, state and federal laws; (ii) petroleum; (iii) asbestos;
(iv) polychlorinated biphenyls; and (v) radioactive materials. The provisions of
this paragraph shall survive the termination of this Lease.
Lessor shall indemnify Lessee from and against any and all costs and
expenses actually to be expended by Lessee pursuant to the terms of a final
clean up order issued by a government entity having jurisdiction, which final
clean up or remediate a release, spill or discharge of Hazardous Materials on
the Premises to the extent such clean up or remediation results from (i) the
acts or omissions of Lessor; or (ii) as a result of Hazardous Materials known to
Lessor to exist on, under or about the Premises or the Building as of the date
of this Lease; or (iii) Hazardous Materials in existence or present which are
caused by tenants other than Lessee of the Building and Park. This indemnity by
Lessor shall not include any costs of defense of Lessee, any third party
recovery against Lessee, any damages or injuries to property, person or natural
resources, or any costs or expenses not required by the final clean up order
this indemnity by Lessor shall not be construed to create an independent
obligation for Lessor to perform or pay for any remediation or clean up over and
above what Lessor would otherwise be required to perform by law following a
final adjudication of said matter.
30. FINANCIAL STATEMENTS: Within ten (10) days after Lessor's request
--------------------
Lessee shall deliver to Lessor the then current audited financial statements of
Lessee (including interim periods following the end of the last fiscal year for
which annual statements are available) which statements shall be prepared or
compiled by a certified public accountant (except for interim period statements
which may be internally prepared) and shall present fairly the financial
condition of Lessee at such dates and the result of its operations and changes
in its financial positions for the periods ended on such dates. If an audited
financial statement has not been prepared, Lessee shall provide Lessor with an
unaudited financial statement and/or such other information, the type and form
of which shall be reasonably agreed to by Lessor and Lessee, which reflects the
financial condition of Lessee.
31. GENERAL PROVISIONS:
------------------
(i) TIME. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.
(ii) SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
(iii) RECORDATION. Lessee shall not record this Lease or a short form
memorandum hereof without the prior written consent of the Lessor.
(iv) LESSOR'S PERSONAL LIABILITY. The personal liability of Lessor
(which, for purposes of this Lease, shall include Lessor and the Owner of the
Building if other than the Lessor) to Lessee for any default by Lessor under the
terms of this Lease shall be limited to the actual interest of Lessor and its
present or future partners in the Building and Lessee agrees to look solely to
Lessor's or Lessor's present or future partners' actual interest in the Building
for the recovery of any judgment against Lessor, it being intended that Lessor
shall not be personally liable for any judgment or deficiency. The liability of
Lessor under this Lease is limited to its actual period of ownership of title to
the Building, and Lessor shall be released from liability upon transfer of title
to the Building.
(v) SEPARABILITY. Any provisions of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provisions hereof and such other provision shall remain in full force and
effect.
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<PAGE>
(vi) CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
(vii) ATTORNEYS' FEES. In the event any legal action is brought to
enforce or interpret the provisions of this Lease, the prevailing party therein
shall be entitled to recover all costs and expenses including reasonable
attorneys' fees.
(viii) This Lease supersedes any prior agreements and contains
the entire agreement of the parties on matters covered. No other agreement,
statement or promise made by any party that is not in writing and signed by all
parties to this Lease shall be binding.
(ix) WARRANTY OF AUTHORITY. Each person executing this agreement on
behalf of a party represents and warrants that (1) such person is duly and
validly authorized to do so on behalf of the entity it purports to so bind, and
(2) if such party is a partnership, corporation or trustee, that such
partnership, corporation or trustee has full right and authority to enter into
this Lease and perform all of its obligations hereunder.
(x) NOTICES. All notices and demands required or permitted to be
sent to the Lessor or Lessee shall be in writing and shall be sent by United
States mail, postage prepaid, certified or by personal delivery or by overnight
courier, addressed to Lessor at 101 Lincoln Centre Drive, Foster City,
California 94404, or to Lessee at the Premises, or to such other place as such
party may designate in a notice to the other party given as provided herein.
Notice shall be deemed given upon the earlier of actual receipt or the third day
following deposit in the United States mail.
(xi) INTERLINEATION. The use of underlining or strikeouts
(strikeouts) within the Lease is for reference purposes only, and any such
strikeout language shall have no meaning or effect. No other meaning or emphasis
is intended by this use, nor should any be inferred.
32. BLANKET ENCUMBRANCE: Lessee is aware of the fact that the Lot may be
-------------------
subject to a deed of trust, mortgage, or other lien known as a "Blanket
Encumbrance." According to California law, Lessee could lose its interest
through foreclosure of the Blanket Encumbrance or other legal process even
though Lessee is not delinquent in Lessee's payments or other obligations under
the Lease.
-12-
<PAGE>
IN WITNESS WHEREOF, this Lease is executed on the date and year first
written above.
LESSEE:
Jetfax, Inc.,
A Delaware Corporation
By:
--------------------------------------------------
Rudy Prince
President
OWNER/LESSOR:
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership
By: Lincoln Property Company N.C., Inc.
As Manager and Agent for Owner
By:
--------------------------------------------------
Vice President
-13-
<PAGE>
EXHIBIT A - PREMISES
Page 1 of 1
Lease dated December 1, 1993, between
Jetfax, Inc.,
A Delaware Corporation
("Lessee"),
and
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through
LINCOLN PROPERTY COMPANY N.C., INC.,
As Manager and Agent for Owner
("Owner/Lessor")
- DESCRIBE DIAGRAM HERE -
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<PAGE>
EXHIBIT B - TENANT IMPROVEMENTS
Page 1 of 2
Lease dated December 1, 1992, between
Jetfax, Inc.,
A Delaware Corporation
("Lessee"),
and
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through
LINCOLN PROPERTY COMPANY N.C., INC.,
As Manager and Agent for Owner
("Owner/Lessor")
Lessee agrees to accept the Premises on an "as is" basis. However, Lessor and
Lessee agree that Lessee shall be permitted to install improvements at its own
cost and expense during the period commencing on the date of Lease execution
which shall be at least twenty (20) days prior to the commencement date. The
right to early access is subject to the terms and conditions detailed below:
1. Lessee shall obtain insurance coverage as specified in
Paragraph 12 of this Lease prior to the commencement of
construction of improvements.
2. Lessee shall be responsible for the payment of all utility
charges as of the commencement of construction of
improvements.
3. Lessor reserves the right to approve all improvements
required by Lessee. The improvements requested by Lessee
shall be detailed on a full set of working drawings ("Plans")
and submitted to Lessor for approval prior to the
commencement of any work.
4. All work shall be performed by California licensed
contractors, and said contractors shall obtain the necessary
permits from the City of Menlo Park prior to the performance
of any work. A copy of all permits shall be submitted to
Lessor.
5. A copy of the fully executed Construction Contract or similar
document, if any, and a list of subcontractors shall be
submitted to Lessor prior to the commencement of any work.
6. A copy of the Certificate of Insurance furnished by the
general contract in an amount not less than $1 million,
naming Lincoln Property Company as its interests may appear,
anti Lincoln Menlo Associates Limited, A California Limited
Partnership as the additional insured.
7. Copies of lien releases from all contractors, and
subcontractors shall be submitted to Lessor as their
respective work is completed and their contracts are paid.
8. Any changes to the Plans shall be submitted to Lessor for
review and approval, such approval shall not be unreasonably
withheld.
9. Structural calculations are required for any roof-mounted
equipment. Lessor requires the contractor(s) to use its roof-
mount detail for any equipment mounted on the roof and that
all roof work be inspected by Lessor's agent.
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<PAGE>
EXHIBIT B - TENANT IMPROVEMENTS
Page 2 of 2
10. Lessor must be notified in advance of the commencement date
of any work so it may file a Notice of Non-Responsibility.
INITIALS:
- --------
LESSEE:
-------------------
OWNER/LESSOR:
---------------------
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<PAGE>
EXHIBIT C - RULES & REGULATIONS
Page 1 of 2
Lease dated December 1, 1992, between
Jetfax, Inc.,
A Delaware Corporation
("Lessee"),
and
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through
LINCOLN PROPERTY COMPANY N.C., INC.,
As Manager and Agent for Owner
("Owner/Lessor")
1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Premises without the prior written consent of Lessor. Lessor
shall have the right to remove any such unapproved item without notice and
at Lessee's expense.
2. Lessee shall not regularly park motor vehicles in designated parking areas
after the conclusion of normal daily business activity.
3. Lessee shall not use any method of heating or air conditioning other than
that supplied by Lessor without the consent of Lessor.
4. All window coverings installed by Lessee and visible from the outside of
the building require the prior written approval of Lessor.
5. Lessee shall not use, keep or permit to be used or kept any foul or noxious
gas or substance or any flammable or combustible materials on or around the
Premises.
6. Lessee shall not alter any lock or install any new locks or bolts on any
door at the Premises without the prior consent of Lessor.
8. Lessee shall park motor vehicles in those general parking areas as
designated by Lessor except for loading and unloading. During those periods
of loading and unloading, Lessee shall not unreasonably interfere with
traffic flow within the Project and loading and unloading areas of other
Lessees.
9. Lessee shall not disturb, solicit or canvas any occupant of the Building or
Project and shall cooperate to prevent same.
10. No person shall go on the roof without Lessor's permission.
11. Business machines and mechanical equipment belonging to Lessee which cause
noise or vibration that may be transmitted to the structure of the
Building, to such a degree as to be objectionable to Lessor or other
Lessees, shall be placed and maintained by Lessee, at Lessee's expense, on
vibration eliminators or other devices sufficient to eliminate noise or
vibration.
12. All goods, including material used to store goods, delivered to the
Premises of Lessee shall be immediately moved into the Premises and shall
not be left in parking or receiving areas overnight.
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<PAGE>
EXHIBIT C - RULES & REGULATIONS
Page 2 of 2
13. Tractor trailers which must be unhooked or parked with dolly wheels beyond
the concrete loading areas must use steel plates or wood blocks 'tinder the
dolly wheels to prevent damage to the asphalt paving surfaces. No parking
or storing of such trailers will be permitted in the auto parking areas of
the Project or on streets adjacent thereto.
14. Forklifts which operate on asphalt paving areas shall not have solid rubber
tires and shall only use tires that do not damage the asphalt.
15. Lessee is responsible for the storage and removal of all trash and refuse.
All such trash and refuse shall be contained in suitable receptacles stored
behind screened enclosures at locations approved by Lessor.
16. Lessee shall not store or permit the storage or placement of goods or
merchandise in or around the common areas surrounding the Premises. No
displays or sales or merchandise shall be allowed in the parking lots or
other common areas.
INITIALS:
- --------
LESSEE:
----------------------
OWNER/LESSOR:
-----------------------
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<PAGE>
EXHIBIT D
WILLOW PARK
DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS
Page 1 of 8
This Declaration of Covenants, Conditions and Restrictions
(hereinafter called "Declaration") is made this twenty-fifth day of August 1979,
by Lincoln Property Company No. 238, A California Limited Partnership (Phases 1
& 2) (hereinafter called "Lincoln Property Company").
RECITALS
1. Declarant is, or at the time of recording this Declaration
will be, the Owner in fee of all that certain real property which is situated in
the City of Menlo Park, County of San Mateo, State of California, described on
the map (hereinafter called "Map") entitled "Menlo Industrial Center, Menlo
Park, California" which Map is filed in the office of the Recorder of the County
of San Mateo, State of California, on October 1, 1979, in Book No. 99 of Maps,
at pages 81, 82 and 83.
2. As Owner of the real property described in Paragraph 1 of
these Recitals, Declarant has executed this Declaration for the purpose of
imposing upon all portions of said real property (other than Parcel E as shown
on the Map) a general plan of improvement for the benefit of said real property
(other than said Parcel E) and its present and future owners. Said real property
(other than Parcel E) is hereinafter called the "Property."
NOW, THEREFORE, Declarant hereby declares that the Property is now
held, and shall hereafter be held, developed, encumbered, hypothecated,
transferred, sold, leased, conveyed, improved, used and occupied subject to the
covenants, conditions, restrictions and limitations hereinafter set forth, all
of which are declared to be in furtherance of a plan for the development and
operation of a landscaped business and industrial park and are established for
the purpose of enhancing and protecting the value, attractiveness and
desirability of the Property and every part thereof. Each of the covenants,
conditions, restrictions and limitations set forth herein shall run with the
land, and every part thereof, and shall burden as well as inure to the benefit
of and pass with each and every portion of the Property hereinafter developed,
encumbered, hypothecated, transferred, sold, leased, conveyed, improved, used or
occupied and shall apply to and bind any and all parties having or acquiring any
right, title, license or interest in the Property or any part thereof.
ARTICLE I
DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined
in this Article I shall, for all purposes of this Declaration, have the meanings
herein specified.
1.1 Building. "Building" shall mean the principal structure or
--------
structures on any Site, including all garages, outside platforms, outbuildings,
docks and the like.
1.2 Declarant. "Declarant shall mean Lincoln Property Company,
---------
its successors and assigns. Declarant's assigns shall be deemed' to include any
party whom Declarant designates, by means of a notice recorded in the Official
Records of San Mateo County, as the party who, from and after the date such
notice is recorded, will perform Declarant's functions under this Declaration.
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EXHIBIT D
Page 2 of 8
1.3 Deed of Trust. "Deed of Trust" shall mean, with respect to
-------------
any portion of the property, a duly recorded Deed of Trust, mortgage or other
instrument which created a lien on the portion of the Property is describes.
1.4 Improvements. "Improvements" shall mean and include without
------------
limitation buildings, outbuildings, pedestrian and vehicle access facilities,
parking areas, loading areas, fences, walls, hedged mass plantings, landscaping,
poles, signs and any structures of any type or kind.
1.5 Owner. "Owner" shall mean any person, firm, corporation or
-----
other legal entity (including Declarant) which owns fee title to a Site, as
shown by the Official Records of the County of San Mateo; provided, however,
that the term "Owner" shall not include a mortgage or beneficiary under a deed
of trust holding a security interest in a Site unless such mortgagee or
beneficiary is in actual physical possession of the Site. Whenever this
Declaration creates or imposes an obligation with respect to a Site, the Owner
of the Site shall be responsible for the timely and proper performance of the
obligation, notwithstanding any delegation of such responsibility by lease,
contract, or otherwise to another party.
1.6 Property. "Property" shall mean that certain real property
--------
subject to the covenants, conditions and restrictions set forth herein, namely,
that real property described on Exhibit A attached hereto and incorporated
herein.
1.7 Site. "Site" shall mean a continuous area of land within the
----
Property which is owned of record by the same Owner, whether shown as one parcel
on any recorded map or as a combination of parcels or of portions thereof.
ARTICLE II
REGULATION OF USES
2.1 Permitted Uses. Unless otherwise specifically prohibited
--------------
herein, or by applicable law, any business/industrial use will be permissible if
it does not constitute a nuisance to adjacent Sites. Permitted uses will
include, but not be limited to, manufacturing, warehousing, distribution,
cartage, processing, storage, wholesaling, office, laboratory, professional and
research and development.
2.2 Nuisance. No noxious or offensive activity shall be carried
--------
on nor shall anything be done on any Site which may be or become an annoyance or
nuisance to the Owners or occupants of other Sites, or which will be offensive
to the Owners or occupants of other Sites by reason of odor, fumes, discharge of
any chemical or industrial waste above or below ground, dust, dirt, fly-ash,
smoke, noise, glare or which will be hazardous by reason of danger of fire or
explosion or any other hazard.
2.3 Right of Entry. During reasonable hours and subject to reasonable
--------------
security requirements, Declarant or its authorized representative shall have the
right to enter upon and inspect any Building and/or Site and the Improvements
thereon for the purpose of ascertaining whether or not the provisions of this
Declaration have been or are being complied with and shall not be deemed guilty
of trespass by reason of such entry.
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EXHIBIT D
Page 3 of 8
ARTICLE III
REGULATION OF IMPROVEMENTS
3.1 Minimum Setback Lines
----------------------
(a) General. No Improvement and no part thereof shall be placed on
-------
any Site closer to a property line than herein provided. The following
Improvements are specifically excluded from these setback provisions:
(1) Roof overhang, subject to the specific approval of Declarant
in writing.
(2) Steps and walks.
(3) Paving and associated curbing, except that vehicle parking
areas shall not be permitted within ten (10) feet of the street property
line or lines.
(4) Fences, except that no fence shall be placed within the
street setback area unless specif~c approval is given by Declarant in
writing.
(5) Landscaping.
(6) Planters, not to exceed three (3) feet in height.
(7) Railroad spur tracks, switches and bumpers, provided that
the location of such tracks, switches and bumpers is specifically approved
by Declarant in writing.
(8) Displays identifying the Owner, Lessee or occupant, subject
to the specific approval of Declarant in writing.
(b) Setback from interior property lines. No setback is established
from a rear or side interior property line. The interior lot lines for a corner
lot shall be considered to have a real property line.
(c) Setback Street Property Lines. The setback line is established as
twenty (20) feet from property line on all streets on the property.
3.2 Completion of Construction. After commencement of construction of
--------------------------
any Improvement, the Owner shall diligently prosecute the work thereon to the
end that the Improvement shall not remain in a partly finished condition any
longer than reasonably necessary for the completion thereof.
3.3 No excavation shall be made except in connection with construction
of an Improvement, and upon completion thereof, exposed openings shall be
backfilled and disturbed ground shall be graded and leveled.
3.4 Landscaping.
-----------
(a) Every Site on which a Building shall have been placed shall be
landscaped according to plans approved as specified herein and maintained
thereafter in a sightly and well-kept condition.
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EXHIBIT D
Page 4 of 8
(b) An Owner, Lessee or occupant shall landscape and maintain unpaved
areas between the property lines and the setback lines.
(c) An Owner, Lessee or occupant shall provide hose bibs and
maintenance facilities in the vicinity of the landscaped areas.
(d) Landscape as approved by Declarant shall be installed within
ninety (90) days of occupancy or completion of the Building, whichever occurs
first.
3.5 Site Maintenance. All Improvements on each Site including, without
----------------
limitation, all walks. driveways, fences, parking areas, landscaping and the
exterior of all structures on each Site, shall be maintained free of litter and
debris and in good condition, order and repair. Landscaping shall be kept in
thriving condition, weed-free and neatly trimmed. All undeveloped Sites shall be
kept clean, mowed and in a condition so as not to be a dust or weed problem.
3.6 Signs and Lighting. No signs or displays shall be created on any
------------------
Site, other than the following:
(a) Signs identifying the name, building and business of any person
or firm occupying a Site, the size, design and color of which has been
specifically approved by Declarant in writing; and
(b) Offering a Site for sale or lease if Declarant has specifically
approved said signs in writing. All signs and displays shall be located below
the roof line of the building and shall comply with all applicable laws and
ordinances. Lighting shall be restricted to parking and security lights, fire
lighting and low-level sign illumination and floodlighting of buildings or
landscaping. All lighting shall be shielded and contained within property lines.
3.7 Parking Areas. Adequate parking on a Site shall be provided to
-------------
accommodate all parking needs for employees, visitors and company vehicles.
There shall also be adequate areas provided for truck loading and unloading. The
intent of this provision is to eliminate the need for any on-street parking. If
parking or loading requirements increase as a result of a change in use or
number of employees, additional off-street parking shall be provided to satisfy
the intent of this section.
3.8 Building Regulations. Any building erected on a Site shall
--------------------
conform to the following construction practices:
(a) Exterior walls of sheet or corrugated iron, steel, aluminum
or asbestos will be permitted only upon specific approval in writing by
Declarant.
(b) Exterior walls shall be painted or suitably treated in a
manner acceptable to Declarant.
-22-
<PAGE>
EXHIBIT D
Page 5 of 8
ARTICLE IV
APPROVAL OF PLANS
4.1 No Improvement shall be erected, placed, altered, maintained
or permitted to remain on any land subject to these restrictions until plans and
specifications showing plot layout, including parking and all exterior
elevations, with materials and colors, have been submitted to and approved in
writing by Declarant. Said approval shall be in addition to any approvals and/or
permits required by the City of Menlo Park or any other legal entity having
jurisdiction. Such plans and specifications shall be submitted in writing over
the signature of the Owner of Lessee of the Site or his authorized agent.
4.2 Approval shall be based, among other things, on adequacy of Site
dimensions, adequacy of structural design, conformity and harmony of external
design with neighboring Improvements, effect of location and use of Improvements
on neighboring Sites; proper facing of main elevation with respect to nearby
streets; and conformity of the plans and specifications to the purpose and
general plan and intent of these restrictions. Declarant shall not arbitrarily
or unreasonably withhold its approval of such plans and specifications .
4.3 If Declarant fails either to approve or to disapprove such plans
and specifications within thirty (30) days after the same have been submitted to
it, it shall be conclusively presumed that Declarant has approved said plans and
specifications, subject, however, to the restrictions contained in ARTICLE III
hereof.
4.4 Notwithstanding anything to the contrary herein contained, after
the expiration of one year from the date of issuance of a building permit by
municipal or other governmental authority for any Improvement, said Improvement
shall, in favor of purchasers and encumbrancers in good faith and for value, be
deemed to be in compliance with all provisions of this ARTICLE IV, unless actual
notice of such non-compliance or non-completion executed by Declarant shall
appear of record in the _____ of the County Recorder of San Mateo County,
California, or unless legal proceedings shall have been instituted to enforce
compliance or completion.
4.5 Fee. An architectural review fee shall be paid to Declarant at the
time plans are submitted for approval based upon the following schedule:
(a) When the plans submitted are prepared by an architect
licensed to practice in the State of California, the architectural review
fee shall be $100.00.
(b) In all other cases, the architectural review fee shall be
$200.00.
ARTICLE V
DURATION AND MODIFICATION AND REPEAL
5.1 Term. This Declaration, every provision hereof and every covenant,
----
conditions and restriction contained herein shall continue in full force and
effect for a period of sixty (60) years from the date hereof.
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EXHIBIT D
Page 6 of 8
5.2 Termination and Modification. This Declaration or any provisions
----------------------------
thereof or any covenant, condition or restriction contained herein may be
terminated, extended, modified or amended as to the whole of said property or
any portion thereof, with the written consent of the Owners of sixty-five
percent (65 %) in area of the Property; provided that so long as Declarant owns
at least twenty percent (20%) in area of the Property, no such termination,
extension, modification or amendment shall be effective without Declarant's
written approval. No termination, extension, modification or amendment hereof
shall be effective until a written instrument embodying the same has been
executed and recorded in the Official Records of San Mateo County.
ARTICLE VI
ENFORCEMENT
6.1 Abatement and Suit. Violation or breach of any restriction herein
------------------
contained shall give to Declarant the right to enter upon the Property upon or
as to which said violation or breach exists and summarily to abate and remove at
the expense of the Owner, Lessee or occupant thereof any structure, thing or
condition that may be or exist thereon contrary to the intent and meaning of the
provisions hereof, or to prosecute a proceeding at law or in equity against the
person or persons who have violated or are attempting to violate any of these
restrictions to enjoin or prevent them from doing so, to cause said violation to
be remedied or to recover damages for said violation. In addition, every Owner
of a Site shall have the right, in the event of violation or breach of any
restriction herein contained, to prosecute a proceeding at law or in equity
against the person or persons who have violated or are attempting to violate any
of these restrictions to enjoin or to recover damages for said violation. All
remedies provided herein or at law or in equity shall be cumulative and not
exclusive.
6.2 Deemed to Constitute a Nuisance. The result of every action or
-------------------------------
omission whereby any restriction herein contained is violated in whole or in
part is hereby declared to be and to constitute a nuisance. Every remedy allowed
by law or equity against an Owner, either public or private, shall be applicable
against every such result and may be exercised by Declarant or by any Owner of
property subject hereto. Any costs or expenses paid or incurred by Declarant or
an Owner (collectively referred to as "Declarant" in this Section 6.2) in
abating such nuisance or prosecuting any such remedy (including all reasonable
attorneys' fees and costs of collection), together with interest thereon at the
rate of ten percent (10%) per annum, shall be a charge against the Site on which
the nuisance has occurred or is occurring, shall be a continuing lien thereon
until paid, and shall also be the personal obligation of the Owner of such Site
when such charges became due and who committed such breach or violation. In
addition to any other rights or remedies hereunder, Declarant may deliver to the
Owner of the Site on which the nuisance has occurred or is occurring and record
with the San Mateo County Recorder a certificate of notice of claim of lien. If
the violation recited in such lien claim has not been cured to Declarant's
satisfaction and any recited amounts so charged have not been paid within thirty
(30) days thereafter, Declarant or its authorized representative may foreclose
such lien by a sale conducted pursuant to Sections 2924, 2924b and 2924c of the
California Civil Code, as amended from time to time, or other statues applicable
to the exercise of powers of sales in mortgages or Deeds of Trust, or in any
other manner permitted by law. Declarant, through its authorized
representatives, may bid on and acquire any land subject to such lien at any
such foreclosure sale. If the violations recited in such lien claim are timely
cured and any recited amounts timely paid as provided above, Declarant shall
forthwith record an appropriate release of such lien at Declarant's sole
expense.
-24-
<PAGE>
EXHIBIT D
Page 7 of 8
6.3 Attorneys' Fees. In any legal or equitable proceeding for
---------------
the enforcement or to restrain the violation of this Declaration or any
provision hereof, the losing party or parties shall pay the attorneys' fees of
the prevailing party or parties, in such amount as may be fixed by the court in
such proceedings. 6.4 Failure to Enforce Not a Waiver of Rights. The failure of
Declarant or any Owner to enforce any restriction herein contained shall in no
event be deemed to be a waiver of the right to do so thereafter nor of the right
to enforce any other restriction.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Assignment of Declarant's Rights and Duties. Declarant may assign
-------------------------------------------
any and all of its rights, powers, reservations and obligations hereunder to any
person, corporation or association. To be effective, any such assignments must
be accepted in writing by the assignee and the acceptance must be recorded in
the Official Records of San Mateo County. To the extent of the assignment, the
assignee shall have the same rights, obligations, duties and powers and be
subject to the same obligations and duties as given to and assumed by Declarant
herein. The term Declarant as used herein includes all such assignees and their
heirs, successors and assigns. Declarant may also resign as Declarant by
recording a written notice of resignation in the Official Records of San Mateo
County and mailing a copy thereof to each then Owner. The resignation shall be
effective on the date it is recorded and Declarant shall thereafter have no
further rights, powers, reservations, obligation or liabilities hereunder. If at
any time Declarant either resigns or ceases to exist without making an
assignment of its authority as Declarant, a successor Declarant may be appointed
in the same manner as this Declaration may be terminated, extended, modified or
amended under Section 2 of ARTICLE IV.
7.2 Constructive Notice and Acceptance. Every person or other entity
----------------------------------
who now or hereafter owns or acquires any right, title or interest in or to any
portion of the Property is and shall be conclusively deemed to have consented
and agreed to every covenant, condition and restriction contained herein,
whether or not any reference to this Declaration is contained in the instrument
by which such person or entity acquired an interest in said property.
7.3 Waiver. Neither Declarant nor its successors or assigns shall be
------
liable to any Owner, Lessee, licensee or occupant of land subject to his
Declarant by reason of any mistake in judgment, negligence, nonfeasance, action
or inaction and/or for the enforcement or failure to enforce any provision of
this Declaration. Every Owner, Lessee, licensee or occupant of any of said
property by acquiring his interest therein agrees that he will not bring any
action or suit against Declarant to recover any damages or to seek equitable
relief because of any mistake in judgment, negligence, nonfeasance, action or
inaction and/or the enforcement or failure to enforce any provision of this
Declaration.
7.4 Mutuality. Reciprocity. Runs with Land. All covenants, conditions,
---------
restrictions and agreements contained herein are made for the direct, mutual and
reciprocal benefit of each and every part and parcel of the property now or
hereafter made subject to this Declaration, shall create reciprocal rights and
obligations between the respective Owners of all parcels and privily of contract
and estate between all grantees of said parcels, their heirs, successors and
assigns, and shall, as to the Owner of each parcel, his heirs, successors and
assigns, operate as covenants running with the land for the benefit of all other
parcels.
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<PAGE>
EXHIBIT D
Page 8 of 8
7.5 Rights of Beneficiaries. No breach of the restrictions and other
-----------------------
provisions contained herein shall defeat or render invalid the lien of any Deed
of Trust now or hereafter executed upon land subject to these restrictions;
provided, however, that if any portion of said property is sold under a
foreclosure of any mortgage or under the provisions of any deed of trust, any
purchaser at such sale and his successors and assigns shall hold any and all
property so purchased subject to all of the restrictions and other provisions of
this Declaration.
7.6 Paragraph Headings. Paragraph headings, where used herein, are
------------------
inserted for convenience only and are not intended to be a part of this
Declaration or in any way to define, limit or describe the scope and intent to
the particular paragraphs to which they refer.
7.7 Effect of Invalidation. If any provision of this Declaration is
----------------------
held to be invalid by any court, the invalidity of such provision shall not
affect the validity of the remaining provisions hereof.
7.8 Existing Improvements. Improvements which are completely
---------------------
constructed on the date this Declaration is recorded are deemed to satisfy all
the requirements hereof.
7.9 Estoppel Certificate. At the request of an Owner, Declarant shall
--------------------
supply to such Owner or any actual or potential encumbrancer or purchaser of a
Site a written certificate stating that there are no violations hereof, or if
there are any such violations, the nature of such violations. Such certificate
shall be delivered within ten (10) working days after such request by an Owner.
INITIALS:
- --------
LESSEE:
----------------------
OWNER/LESSOR:
----------------------
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<PAGE>
ADDENDUM 1
ADJUSTMENTS TO RENT
Page 1 of 1
Lease dated December 1, 1992, between
Jetfax, Inc.,
A Delaware Corporation
("Lessee"),
and
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through
LINCOLN PROPERTY COMPANY N.C., INC.,
As Manager and Agent for Owner
("Owner/Lessor")
This Addendum No. 1 is incorporated as a part of that certain Lease Agreement
dated December 1, 1992, by and between Jetfax, Inc., A Delaware Corporation
("Lessee"), and LINCOLN MENLO PHASE I ASSOCIATES LIMITED, A California Limited
Partnership acting through LINCOLN PROPERTY COMPANY N.C., INC., As Manager and
Agent for Owner ("Owner/Lessor''), for the Premises located at 1376 Willow Road,
Menlo Park, California 94025.
Base Rent Schedule
February __, through February __, 1995 Base Rent shall be $9,360.00 per month
February __, through February __, 1995 Base Rent shall be $9,620.00 per month
February __, through February __, 1995 Base Rent shall be $9,880.00 per month
Lessee and Lessor agree that all of the t and conditions including Lessee s
payment of its proportionate share of Operating Expenses, Tax Expenses and
Utility Expenses referred to on page 1 of the above-referenced Lease, and more
specifically on pages 2, 3 and 4, paragraphs 6.A, 6.B, 6.C and paragraph 7 of
said Lease, are to be in full force and effect as of the date of Lessee's
possession of the Premises, and that such date shall be deemed to be the
commencement date of said Lease.
INITIALS:
- --------
LESSEE:
------------------
OWNER/LESSOR:
-----------------------
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<PAGE>
ADDENDUM 2
ADJUSTMENTS TO RENT
Page 1 of 1
Lease dated December 1, 1992, between
Jetfax, Inc.,
A Delaware Corporation
("Lessee"),
and
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through
LINCOLN PROPERTY COMPANY N.C., INC.,
As Manager and Agent for Owner
("Owner/Lessor")
This Addendum No. 2 is incorporated as a part of that certain Lease Agreement
dated December 1, 1992, by and between Jetfax, Inc., A Delaware Corporation
("Lessee"), and LINCOLN MENLO PHASE I ASSOCIATES LIMITED, A California Limited
Partnership acting through LINCOLN PROPERTY COMPANY N.C., INC., As Manager and
Agent for Owner ("Owner/Lessor"), for the Premises located at 1376 Willow Road,
Menlo Park, California 94025.
This Lease and the effectiveness thereof is expressly conditioned upon (a) the
full execution by Lessor and Lessee of Amendments to Lessee's existing Leases
dated September 22, 1989 and June 4, 1990 for the Premises located at 978 and
976 Hamilton Court, respectively, amending the expiration dates of the Leases to
the commencement date of this Lease; and (b) the satisfaction of all conditions
precedent to the effectiveness of such Amendments. If the aforementioned
Amendments are not executed, then this Lease shall be deemed null and void, and
Lessor shall refund all deposits made in consideration of this Lease.
INITIALS:
- --------
LESSEE:
---------------------
OWNER/LESSOR:
--------------------------
-28-
<PAGE>
ADDENDUM 3
ADJUSTMENTS TO RENT
Page 1 of 1
Lease dated December 1, 1992, between
Jetfax, Inc.,
A Delaware Corporation
("Lessee"),
and
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through
LINCOLN PROPERTY COMPANY N.C., INC.,
As Manager and Agent for Owner
("Owner/Lessor")
This Addendum No. 3 is incorporated as a part of that certain Lease Agreement
dated December 1, 1992, by and between LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
A California Limited Partnership acting through LINCOLN PROPERTY COMPANY N.C.,
INC., As Manager and Agent for Owner ("Owner/Lessor"), and Jetfax, Inc., A
Delaware Corporation ("Lessee''), of the Premises located at 1376 Willow Road,
Menlo Park, California 94025.
If Lessee is not in default in the performance of any of its obligations under
this Lease, Lessee shall have the right at its option to extend the term of the
Lease for five (5) years (the "Extended Term"). The Lease of the Premises during
the Extended Term shall be upon the same terms, covenants and conditions as are
set forth in this Lease, other than rent and the term of the Leasehold. If
Lessor does not receive from Lessee written notice of Lessee's exercise of this
option by 5:00 p.m. on August 16, 1997 (the "Option Notice"), all rights under
this option shall automatically terminate. Time is of the essence herein.
The monthly rent for the Extended Term shall be 9570 of the then current market
rent for the highest and best use for similar space (the "Fair Rental Value")
agreed upon solely by and between Lessor and Lessee and their agents appointed
for this purpose. Neither Lessor nor Lessee shall have the right to have a court
or any other third party entity establish the Fair Rental Value. If Lessor and
Lessee are unable to agree on the Fair Rental Value for the Extended Term within
thirty (30) days after receipt by Lessor cf the Option Notice, Lessor and Lessee
being obligated only to act in good faith, this option shall automatically
terminate and the end of its Initial Term. In no event shall the rent for any
period of the Extended Term be less than the highest rent charged during the
Initial Term of the Lease. Upon determination of the Rent for the Extended Term,
pursuant to the terms outlined above, the parties shall immediately execute an
amendment to the Lease stating the minimum monthly Rent for the Extended Term.
Lessee shall have no other right to extend the term of the Lease unless Lessor
and Lessee otherwise agree in writing.
This option is personal to Lessee and may not be assigned, voluntarily or
involuntarily, separate from or as a part of the Lease provided, however, Lessee
may assign the Lease with the option as provided in Paragraph 14. Any assignment
shall not in any way affect or limit the liability of Lessee pursuant to the
Lease. Notwithstanding the timely giving of the Option Notice, if Lessee is in
default of any provision of the Lease on the date of commencement of the
Extended Term, at Lessor's option, all rights of Lessee under this option shall
terminate and be of no force and effect.
INITIALS:
- --------
LESSEE:
---------------------
OWNER/LESSOR:
------------------------------
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<PAGE>
EXHIBIT 10.7
L E A S E
THIS LEASE, made and entered into this 18th day of December, 1991 by and
between ROBERT S. GRANT, hereinafter referred to as "Lessor" and CRANDELL
DEVELOPMENT CORPORATION, A CALIFORNIA CORPORATION AND MICHAEL CRANDELL, an
individual, jointly and severally, hereinafter referred to as "Lessees."
W I T N E S S E T H:
ARTICLE 1 - DESCRIPTION OF PREMISES
Lessor, for and in consideration of the rents, covenants and agreements
contained herein on the part of Lessees do hereby lease unto Lessees that
certain office space known as "Suites A, C, D and E and appurtenant common area
and six (6) parking spaces at 125 East Victoria Street, Santa Barbara.
California, as shown on Exhibit "A," hereto attached.
ARTICLE 2 - TERM
The term of this lease shall be for twenty four months commencing on
February 1, 1992 and terminating on January 31, 1994. Lessees may occupy the
above stated spaces rent free from the date of this lease through January 31,
1992 during which time all other provisions of this Lease remain in force.
ARTICLE 3 - RENT
A) Lessees agree to pay Lessor as rent for the said leased premises the
sum of Four Thousand One Hundred Forty-eight dollars ($4,148.00) per month;
payable on the first day of each month within the terms of this lease. The
monthly rent shall be the same as provided herein except that it shall be
adjusted annually beginning February 1, 1993 and each anniversary thereof, such
that if at the commencement of the year in question the official Consumer's
Price Index (all items 1982-84= 100) of the Bureau of Labor Statistics, United
States Dept. of Labor, pertaining to All Urban Consumers for the Los Angeles--
Anaheim-Riverside area, as published in the official Department of Labor
Publication for the last month of the year in question, is greater than said
index for the month of February 1, 1992, the rent shall be increased in
proportion to the percentage increase of said index between those two specific
months.
B) Lessees shall pay to Lessor concurrently with the execution of this
lease, the first months rent in the amount of Four Thousand One Hundred Forty-
Eight dollars ($4148.00) and an
<PAGE>
additional sum of Four Thousand One Hundred Forty-Eight ($4148.00) which shall,
at the time of termination of this Lease, be applied toward the rental for the
last month of the lease term.
ARTICLE 4 - OPTION TO EXTEND TERM
Lessees shall have the option to extend the terms of this lease for two
additional one year periods, the first of which starts on February 1, 1994, and
terminates on January 31, 1995 and the second of which starts on February 1,
1995, and terminates on January 31, 1996-upon the following terms and
conditions:
A) Extention of the term of this Lease shall be accomplished
automatically upon the giving by Lessees to Lessor written notice of his
election so to exercise such option no later that NINETY (90) days prior to the
expiration of the initial Lease period and NINETY (90) days prior to the
expiration of subsequent one (1) year extended terms.
B) Lessees shall have the right to extend this lease as aforesaid only if
Lessees are not in default under any of the terms and provisions hereof either
at the time of the exercise of their option or at the time of the commencement
of the extended term of this lease.
C) Upon the extension of this lease as aforesaid all the terms and
conditions of this lease shall govern and apply during such extended term except
the rent payable.
D) The base monthly rent during the extended term shall be equal to the
base monthly rent paid by Lessees during the initial Lease term, adjusted upward
as described in ARTICLE 3 to the index of the first month of the extended term.
ARTICLE 5 - INTERIOR CONDITION
Lessees accept interior of subject office suite in as is condition. Lessees
may install at own expense, carpet, drapes and or blinds, and paint walls and
ceilings, with Lessor's prior approval of color.
ARTICLE 6 - PARKING
Lessor shall provide for the use of Lessees six (6) parking spaces in the
lot behind said office building at no additional rental. Lessees may rent
additional parking at the rate of $50 per month per space during the initial
term of this lease and at the then prevailing rates for the extended terms in
the adjacent parking lot Lessor leases from Dr. Preuss. The term of the Pruess
Lease expires August 31, 1996 but may be cancelled upon 12 months notice. Should
the Pruess
-2-
<PAGE>
Lease be cancelled, then Lessees' option to rent additional parking
from Lessor is automatically voided.
ARTICLE 7 - UTILITIES AND SERVICES
A) Lessor shall provide and pay for trash removal from a designated place
on Lessor's premises.
B) Lessees shall pay forty nine and one half percent (49.5%) of
electricity from meter numbers TP 705 and 732, except total monthly charges
resulting from meter TP 705 shall be reduced by twenty percent (20%), for
exterior lights. Lessees shall pay forty nine and one half percent (49.5%) of
monthly charges for natural gas used by Southern California Gas Co. account 08-
4850-959-6202-8. C) Lessor shall provide janitorial service for the common
areas, common restrooms and exterior areas of the leased premises. Lessees shall
provide their own janitorial services for the interior portions of the leased
premises including windows inside and out and for the exterior of the westerly
patio used exclusively by Lessees.
ARTICLE 8 - LIABILITY INSURANCE
Lessees further agree to provide to Lessor, at the sole cost and expense of
Lessees, a public liability insurance policy to protect Lessor against any
liability to the public incident to the use of or resulting from any occurrence
in or about said premises, the limits of liability under such insurance to be
not less than FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) for any one person
injured, aggregate limits of ONE MILLION DOLLARS ($1,000,000.00) for all persons
injured, in any one occurrence, and ONE HUNDRED THOUSAND DOLLARS ($100,000.00)
for property damage arising out of any one occurrence. The inclusion of Lessor
by endorsement or as additional insured under Lessees' own public liability
insurance policy shall constitute compliance with this Article so long as the
coverages and limits of liability are no less than those provided herein.
Lessees shall pay thirty one point four percent (31.4%) of Lessor's annual
Liability insurance cost on the total property.
ARTICLE 9 - INDEMNITY
Lessees agree to indemnify and save Lessor harmless against and from all
claims, charges, damages, losses and liabilities (including reasonable attorneys
fees) arising out of the
-3-
<PAGE>
use and occupancy of the premises by Lessees, caused by or resulting from the
negligent or willful act or omission of Lessees, their agents or employees.
ARTICLE 10 - DAMAGE TO OR DESTRUCTION OF PREMISES
If, during the term of this lease, or any renewal or extension thereof the
demised premises are damaged or destroyed by casualty including, but not limited
to, fire or earthquake, and the damage is so extensive that the ordinary
business of Lessees cannot reasonably be conducted therein, and such damage
cannot with reasonable diligence be repaired within 120 days from the happening
of such casualty, then at the option of either Lessor or Lessees, to be
exercised within thirty (30) days after the happening of such casualty, this
lease shall cease and terminate as of the date of such casualty, and Lessees
shall forthwith vacate and surrender said premises. If (1) neither Lessor nor
Lessees shall elect to terminate this lease, or (2) the demised premises are so
damaged by such casualty that the ordinary business of the Lessees cannot
reasonably be conducted therein, but such damage can, with reasonable diligence
be repaired within 120 days, then Lessor shall, with all reasonable diligence,
unless prevented by strikes, lockouts or other labor disturbances or inability
to obtain materials, repair and restore said premises, and no rent shall accrue
or be payable during or for the period from the date of such casualty to the
date when said premises shall have been repaired and restored. If the demised
premises are so slightly damaged by such casualty that the ordinary business of
Lessees can reasonably be conducted therein, then Lessor shall with all
reasonable diligence, unless prevented by strikes, lockouts or other labor
disturbances or inability to obtain materials, repair and restore said premises,
and there shall be no allowance or deduction from the rent herein provided on
account of such damage. Lessees shall promptly notify Lessor in the event the
demised premises are so damaged by such casualty. Lessor's only responsibility
shall be to make repairs if and as herein agreed to be made, and nothing in this
lease is intended to or shall be construed to make Lessor liable for any damage
due to such casualty.
ARTICLE 11 - ASSIGNMENT AND SUBLETTING
Lessees shall not sublet, transfer, assign, hypothecate or encumber this
lease, or any part or interest herein, without first obtaining the written
approval of Lessor; Lessor shall not unreasonably withhold such written
approval. No such assignment, subletting, transfer,
-4-
<PAGE>
hypothecation or encumbrance shall affect the obligation of the Lessees herein
to pay the rent herein provided for unless otherwise agreed in writing by
Lessor. Any assignee or subtenant of the Lessees shall be bound by the terms of
this lease.
ARTICLE 12 - ATTORNEYS FEES
In the event an action is instituted by either party hereto against the
other to enforce any of the terms or provisions of this lease or to determine
the rights of the parties hereunder, the party prevailing in such action or
proceeding shall be entitled to recover reasonable attorneys fees and costs paid
or incurred in connection with such suit or proceeding from the other party. The
entitlement to recover such costs shall not be limited to those costs ordinarily
awarded by a Court to the prevailing party but shall include any and all
reasonable costs and expenses incidental to or concerning the maintenance and
prosecution or defense of such suit or proceeding.
ARTICLE 13 - HOLDING OVER
Should Lessees continue in possession of the premises after the end of the
term hereof with the express or implied consent of Lessor, such holding over
shall be construed to be a tenancy from month to month only and shall be at the
same rent as for the month last preceding such holding over, and otherwise
subject to the covenants and conditions herein contained.
ARTICLE 14 - DEFAULT
It is further expressly understood and agreed that each and all of the
provisions of this lease are conditions precedent to be faithfully and fully
performed and observed by the said Lessees to entitle Lessees to continue in
possession of said premises hereunder and that if default be made by Lessees in
the observance, payment, or performance of any of the provisions, terms, or
conditions hereof, except the payment of rent, and such default shall continue
for (30) days after written demand for performance, specifying the nature of the
default claimed, given by Lessor to Lessees, or should Lessees abandon said
lease premises or any part thereof (absence of ten days after default in payment
of rent shall constitute abandonment), then at the option of Lessor, his
successors or assigns, may, without notice or process of law, re-enter and take
possession of said premises and remove all persons and all Lessees' property
therefrom, placing Lessees' personal property in storage in a public warehouse
at the expense and risk of Lessees,
-5-
<PAGE>
make any repairs, changes, alterations, or additions in or to said premises
which may be necessary or convenient, relet said premises, or any part thereof
on such terms, conditions and rentals as Lessor may deem proper, and apply the
proceeds that may be collected from said sub-letting, less the expense of so
doing, upon the rent to be paid by Lessees, and hold Lessees for any balance
that may be due under said lease, or at Lessor's option, Lessees shall be deemed
to have forfeited all rights herein and this lease shall at once be deemed
terminated and at an end, and Lessor shall thereupon be entitled to recover from
the Lessees the worth, at the time of such termination, of the excess if any, of
the amount of rent and charges equivalent to the rent reserved in the lease for
the balance of the term over the reasonable rental value of the demised premises
for the same period. Lessees hereby waives all claims for damages to property or
otherwise that may be caused by Lessor in re-entering and taking possession of
the premises as herein provided, and all claims for damages that may result from
the destruction of or injury to the premises or building.
ARTICLE 15 - WAIVER
The waiver by Lessor of any breach of any term, covenant, or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant, or
condition herein contained. The subsequent acceptance of rent hereunder by
Lessor shall not be deemed to be a waiver of any preceding breach by Lessees of
any term, covenant, or condition of this lease, other than the failure of
Lessees to pay the particular rentals so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of acceptance of such rent.
ARTICLE 16 - REPAIRS
Lessees shall, at his expense, maintain and keep in good order and repair
the interior surfaces of walls and partitions within the leased premises. Lessor
shall maintain and repair the exterior walls, exterior surfaces, roof, common
area and walkways, outside rest rooms, heating and air-conditioning systems,
plumbing, wiring and windows excepting, however, any and all
-6-
<PAGE>
damages which may be caused or occasioned by the negligence of or at the fault
of Lessees, their employees or invitees.
ARTICLE 17 - USE
The premises are leased to Lessees for the purpose of a general
professional or business office. Lessees shall not use the premises, or permit
the said premises, or any part thereof, to be used, for any purpose or purposes
other than the above-stated use. Lessor agrees that he shall not rent or lease
any part of either building owned by them at the said 125 East Victoria Street
for use in connection with the retail sale of merchandise.
ARTICLE 18 - CONDEMNATION
Throughout this lease, the word "condemnation" is coextensive with the
phrase "right of eminent domain", i.e. the right of people or government to take
property for government use, and shall include the intention to condemn
expressed in writing as well as the filing of any action or proceeding for
condemnation.
In the event that any proceeding or action is commenced for the
condemnation, in exercise of the right of eminent domain, of the demised
premises or any portion thereof, or if Lessor is advised in writing by any
government (federal, state or municipal), or agency or department or bureau
thereof, or any entity or body having the right or power of condemnation, of its
intention to condemn the or any portion of the demised premises, Lessees having
the right of possession of the demised premises at the time thereof, or if the
demised premises or any part or portion thereof be condemned through such
action, then and in any of said events:
(a) Lessor may, without any obligation or liability to Lessees, and
without affecting the validity and existence of this lease other than as
hereafter expressly provided, agree to sell and/or convey to the condemnor,
without first requiring that any action or proceeding be instituted, or, if such
action or proceeding shall have been instituted, without requiring any trial or
hearing thereof, and Lessor is expressly empowered to stipulate to judgment
therein, the part or portion of the demised premises sought by the condemnor,
free from this lease and the rights of Lessees hereunder excepting only as
hereinafter in paragraph (b) provided.
(b) Lessees shall have no claim against Lessor nor be entitled to any part
or portion of the amount that may be paid or awarded as a result of the sale,
for the reasons as aforesaid, or
-7-
<PAGE>
condemnation of the demised premises or any part or portion thereof, Lessees
hereby assigning, transferring and setting over unto Lessor any interest, if
any, which Lessees would but for this provision have in, to, upon, or against
the demised premises or any part or portion thereof or the amount agreed to be
paid and/or awarded and paid to Lessor, excepting only Lessees shall be entitled
to seek to recover as against the condemnor, and Lessor shall have no claim
therefor or thereto, for Lessees' trade fixtures and any removable structures
and improvements erected and made by Lessees to or upon the demised premises
which Lessees are entitled to remove upon the expiration of the term hereof.
ARTICLE 19 - SIGNS AND DIRECTORY
Lessees agree to pay the cost of any and all signs used by them and that
they shall be consistent with the design presently being utilized in the
building and approved by Lessor.
ARTICLE 20 - GENERAL COVENANTS
Time shall be of the essence of this lease and of each of the provisions
thereof.
No remedy or election given by any provisions in this lease shall be deemed
exclusive unless so indicated, but it shall, wherever possible, be cumulative
with all other remedies in law or equity except as otherwise herein specifically
provided. Each provision hereof shall be deemed both a covenant and condition
and all of the covenants and conditions contained herein shall be covenants
running with the land and shall be construed as such. The article headings in
this lease contained are for convenience only, and do not constitute a part of
the provisions hereof. This lease binds, applies to and inures to the benefit
of, as the case may require, the respective successors and assigns of Lessor and
Lessees.
ARTICLE 21 - RIGHT TO LEASE ADDITIONAL SPACE
Lessees shall have the right of first refusal to lease additional space on
the premises as it becomes available. Lessor shall notify Lessees in writing as
space becomes available including terms and conditions for its lease. Lessees
shall have thirty (30) days to accept or reject said space, after which, Lessees
forefits all rights under this Article and Lessor may lease to others.
ARTICLE 22 - NOTICES
Whenever the delivery or service of a notice from one party to the other
shall become necessary or convenient hereunder, service shall be made in the
following manner:
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<PAGE>
Upon Lessor by sending such notices postage prepaid by United States
Certified Mail, addressed to Lessor Robert S. Grant, 1777 Las Tunas Road, Santa
Barbara, California or at such other address as Lessor may designate.
Upon Lessees by sending such notices postable prepaid by United States
Certified Mail, addressed to Lessees at Suite A, 125 East Victoria Street, Santa
Barbara, California, or at such other place as Lessees may designate.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
CRANDELL DEVELOPMENT
CORPORATION
BY:
/s/ Michael Crandell
--------------------
MICHAEL CRANDELL,
PRESIDENT, LESSEE
/s/ Michael Crandell
--------------------
MICHAEL CRANDELL,
INDIVIDUALLY, LESSEE
/s/ Robert S. Grant
- -------------------
ROBERT S. GRANT, LESSOR
-9-
<PAGE>
25 February 1994
Mr. Michael Crandell, President
CRANDELL GROUP, INC.
125 East Victoria Street
Santa Barbara, CA 93101
Subject: 125 E. Victoria Street
Dear Michael:
This letter is to confirm the rent adjustment that is granted to the Crandell
Group, Incorporated for lease of Suites A, C, D, and E in my office building
located 125 E. Victoria Street, Santa Barbara, California.
First: All terms and conditions of the original lease for said office suites
- -----
dated 18 December 1991 and the Assignment and Assumption of Lease to
the Crandell Group, Inc. dated 1/28/93 remain in effect except as
modified by this letter.
Second: The base rent listed in ARTICLE 3 - RENT, Paragraph A, shall be
- ------
changed to $3,780 dollars per month effective March 1, 1994. For
purposes of any subsequent annual rent adjustment, the Consumer Price
Index (CPI) for February 1994 shall be used as the base index month.
Third: The CPI annual rent adjustment for February 1, 1993 to January 31, 1994
- -----
has not been changed, nor paid, and is hereby intentionally waived.
Fourth: In addition to the six uncovered parking spaces included in the Lease,
- ------
the Crandell Group will continue to rent extra parking spaces #18, 20
and 21 at $50 per month per space and one garage space at $80 per
month, for a total of $230 per month. Crandell will cease renting
extra parking space #25 at the end of this month.
Fifth: The first option to extend the term of the Lease until January 31,
- -----
1995 is hereby exercised at the following monthly rate:
<TABLE>
<CAPTION>
<S> <C>
Base Rent: $3,780
Extra Parking: 230
----------------- ------
Total Rent: $4,010
</TABLE>
This letter will serve as Amendment #1 to the subject Lease by your signing and
returning a copy of this letter to me.
<PAGE>
Your continued tenancy is much appreciated.
Sincerely,
/s/ Robert S. Grant
Robert S. Grant, Lessor
RSG/sg
Approved
Lessee: /s/ by Michael Crandell Date: 2/28/94
----------------------- -------
Crandell Group, Inc.
Michael Crandell, President
<PAGE>
17 May 1995
Mr. Michael Crandell
CRANDELL GROUP, INC.
125 E. Victoria Street, Suite A
Santa Barbara, CA 93101
Subject: Lease Amendment #2
Dear Michael:
This letter will serve to confirm the agreement reached between us during our
meeting of 3/20/95 and become Amendment #2 to your lease dated December 18,
1991, and its Amendment #1 dated February 25, 1994. The terms of your lease are
hereby modified as follows:
a. The period of the extended lease shall be for twelve months, beginning
April 1, 1995.
b. The base rent shall be Thirty-Two Hundred Seventy-Four Dollars ($3,274.00)
per month.
c. The extra covered space shall be retained at the rate of $80.00 per month,
making the total monthly rent payment Thirty-Three Hundred Fifty-Four
Dollars ($3,354.00).
d. All other terms and conditions of the lease and Amendment #1 mentioned
above shall remain in force.
Please sign and return one copy of this letter to me in the enclosed envelope.
Your continued tenancy is much appreciated.
Very truly yours, Approved:
/s/ Robert S. Grant
Robert S. Grant, Lessor /s/ Michael Crandell 5/6/95
-------------------- ------
1777 Las Tunas Road Michael Crandell Date
Santa Barbara, CA 93101 Crandell Group, Inc., Lessee
<PAGE>
25 March 1996
Mr. Michael Crandell
CRANDELL GROUP, INC.
125 E. Victoria Street, Suite A
Santa Barbara, CA 93101
Subject: Lease Amendment #3
Dear Michael:
This letter will serve to confirm your request for a six (6) month extension of
your lease dated December 18, 1991, and as amended by Amendment #1 dated
February 25, 1994 and, Amendment #2 dated May 17, 1995 and become Amendment #3
to your lease dated December 18, 1991. The terms of your lease are hereby
modified as follows:
a. The period of the extended lease shall be for six months, beginning April
1, 1996 and ending September 30, 1996.
b. The base rent shall be Thirty-Three Hundred Seventy-Four Dollars
($3,374.00) per month.
c. The extra covered space shall be retained at the rate of $80.00 per month,
making the total monthly rent payment Thirty-Three Hundred Fifty-Four
Dollars ($3,354.00).
d. All other terms and conditions of the lease and Amendments #1 and #2
mentioned above shall remain in force.
Please sign and return one copy of this letter to me in the enclosed envelope.
Your continued tenancy is much appreciated.
Very truly yours, Approved:
/s/ Robert S. Grant
Robert S. Grant, Lessor /s/ Michael Crandell 4/11/96
-------------------- -------------
1777 Las Tunas Road Michael Crandell Date
Santa Barbara, CA 93101 Crandell Group, Inc., Lessee
<PAGE>
EXHIBIT 10.8
[Execution Copy]
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS AGREEMENT (this "Agreement") is made as of March 5, 1997, by and among
JETFAX, INC., a Delaware corporation (the "Company"), and Edward R. Prince, III,
Lon B. Radin and Virginia Snyder (each sometimes hereinafter referred to
collectively as the "Stockholders" and individually as a "Stockholder").
WHEREAS, the Stockholders are holders of an aggregate of 767,500 shares of
the Company's Common Stock (as defined herein); and
WHEREAS, the Company is contemplating an initial public offering of the
Company's securities and requires in connection therewith that the Stockholders
agree to a standoff agreement, and in consideration thereof the Company agrees
to grant such Stockholders the registration rights set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1
---------
Definitions
-----------
1.1 For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(b) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Act.
(c) "Common Stock" shall mean the Company's common stock, $.01 par
value per share.
<PAGE>
(d) "Preferred Stock" shall mean the Company's preferred stock,
$.01 par value per share.
1.2 Wherever used in this Agreement the words "include" or "including"
shall be construed as incorporating, also, "but not limited to" or "without
limitation", the word "day" means a calendar day unless otherwise specified,
the word "party" means each and every person whose signature is set forth at the
end of this Agreement, the word "law" (or "laws") means any statute, ordinance,
resolution, regulation, code, rule, order, decree, judgment, injunction, mandate
or other legally binding requirements of a government entity, the word "notice"
shall mean notice in writing (whether or not specifically stated) and shall
include notices, consents, approvals and any other written communication
contemplated under this Agreement and the words "business day" shall mean any
day other than Saturday, Sunday or a day on which commercial banks located in
San Francisco, California are required or authorized by law to close.
1.3 Certain other words and phrases are defined or described elsewhere in
this Agreement. Unless the context otherwise requires, words in the singular
number include the plural and vice versa. Use of the masculine, feminine or
neuter shall include each such other gender. Unless specified to the contrary,
references to Articles and/or Sections mean the particular Article or Section in
this Agreement. References to this Agreement shall include this Agreement as
varied or modified from time to time by the parties.
SECTION 2
---------
Registration Rights
-------------------
2.1 Optional Registrations. If at any time or times the Company shall
----------------------
determine to register any of its securities (for itself or for any other
securities holder of the Company) under the Act or any successor legislation
(other than a registration relating to stock option plans, employee benefit
plans or a Rule 145 transaction), and in connection therewith the Company may
lawfully register its Common Stock, the Company will give written notice thereof
to the Holders (as defined below) and will use its best efforts to include in
such registration and to effect the registration under the Act of all
Registrable Securities (as defined below) which such Holders may request in
writing delivered to the Company within five (5) days after receipt by such
Holders of the notice given by the Company; provided, however, if the
-------- -------
-2-
<PAGE>
managing underwriter for the Company advises the Company in writing that
including all or part of the Registrable Securities in such offering will
adversely affect the marketing of the proposed offering, then, in connection
with any such underwritten offering by the Company of any of its securities,
such registration of Registrable Securities shall be limited to not less than
five percent (5%) of the total number of shares to be sold in the case of an
initial public offering of the Company's securities, and ten percent (10%) of
the total number of shares to be sold in the case of a subsequent offering;
further provided, however, that such limited number of shares of Common Stock in
- ------- -------- -------
such offering shall be taken from those owned (or obtainable upon the exercise
of rights with respect to other securities) by a group of holders requesting
registration consisting of the Holders and other holders having similar
registration rights to those of the Holders, and such limitation shall be
imposed upon the Holders and such other holders pro rata on the basis of the
total number of (i) shares of Registrable Securities owned by the requesting
Holders and (ii) shares of Common Stock owned, or obtainable by them upon the
exercise of rights with respect to other securities, by such other requesting
holders. In the event of such a limitation, shares of persons not having similar
registration rights will not be included in such registration. Notwithstanding
the foregoing, the Company shall not be obligated to take any action pursuant to
this Section 2.1 in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act. The Company shall have
the right to select the managing underwriter or underwriters for any
underwritten public offering made pursuant to a registration under this Section
2.1. Subject to the foregoing, if such proposed registration is in connection
with an underwritten offering of Common Stock, upon request of any Holder, the
Company shall use its reasonable efforts to cause the managing underwriter
therefor to include in such underwritten offering the Registrable Securities as
to which the Holder requests such inclusion, on terms and conditions comparable
to those of the securities offered on behalf of the Company.
2.2 Definitions. For the purposes of Section 2:
-----------
(a) The term "Registrable Securities" shall mean (i) the Common Stock
issued or issuable upon conversion of all outstanding shares of all series of
the Company's Preferred Stock that are so convertible and upon exercise of any
warrants of the Company for
-3-
<PAGE>
which there are contractual registration rights similar to those of the holders
of such Preferred Stock; (ii) the Common Stock held by the Stockholders as of
the date of this Agreement; and (iii) any Common Stock or other securities of
the Company issued or issuable with respect to the Common Stock described in
clauses (i) and (ii) by way of a stock dividend or stock split, or other
distribution, with respect to or in exchange for or replacement of such Common
Stock or other securities.
(b) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement.
(c) The term "Holder" means any person owning or having immediately
exercisable right to acquire Registrable Securities, including any of the
Stockholders, so long as such Stockholder holds any Registrable Securities.
2.3 Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in
connection with three registrations pursuant to Section 2.1 shall be borne by
the Company, except that the Holders shall bear underwriting commissions and
discounts attributable to their Registrable Securities being registered and the
fees and expenses of separate counsel, if any, for such Holders. All other
selling expenses relating to securities registered on behalf of the Holders and
all other registration expenses shall be borne by the Holders of such securities
pro rata. If the Company includes in any registration any securities to be
offered by it, all expenses thereof shall be borne solely by the Company.
(b) A proportionate share of the expenses of the registration and
offering incurred in connection with any registration pursuant to Section 2.1
after the third registration thereunder, shall be borne pro rata by the Holder
or Holders requesting the registration on the basis of the ratio of the number
of their shares so registered to the total number of shares included in such
registration.
2.4 No Transfer of Registration Rights. The rights to cause the Company
----------------------------------
to register securities granted the Stockholder under
-4-
<PAGE>
this Section 2 may not be assigned or transferred in whole or in part.
2.5 Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriter or underwriters of any proposed firm underwritten public offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten public offering for a period of up to
180 days beginning on the effective date of the applicable registration
statement. The Holders shall upon request execute a separate written agreement
confirming and agreeing as to the foregoing.
2.6 Registration Indemnification. In the event of any registration under
----------------------------
the Act pursuant to this Section 2 of Registrable Securities of any Holder, the
Company will hold harmless such Holder and each underwriter of such securities
and each other person, if any, who controls such Holder or such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Holder or such underwriter or controlling person may
become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or such underwriter specifically for use in the preparation thereof.
-5-
<PAGE>
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking reasonably
satisfactory to it and its counsel from each Holder, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Act, with respect to any
statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company through an instrument duly
executed by the Holder specifically for use in the preparation of such
registration statement, preliminary prospectus or final prospectus or such
amendment or supplement thereto.
Promptly after receipt by an indemnified party under this Section 2.6
of notice of the commencement of any action involving a claim referred to in the
preceding provisions of Section 2.6, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and or assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
2.7 Registration Procedures. Whenever the Company is required by this
-----------------------
Agreement to use its best efforts to effect the registration of any securities,
the Company shall:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective as provided herein;
(b) prepare and file with the Commission all amendments and
supplements to such registration statement and any prospectus used therewith as
may be necessary to keep such registration
-6-
<PAGE>
statement effective and current and to comply with the provisions of the Act
with respect to the sale or other disposition of such securities;
(c) furnish to each Holder of such securities such number of copies
of a prospectus, including a preliminary pros pectus, in conformity with the
requirements of the Act, and such other documents, as such Holder may reasonably
request in order to facilitate the disposition of its securities; and
(d) use its best efforts to register or qualify the securities under
such other securities or "blue sky" or other applicable laws of such
jurisdictions within the United States as the Holder shall reasonably request,
to enable the Holder to consummate the public sale or other disposition in such
jurisdictions of such securities.
2.8 Rule 144 Undertakings. At any time and from time to time after the
---------------------
expiration of ninety (90) days following the earlier of the close of business on
such date as (i) a registration statement filed by the Company under the Act
becomes effective or (ii) the Company registers a class of securities under
Section 12 of the Securities Exchange Act of 1934, as amended, the Company shall
use its best efforts to make publicly available and available to the Holders,
pursuant to Rule 144 of the Commission under the Act, such information as is
necessary to enable the Holders to make sales of Registrable Securities pursuant
to that Rule and the Company shall use its best efforts to timely file with the
Commission all documents and reports required of the Company under the
Securities Exchange Act of 1934. The Company shall furnish to any Holder upon
request (after the preceding sentence shall have become applicable), a written
statement executed by the Company as to compliance with the current public
information requirements of Rule 144.
2.9 Cooperation. In connection with any registration of Registrable
-----------
Securities pursuant to this Section 2, the Company agrees to:
(a) enter into such customary agreements (including, in the event of
any underwritten public offering, an underwriting agreement containing such
terms and provisions, as are customarily contained in underwriting agreements
for comparable offerings and, if no underwriting agreement is entered into, an
indemnification agreement on such terms as is customary in transactions of such
-7-
<PAGE>
nature) and take all such other actions as the Holders or the underwriters, if
any, participating in such offering and sale may reasonably request in order to
expedite or facilitate such offering and sale;
(b) furnish, at the request of the Holders or any underwriters
participating in such offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with respect to the Common Stock registered
and/or the date of the closing for the sale of the Common Stock from the
independent certified public accountants of the Company and addressed to the
Holders and any underwriters participating in such offering and sale, which
letter or letters shall be in form and substance as is customarily given by
independent certified public accountants, and (ii) an opinion, dated the date of
the closing for the sale of the Common Stock, of the counsel representing the
Company with respect to such offering and sale addressed to the Holders and any
such underwriters, which opinion shall be in form and substance as is customary
in transactions of a similar nature for similar entities;
(c) make available for inspection by the Holders and the underwriters,
if any, participating in such offering and sale (which inspecting underwriters
shall, if reasonably possible, be limited to any manager or managers for such
participating underwriters), one counsel for the Holders and any such
underwriters, taken together, and one accountant or accounting firm retained by
the Holders and any such underwriters, taken together, all financial and other
records, corporate documents and properties of the Company, and supply such
additional information, as they shall reasonably request; provided that any such
party shall keep the contents thereof confidential in the manner prescribed by a
confidentiality agreement containing customary terms to be executed by the
persons who are provided such access.
2.10 Action to Suspend Effectiveness; Supplement to Registration Statement.
---------------------------------------------------------------------
In connection with any registration of Registrable Securities pursuant to this
Section 2:
(a) The Company will notify the Holders and their counsel promptly of
(i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Common Stock requested to be registered or
the institution or threatening of any proceeding for such purpose (a "STOP
ORDER") or (ii) the receipt by the Company of any notification with respect to
the suspension of the qualification of the Common Stock requested to be
-8-
<PAGE>
registered for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. Immediately upon receipt of any such notice, the
Holders shall cease to offer or sell any Common Stock pursuant to the
registration statement in the jurisdiction to which such Stop Order or
suspension relates. The Company will use all reasonable efforts to prevent the
issuance of any such Stop Order or the suspension of any such qualification and,
if any such Stop Order is issued or any such qualification is suspended, to
obtain as soon as possible the withdrawal or revocation thereof, and will notify
the Holders and their counsel at the earliest practicable date of the date on
which the Holders may offer and sell Common Stock pursuant to the registration
statement.
(b) For as long as sales of Registrable Securities are permitted
pursuant to a registration statement filed pursuant to this Section 2, the
Company will notify the Holders and their counsel promptly of the occurrence of
any event or the existence of any state of facts that, in the judgment of the
Company, should be set forth in such registration statement. Immediately upon
receipt of such notice, the Holders shall cease to offer or sell any Common
Stock pursuant to such registration statement, cease to deliver or use such
registration statement and, if so requested by the Company, return to the
Company, at its expense, all copies (other than permanent file copies) of such
registration statement. The Company will, as promptly as practicable, take such
action as may be necessary to amend or supplement such registration statement in
order to set forth or reflect such event or state of facts. The Company will
furnish copies of such proposed amendment or supplement to the Holders and their
counsel.
SECTION 3
---------
Miscellaneous
-------------
3.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California without giving effect to principles of
conflicts of law thereunder.
3.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.3 Entire Agreement; Amendment; Waiver.
-----------------------------------
-9-
<PAGE>
(a) This Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subject hereof.
(b) This Agreement may be amended or modified upon the written
consent of the Company and holders in interest of not less than a majority of
the aggregate of the Common Stock then held by the Stockholders.
(c) Any provision of this Agreement may be waived with respect to
rights of any Stockholder by a written instrument executed by holders in
interest of not less than a majority of the aggregate of the Common Stock then
held by the Stockholders.
3.4 Notices. All notices and other communications required or permitted
-------
under this Agreement shall be in writing and shall be deemed effectively given
upon personal delivery, upon delivery by a nationally recognized overnight
courier service or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the Company at its
address set forth on the signature page of this Agreement and to a Stockholder
at his or her address set forth on the signature pages of this Agreement, or at
such other address as any party may designate by ten days prior written notice
given pursuant to the terms of this section.
3.5 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement upon any breach or
default of any other party under this Agreement shall impair any such right,
power or remedy of such party nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or in any similar breach or
default occurring thereafter; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
3.6 Separability. In the event any provision of this Agreement shall be
------------
held to be invalid, illegal or unenforceable,
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<PAGE>
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
3.7 Expenses. Each party shall bear its own expenses and legal fees
--------
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby other than as expressly stated herein.
3.8 Interpretation. All parties have been assisted by counsel in the
--------------
preparation and negotiation of this Agreement and the transactions contemplated
hereby, and this Agreement shall be construed according to its fair language.
The rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
3.9 Titles. The titles of the sections of this Agreement are for
------
convenience of reference only and are not to be considered in construing this
Agreement.
3.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one Agreement.
[balance of this page intentionally left blank]
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<PAGE>
[Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
JETFAX, INC.
By: /s/Allen K. Jones
-----------------
Allen K. Jones
Vice President and Chief Financial Officer
Address:
1376 Willow Road
Menlo Park, CA 94025
EDWARD R. PRINCE, III
/s/Edward R. Prince III
-----------------------
Address:
c/o JetFax, Inc.
1376 Willow Road
Menlo Park, CA 94025
LON B. RADIN
/s/Lon B. Radin
---------------
Address:
c/o JetFax, Inc.
1376 Willow Road
Menlo Park, CA 94025
VIRGINIA SNYDER
/s/Virginia Snyder
------------------
Address:
2312 Arlene Drive
Santa Clara, CA 95050
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<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 10.9
HYBRID FAX, INC.
-----------------------------
STOCK AND WARRANT PURCHASE AGREEMENT
Dated as of August 31, 1988
-----------------------------
For the Purchase of
299,995 Shares of Series A Preferred Stock
and
Warrants to Purchase 75,009 Shares of Common Stock
- --------------------------------------------------------------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
--------------------------------------------------------------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE
- --------------------------------------------------------------------------------
CONFLICT OF LAWS PROVISIONS THEREOF.
- ------------------------------------
<PAGE>
Stock and Warrant Purchase Agreement
HYBRID FAX, INC.
Dated as of August 31, 1988
Hybrid Fax, Inc., a Delaware corporation (the "Company"), each of the
purchasers listed in Schedule I hereto (the "Purchasers") and First Stage
Partners, a Texas general partnership whose partners consist of the Purchasers
(the "Partnership") have entered into this Agreement for the purpose of the
Purchasers purchasing, and the Company issuing, certain shares of the Company's
Series A Preferred Stock and certain warrants to purchase common stock of the
Company.
1. Authorization of the Securities. The Company has duly authorized the
-------------------------------
issuance and sale of (a) up to 400,000 shares of the Company's Series A
Preferred Stock (the "Preferred") par value $.01 per share, and (b) up to
100,000 warrants (the "Warrants") entitling the holders thereof to purchase, on
certain terms and conditions, an aggregate of 100,000 shares of common stock of
the Company, par value $.01 per share (the "Common Stock"), at an initial
purchase price of $1.50 per share, subject to adjustment as provided in the
Warrants. Shares of Preferred and Warrants shall be issued at the Closing
provided for in Section 3 hereof in Units (the "Units"), each Unit consisting of
four shares of Preferred and one Warrant to purchase one share of Common Stock.
Subscriptions have been rounded as to the number of shares and Warrants as
provided in Schedule I. The Preferred shall have the designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions set forth in the Certificate of Designation (the
"Certificate of Designation") of the Company in the form attached hereto as
Exhibit A. The Preferred shall, upon the terms and conditions set forth in the
Certificate of Designation, be convertible into shares of Common Stock of the
Company at an initial conversion rate of one share for one share, subject to
adjustment as provided in the Certificate of Designation. The Warrants shall
have such terms and conditions of exercise as are set forth in the Warrant
Agreement dated the date hereof between the Company, the Purchasers and the
Partnership which is substantially in the form provided to each of the
Purchasers (the "Warrant Agreement").
2. Purchase and Sale of the Units.
------------------------------
(a) Each Purchaser has executed and delivered to the Company, and the
Company has accepted, a Subscription Agreement and Power of Attorney (the
"Subscription Agreement") pursuant to which such Purchaser has subscribed for
the purchase of a number of shares of Preferred and Warrants in the amounts set
forth opposite such Purchaser's name in Schedule I hereto. An amount equal to
one-half of the purchase price has been paid in to the Company by the Purchasers
upon the acceptance of the Subscription Agreement. Subject to the terms and
conditions of this Agreement
-2-
<PAGE>
and the Subscription Agreement, the Company shall issue and sell to the
Purchasers and each Purchaser shall purchase from the Company, at the Closing
(as defined below), the number of Units specified opposite the Purchaser's name
in Schedule I hereof (the "Purchaser Units") for a purchase price of $3.00 per
Unit in cash.
(b) The Purchaser Units shall be evidenced by Preferred stock certificates
and a Warrant Certificate in the form provided for in the Warrant Agreement.
Each Purchaser Unit or fraction thereof will contain only whole numbers of
shares of Preferred. Exact amounts of shares and Warrants to be issued to the
Purchasers has been rounded to the whole numbers of each as set forth in
Schedule I hereto.
3. Closing.
-------
(a) The closing of the sale and purchase of the Purchaser Units (the
"Closing") to be purchased by the Purchasers shall take place at the offices of
the Company in Brisbane, California at 11:00 a.m. on August 31, 1988, or on such
other business day on or prior to September 21, 1988.
(b) At the Closing, each Purchaser shall deliver the balance of the
purchase price owing on the Purchaser Units, which payment shall be made in
personal or cashier's check or wire transfer to the account of the Company. The
failure of any Purchaser to deliver the balance of his purchase price shall not
effect the obligations of the Company, the Partnership and the remaining
Purchasers to consummate the Closing provided that the aggregate purchase price
for the sale of all Purchaser Units shall equal or exceed $150,000.
(c) If the Closing fails to occur on or before September 15, 1988, each of
the Purchaser and the Company shall, at its election and notwithstanding
anything to the contrary contained in this Agreement, be relieved of all further
obligations under this Agreement, and all funds paid to the Company by the
Purchasers shall be returned to the Purchasers without interest.
(d) At the Closing, each Purchaser shall, upon issuance by the Company,
contribute the shares of Preferred and Warrants purchased by such Purchaser to
the Partnership in accordance with Section 4.2(a) of the Agreement of
Partnership of the Partnership dated as of the date hereof which is
substantially in the form provided to each of the Purchasers. By execution of
this Agreement, each Purchaser hereby assigns and conveys, effective at Closing,
all right, title and interest in the Purchaser Units to the Partnership.
(e) At the Closing, the Company will deliver the shares of Preferred and
Warrants purchased hereby by each of the Purchasers by delivering to the
Partnership, on behalf of each Purchaser, a single Preferred Stock Certificate
and a single Warrant Certificate each dated the Closing Date (as defined above)
and registered in the name of Douglas Y. Bech, as trustee for the Partnership,
against delivery to the Company of the balance of purchase price therefor as
provided
-3-
<PAGE>
in Section 2(b) hereof. The Partnership shall accept the Certificates at Closing
on behalf of the Purchaser.
(f) By delivering payment for the remainder of the purchase price for the
Purchaser Units, each Purchaser shall be deemed to have confirmed as of the
Closing Date that the representations and warranties made by it in Section 7 of
this Agreement and in the Subscription Agreement remain accurate in all material
respects as of the Closing Date and that such Purchaser has performed all of its
obligations to be performed under this Agreement and the Subscription Agreement
on or prior to the Closing Date.
4. Conditions to Purchase. The obligation of the Purchaser to purchase
----------------------
and pay for the Purchaser Units at the Closing shall be subject to the
fulfillment, or the waiver by the Purchaser, prior to or at the Closing, of the
following conditions:
(a) all representations and warranties and other statements of the Company
herein shall be, at and as of the Closing Date, after giving effect to the
transactions contemplated by this Agreement, true and correct in all material
respects;
(b) the Company shall have performed and complied with all of its
obligations and conditions hereunder to be performed on or prior to the Closing
Date in all material respects;
(c) the Company shall have furnished or caused to be furnished to the
Purchaser a certificate, dated the Closing Date and signed by one of its senior
officers as to the fulfillment of the conditions set forth in clauses (a) and
(b) of this Section 4;
(d) the Company shall have entered into a definitive technology transfer
agreement (the "Technology Agreement") with Lon B. Radin in a form satisfactory
with the Company and its counsel;
(e) the Company shall have entered into definitive stock purchase
agreements (the "Employee Stock Agreements") with each of Edward R. Prince III,
Lon B. Radin, David A. Brewer and Mark Flynn on terms substantially as described
in the Business Plan and the Supplemental Business Plan (as defined in the
Subscription Agreements) and in a form satisfactory to the Administrative
Partners of the Partnership;
(f) the Company shall have received prior to the Closing pursuant to this
Agreement and the several Subscription Agreements executed and delivered by each
of the Purchasers ("Subscription Agreement") cash gross proceeds from the
issuance of the Purchaser Units of at least $150,000; and
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<PAGE>
(g) each Purchaser shall have been furnished with the favorable opinion,
dated the Closing Date and addressed to the Purchaser from Andrews & Kurth,
counsel for the Company, in form and substance satisfactory to the
Administrative Partners of the Partnership.
5. Conditions to Sale. The obligation of the Company to issue and sell
------------------
the Purchaser Units to the Purchaser at the Closing shall be subject to the
fulfillment, or the waiver by the Company, prior to or at the Closing, of the
following conditions:
(a) all representations and warranties and other statements of the
Purchaser herein and in the Subscription Agreement shall be, at and as of the
Closing Date, after giving effect to the transactions contemplated by this
Agreement, true and correct in all material respects; and
(b) the Purchaser shall have performed and complied with all of its
obligations and conditions hereunder to be performed on or prior to the Closing
Date in all material respect.
6. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
(a) The Company has been duly incorporated and organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own its
properties and conduct its business as described in the Business Plan (as
defined in the Subscription Agreement); the Company has been (or at the Closing
Date will be) duly qualified as a foreign corporation for the transaction of
business and is (or at the Closing Date will be) in good standing, under the
laws of each other jurisdiction in which the Company owns or leases properties,
or conducts any business so as to require such qualification, other than where
the failure to be so qualified or in good standing would not have a material
adverse effect on the Company. The Company has heretofore delivered or prior to
the Closing will deliver to the Purchaser a substantially complete and correct
copy of, and the Company has all requisite corporate power and authority to
enter into and perform all of its obligations under, this Agreement, the
Subscription Agreements, the Certificate of Designation (as fled with the
Secretary of State of the State of Delaware and the Warrant Agreement together
with any exhibits, schedules or attachments thereto (collectively, the
"Documents").
(b) All of the Common Stock of the Company outstanding as of the date
hereof has been, and all of the Common Stock and Preferred of the Company
outstanding on the Closing Date will be, duly and validly authorized and issued,
fully paid and non-assessable; the authorized capital stock of the Company
immediately prior to the Closing will consist of: (i) 5,000,000 shares of Common
Stock, par value $.01 per share, of which 200,000 shares will be issued and
outstanding and (ii) 3,000,000 shares of Preferred Stock, par value $.01 per
share, of which no shares will be issued and outstanding. Except (i) for up to
200,000 shares of Common Stock reserved or available for sale to certain future
employees, officers, consultants and directors of the Company, (ii) 690,000
shares of Common Stock issued or to be issued pursuant to the Employee Stock
Agreements, and
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<PAGE>
(iii) as provided for in the Certificate of Designation and in the Warrant
Agreement, (a) there are no outstanding subscriptions, warrants, options, calls
or commitments of any character relating to or entitling any person to purchase
or otherwise acquire from the Company any capital stock of the Company, (b)
there are no obligations or securities convertible into or exchangeable for any
shares of capital stock of the Company or any commitments of any character
relating to or entitling any person to purchase or otherwise acquire any such
obligations or securities; (c) there are no preemptive or similar rights to
subscribe for or to purchase any capital stock of the Company; and (d) the
Company has not entered into any agreement to register its equity or debt
securities under the Securities Act of 1933 as amended (the "Securities Act");
(c) The execution, delivery and performance by the Company of this
Agreement and the Documents and the consummation by the Company of the
transactions contemplated thereby have been or, prior to the Closing Date will
be, duly authorized by all necessary corporate action on the part of the
Company; this Agreement has been duly executed and delivered by the Company and
is a valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement thereof is
subject to general principles of equity (whether applied in a proceeding at law
or in equity and except that enforcement of any indemnification and provisions
contained in such Documents may be limited or denied on the basis of federal or
applicable state securities laws and the public policies underlying such laws.;
the Preferred and Warrants have been duly authorized by the Company for issuance
and sale pursuant to this Agreement, the Certificate of Designation and the
Warrant Agreement and, upon the issuance thereof in accordance with this
Agreement, and in the case of the Preferred, the Certificate of Designation,
and, in the case of the Warrants, the Warrant Agreement, will be entitled to the
benefits of the Certificate of Designation and the Warrant Agreement and the
related certificates;
(d) The issue and sale of the Preferred and Warrants hereunder on the
Closing Date and the execution and delivery of, and the compliance by the
Company with all of the provisions of this Agreement such Preferred and
Warrants, the Certificate of Designation and the Warrant Agreement and the
consummation of the transactions herein and therein contemplated will not result
in a breach or violation of any of the terms or provisions off or constitute a
default under, or result in the creation of any lien in respect of any property
or assets of the Company under, the Certificate of Incorporation or By-Laws of
the Company, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the Company
is bound, or any statute or law to which the Company or any of its properties
are subject or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its properties; and,
assuming the accuracy in all material respects of the representations of the
Purchaser set forth in Section 7 hereof, no consent, approval, authorization,
order, registration or qualification of or with any such court or governmental
agency or body is required for validity of the execution and delivery of or for
the performance by the Company of this Agreement or the Warrant Agreement, the
issue and sale of the Preferred and Warrants constituting
-6-
<PAGE>
the Purchaser Units or the placement of the Purchaser Units or the consummation
by the Company of the other transactions contemplated by this Agreement, the
Preferred and Warrants constituting the Purchaser Units, the Certificate of
Designation or the Warrant Agreement, except such as may be required under state
securities or Blue Sky laws in connection with the placement of the Units and
except such as may be required under the Securities Act and such state
securities or Blue Sky laws in connection with subsequent resales by purchasers
in such placement;
(e) There are no legal or governmental proceedings pending to which the
Company is a party or of which any of its properties is the subject, or which
challenge the validity or legality of this Agreement, the other Documents or the
transactions contemplated hereby or thereby; and, to the best of the Company's
knowledge, no such proceedings are threatened by governmental authorities or by
any other persons; and
(f) On the Closing Date, the Company will not be in violation of any
statutes, laws, ordinances, governmental rules or regulations or any judgment,
order or decree (federal, state, local or foreign) to which it is subject or
have failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership or operation of its properties or the
conduct of its business (including, without limitation, matters relating to
environmental laws or regulations), except for such violations and failures to
obtain such licenses, permits, franchises or other governmental authorizations
that would not, individually or in the aggregate, have a material adverse effect
on the business, results of operations or financial condition of the Company
(whether because such license, permit, franchise or other governmental
authorization will be obtained within a reasonable time after the Closing Date
or otherwise)
7. Representations and Warranties of the Purchasers.
------------------------------------------------
Each Purchaser severally represents the following to the Company and the
Partnership:
(a) Each Purchaser has full power and authority to enter into this
Agreement, the Subscription Agreement, the Warrant Agreement and the Partnership
Agreement, and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Each of the
Agreement, the Subscription Agreement, the Warrant Agreement and the Partnership
Agreement and the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of each Purchaser, and each of
this Agreement, the Subscription Agreement, the Warrant Agreement, and the
Partnership Agreement is a legal, valid and binding obligation of such
Purchaser, enforceable against the purchaser in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and except as enforcement thereof is subject to general
principles of equity (whether applied in a proceeding at law or in equity), and
except that enforcement of the indemnification and contribution provisions of
this Agreement may be limited or denied on the basis of federal or applicable
state securities laws and the public policies underlying such laws.
-7-
<PAGE>
(b) Each Purchaser and, if he has engaged one, Purchaser Representative
(as defined in the Subscription Agreement) have been furnished, prior to the
date hereof, a copy of the Offering Documents (as defined in the Subscription
Agreement), (ii) the Company has made available to the Purchaser and his
Purchaser Representative (if any) the opportunity to ask questions of, receive
answers and to obtain any additional information necessary to verify the
accuracy of the information set forth in the Offering Documents, and the
Purchaser and his Purchaser Representative (if any) did receive all such
information from the Company concerning the terms and conditions of the offering
and (iii) each Purchaser and his Purchaser Representative (if any) together have
such knowledge and experience in financial and business matters necessary to be
able to analyze the merits and risks of this investment.
(c) The Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(d) Each Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Preferred and
Warrants (or the Common Stock issuable upon exercise or conversion) for which
such Purchaser hereby subscribes. Each Purchaser is able to bear the economic
risk of this investment and, consequently, without limiting the generality of
the foregoing, is able to hold the Preferred and Warrants (and the Common Stock
issuable upon conversion or exercise) for an indefinite period of time and has a
sufficient net worth to sustain a loss of the entire investment in the Company
in the event such loss should occur.
(e) Each Purchaser is acquiring the Preferred and Warrants for his own
account for investment and not for the benefit of any other person or with a
view toward resale or redistribution in a manner which would require
registration under the 1933 Act, and such Purchaser does not now have any reason
to anticipate any change in circumstances or other particular occasion or event
which would cause such Purchaser to sell the Preferred and Warrants (or the
Common Stock issuable upon conversion or exercise).
(f) Each Purchaser received no representations or warranties (other than
any contained in this Agreement) from the Company or its employees or agents, or
any other person and, in making my investment decision, and such Purchaser is
relying solely on the information contained in the Offering Documents and
investigations made by such Purchaser or (if applicable) his Purchaser
Representative.
(g) Each Purchaser acknowledges that there are substantial restrictions on
the transferability of the Preferred and Warrants (and the Common Stock issuable
upon the conversion or exercise thereof). Since the Preferred and Warrants (and
the Common Stock issuable upon conversion or exercise thereof) will not be, and
the Purchaser has no right to require that they be, registered under the 1933
Act or qualified pursuant to applicable state securities law (except as provided
in this Agreement), the Preferred and Warrants (and the Common Stock issuable
upon
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<PAGE>
conversion or exercise thereof) may not be, and each Purchaser agrees that
they shall not be, sold unless such sale is exempt from such registration under
the 1933 Act, the Securities Act of Texas and any other applicable state Blue
Sky law or regulation. Each Purchaser further acknowledges that the Company is
under no obligation to aid me in obtaining any exemption from the registration
requirements. Each Purchaser acknowledges that such Purchaser shall be
responsible for compliance with all conditions on transfer imposed by any
securities administrator of any state and for any expenses incurred by the
Company for legal or accounting services in connection with reviewing such a
proposed transfer and/or issuing opinions in connection therewith.
8. Registration Rights.
-------------------
8.1 Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Holders of 50% of the issued or issuable Registrable Securities the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders and (ii)
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, appropriate qualification under Blue Sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 8.1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act; (B) Prior to the earlier of (i) December
31, 1992, or (ii) six months - after the effective date of the Company's
first registered public offering of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume
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and manner of sale limitations contained in Rule 144 promulgated by the
Securities and Exchange Commission or such similar exemption from
registration requirements of the Act;
(D) During the period starting with the date sixty (60) days prior
to the Company's estimated date of filing of, and ending on the date six
(6) months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(E) After the Company has effected two such registrations pursuant to
this paragraph 8.1(a), and such registrations have been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best
efforts to register, qualify or comply under this Section 8.1 shall be
deferred for a period not to exceed 120 days from the date of receipt of
the written request from the Initiating Holders.
Subject to the foregoing clauses (A) through (F), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 8.1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 8.1(a)(i). In such event, the right of any Holder to registration
pursuant to this Section 8.1 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 8.1, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited as provided herein. The Company shall
(together with all Holders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter(s) selected for such underwriting by a majority in interest
of the Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 8.1, if the managing
underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders participating and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration. To
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facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares. If any Holder disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities so withdrawn shall also be withdrawn from registration,
and such Registrable Securities shall not be transferred in a public
distribution prior to 90 days after the effective date of such registration, or
such other shorter period of time as the underwriters may require.
8.2 Registration Form S-3.
---------------------
(a) If any Holder or Holders holding in the aggregate not less than. 15%
of the aggregate number of shares of outstanding Preferred and Common Stock
issued upon the conversion of the Preferred request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of the Registrable Securities the reasonably anticipated
aggregate price to the public of which, net of underwriting discounts and
commissions, would exceed $500,000, and the Company is then entitled to use Form
S-3 under applicable Commission rules to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
Section 8.3 in any six month period. The substantive provisions of Section 8.5
shall be applicable to each registration initiated under this Section 8.3.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this Section 8.3: (i) in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in effecting such registration, qualification or compliance unless
the Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act; (ii) if the Company, within ten (10) days of
the receipt of the request of the Initiating Holders, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within ninety (90) days of receipt of such request (other than with
respect to a registration statement relating to Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities); (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on the date six (6) months immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or (iv) if the Company shall furnish to such
Holder a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for registration statements to be filed in
the near future, then the Company's obligation to use its best
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<PAGE>
efforts to file a registration statement shall be deferred for a period not to
exceed 120 days from the receipt of the request to file such registration by
such Holder.
8.3 Optional Registrations. If at any time or times after the Closing
----------------------
Date, the Company shall determine to register any of its securities (for itself
or for any other securities holder of the Company) under the Securities Act or
any successor legislation (other than a registration relating to stock option
plans, employee benefit plans or a Rule 145 transaction), and in connection
therewith the Company may lawfully register its Common Stock, the Company will
promptly give written notice thereof to the then holders (the "Holders") of all
issued or issuable Registrable Securities (as hereinafter defined) and will use
its best efforts to include in such registration and to effect the registration
under the Securities Act of all Registrable Securities which such Holders may
request in writing delivered to the Company within 15 days after receipt by such
Holder of the notice given by the Company; provided, however, if the managing
underwriter for the Company advises the Company in writing that including all or
part of the Registrable Shares in such offering will adversely affect the
marketing of the proposed offering, then, in connection with any such
underwritten offering by the Company of any of its securities, such registration
of Registrable Securities shall be limited to not less than 10% of the total
number of shares to be sold in the case of an initial public offering of the
Company's securities, and 20% of the total number of shares to be sold in the
case of a subsequent offering; further provided, however, that such limited
number of shares of Common Stock in such offering, which shares shall be taken
from those owned (or obtainable upon the exercise of rights with respect to
other securities) by a group of holders requesting registration consisting of
the Holders and other holders having similar registration rights to those of the
Holders, and such limitation shall be imposed upon the Holders and such other
holders pro rata on the basis of the total number of (i) shares of Registrable
Securities owned by the requesting Holders and (ii) shares of Common Stock
owned, or obtainable by them upon the exercise of rights with respect to other
securities, by such other requesting holders. In the event of such a
limitation, shares of persons not having similar registration rights will not be
included in such registration. The Company shall have the right to select the
managing underwriter or underwriters for any underwritten offering made pursuant
to a registration under this Section 8.3 hereof.
8.4 Registrable Securities. For the purposes of these provisions, the term
----------------------
"Registrable Securities" shall mean (i) the Common Stock issued or issuable upon
conversion of the Preferred (the "Conversion Stock"), (ii) the Common Stock
issued or issuable upon the exercise of the Warrants and (iii) any Common Stock
issued or issuable with respect to the Common Stock described in clause (i) or
(ii) by way of a stock dividend or stock.
8.5 Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in connection
with (i) one registration pursuant to Section 8.1, and (ii) three registrations
pursuant to Section 8.3, shall be borne by the Company, except that the Holders
shall bear underwriting commissions and discounts attributable to their
Registrable Securities being registered and the fees and expenses of separate
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<PAGE>
counsel, if any, for such Holders. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other Registration Expenses shall be borne by the Holders of such securities pro
rata. If the Company includes in such registration any securities to be offered
by it, all expenses shall be borne by the Company.
(b) A proportionate share of the expenses of the registration and offering
incurred in connection with (i) a registration pursuant to Section 8.2 and (ii)
any registration pursuant to Section 8.3 after the third registration
thereunder, shall be borne pro rata by the Holder or Holders requesting the
registration on the basis of the ratio of the number of their shares so
registered to the total number of shares included in such registration.
8.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Purchasers under Sections 8.1, 8.2 and 8.3 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by a
Purchaser provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, and (ii) such assignee or transferee
acquires at least 5,000 shares of the Registrable Securities (appropriately
adjusted for Recapitalizations). Notwithstanding the foregoing, the rights to
cause the Company to register securities may be assigned to any constituent
partner of the Partnership, without compliance with item (ii) above, provided
notice thereof is promptly given to the Company.
8.7 Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriter or underwriters of any proposed firm underwritten offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten offering for a period of up to 90 days
beginning on the effective date of the registration statement, provided that the
Company's officers and directors and each holder of 10% or more of the Company's
issued and outstanding Common Stock also agree to such limitations. The Holders
shall upon request execute a written agreement confirming and agreeing as to the
foregoing.
8.8 Registration Indemnification. In the event of any Registration under
----------------------------
the Act pursuant to these provisions of Registrable Securities of any Holder,
the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which such Holder or such underwriter or controlling person
may become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other
expenses
-13-
<PAGE>
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or such underwriter specifically for use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company through an instrument duly executed by the Holder specifically for use
in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
9. Right of First Purchase.
-----------------------
9.1. Right of First Purchase. The Company hereby grants to each Purchaser
-----------------------
the right to first purchase for a number of shares of the same class of New
Securities (as defined in this Section 9.1) which the Company may, from time to
time, propose to sell and issue. Each Purchaser shall be entitled to purchase a
number of shares of the class of New Securities sufficient to maintain his pro
rata ownership in the Company after taking into account the proposed issuance by
the Company, which pro rata ownership is equal to the ratio that the sum of the
number of shares of Preferred, the number of outstanding shares of Conversion
Stock and the number of shares of Common Stock held by such Purchaser as a
result of the exercise of Warrants then held by such Purchaser bears to the
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<PAGE>
sum of the total number of shares of Common Stock then outstanding and the
number of shares of Conversion Stock or Common Stock issuable upon conversion of
the then outstanding Preferred.
(a) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company including Common Stock and Preferred Stock, whether
now authorized or not, and rights, options or warrants to purchase said shares
of Common Stock or Preferred Stock, and securities of any type whatsoever that
are, or may become, convertible into said shares of Common Stock or Preferred
Stock. Notwithstanding the foregoing, "New Securities" does not include (i) the
shares of Preferred issued pursuant to this Agreement, the Conversion Stock or
Common Stock issued upon the exercise of the Warrants, (ii) securities offered
to the public generally pursuant to a registration statement or pursuant to
Regulation A under the Securities Act, (iii) securities issued in the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other reorganization whereby the Company or
its shareholders own not less than fifty-one percent (51%) of the voting power
of the surviving or successor corporation, (iv) shares of the Company's Common
Stock or related options exercisable for such Common Stock issued to employees,
officers and directors of, and consultants, customers, and vendors to, the
Company, pursuant to any arrangement approved by the Board of Directors of the
Company, (v) stock issued pursuant to any rights or agreements, including
without limitation convertible securities, options and warrants, provided that
the rights of first purchase established by this Section 9.1 apply with respect
to the initial sale or grant by the Company of such rights or agreements, or
(vi) stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Company shall include with such notice a
brief summary of the business plan of the Company. Each Purchaser shall have ten
(10) days from the date of receipt of any such notice to agree to purchase up to
the Purchaser's share (calculated in accordance with Section 9.1(a)) of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. The Company shall notify each Purchaser of any material
revision to the price and terms of the issuance of New Securities and Purchasers
shall be entitled to 10 additional days in order to respond to the Company.
(c) In the event a Purchaser fails to exercise such right of first
purchase within said 10 day period, the Company shall have 120 days thereafter
to sell or enter into an agreement ("pursuant to which the sale of New
Securities covered thereby shall be closed, if at all, within 60 days from the
date of said agreement) to sell the New Securities not elected to be purchased
by Purchasers at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or entered into an agreement
to Sell the New Securities within said 120 day period tor sold and issued New
Securities in accordance with the foregoing within 60 days for the date of said
agreement), the
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<PAGE>
Company shall not thereafter issue or sell any of such New Securities, without
offering securities in the manner provided above.
(d) The right of first purchase granted under this Agreement shall expire
upon the first to occur of the following: (i) the closing of the first public
offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared effective
by, the Commission under the Securities Act; or (ii) as to a Purchaser if such
Purchaser no longer holds at least 5,000 shares of Preferred and/or Conversion
Stock and Warrants (appropriately adjusted for Recapitalizations).
(e) The right of first purchase hereunder is not assignable except by each
of such Purchasers to any wholly-owned subsidiary or constituent partner who
acquires at least 5,000 shares (appropriately adjusted for Recapitalizations).
10. Restrictions on Transfer; Other Agreements.
------------------------------------------
10.1. Restrictive Legend. (a) The Purchaser Units shall (unless their
------------------
disposition is otherwise permitted by the provisions of this Section 10) be
subject to stop transfer instructions and shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"This security has not been registered under the Securities Act of
1933, as amended, and may not be offered, sold or otherwise transferred,
pledged or hypothecated unless and until registered under such act, or
unless such offer, sale, transfer, pledge or hypothecation is exempt from
registration or is otherwise in compliance with such act. The
transferability of this security is also subject to restrictions contained
in a Purchase Agreement which agreements the Company will furnish to the
holder of this security upon request."
(b) The Company hereby agrees that it will, upon the Purchasers request,
eliminate the foregoing legend and stop transfer instructions if, in the written
opinion of counsel (which counsel and opinion (in form, scope and substance)
shall be satisfactory to the Company), the Purchaser is entitled, without
limitation as to manner or sales to sell the Purchaser Units without
registration under the Securities Act by reason of Rule 144 thereunder (or any
successor provision).
10.2. Restrictions on Transfer. The Purchasers by acquiring any of the
------------------------
Purchaser Units hereunder, hereby covenants and agrees that, except as herein
provided, it will not directly or indirectly offer for sale or sell (within the
meaning of the Securities Act) any of the Purchaser Units.
(a) The Purchaser may offer or sell the Purchaser Units pursuant to:
(i) an effective registration statement under the Securities Act
("Registration Statement") filed by the Company under Section 8 hereof, or
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<PAGE>
(ii) an exemption from registration under the Securities Act,
provided that prior to any such proposed transfer of the Purchaser Units,
the Purchaser shall give written notice to the Company of the Purchaser's
intention to effect such transfer, which notice shall be accompanied by
such evidence as may be reasonably satisfactory to the Company that the
proposed transfer of the Purchaser Units may be effected without
registration under the Securities Acts whereupon the Purchaser shall be
entitled to transfer the Purchaser Units in accordance with the terms of
the notice delivered by the Purchaser to the Company, or
(iii) the provisions of Rule 144 under the Securities Act, if
applicable.
(b) Any offer or sale of the Purchaser Units shall be made in accordance
with the Federal and state securities laws (including the prospectus delivery
requirements of the Securities Act), if applicable.
(c) Notwithstanding any provision in this Section 10 to the contrary, the
Partnership shall be permitted to transfer Preferred and Warrants to any
withdrawing partner thereof or as a result of the liquidation of the
Partnership, all in accordance with the Partnership Agreement. Such securities
transferred by the Partnership pursuant to this paragraph shall remain subject
to the other provisions of this Section 10.
(d) Each of the Purchaser Units transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 10.1 above except as
provided in Section 8 or if, in the opinion of the legal counsel referred to
above (which counsel and opinion (in form, scope and substance) shall be
satisfactory to the Company), such legend is not required in order to establish
compliance with any provisions of the Securities Act.
11. Miscellaneous.
-------------
11.1. Notices: Payments. Except as otherwise provided in this Agreement,
-----------------
all notices, requests, claims, demands, waivers and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered by hand, if delivered personally or by courier, or five business
days after being deposited in the mail (registered or certified mails postage
prepaid, return receipt requested) properly addressed as set forth below. Any
such notice or other communication shall be addressed (a) if to the Purchasers
at the address included in their respective Subscription Agreement or at such
other address as the Purchaser shall have furnished to the Company in writing,
(b) if to the Partnership, at such address provided in the Partnership
Agreement, (c) if to any subsequent holder of any of the Purchaser Units, at
such address as shown on the Security Register of the Company maintained
pursuant to the Certificate of Designation or Warrant Agreement or (d) if to the
Company, to Hybrid Fax, Inc., 101 First Street, No. 462, Los Altos, California
94022, Attention: President, with a copy to: Douglas Y. Bech, Andrews & Kurth,
4200 Texas Commerce Tower, Houston, Texas 77002, or to such other address and/or
to the
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attention of such other copied person as the Company shall have furnished
to the Purchaser, the Partnership and each such other holder in writing.
11.2. Headings; Schedules and Exhibits. The headings herein are for
--------------------------------
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The
schedules and exhibits attached hereto, and the certificates and other documents
delivered as specified herein, are expressly made a part of this Agreement.
11.3. Effect of Agreement.
-------------------
(a) This Agreement, including the representations and warranties contained
herein and the annexes, schedules, exhibits, certificates, opinions and other
documents referred to herein or delivered pursuant hereto, and the Subscription
Agreements contain the entire agreement between the Purchaser and the Company
with respect to the subject matter contained herein and supersede all prior
agreements and understandings, oral and written, with respect thereto. No
representations and warranties other than those contained herein or in any such
annex, schedule, exhibit, certificate, opinion or other document shall be deemed
to have been made by the Purchaser or the Company with respect to this
Agreement, the Subscription Agreements and the Purchaser Units. All of the
representations and warranties contained herein and in the Subscription
Agreements or in any such annex, schedule, exhibit, certificate or opinion or
other document shall survive the Closing, regardless of any investigation that
may have been or may be made (or any statements made in respect thereof) at any
time by or on behalf of the party to whom such representations and warranties
are made.
(b) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns but, except
as otherwise provided herein, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
(c) No right, power or remedy granted under this Agreement is intended to
be exclusive, but each shall be cumulative and in addition to any other rights,
powers or remedies referred to in this Agreement or otherwise available at law
or in equity; and the exercise or beginning of exercise by any party hereto of
any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by such party of any or all such other rights,
powers or remedies. No waiver by any party hereto, and no failure or delay on
the part of such party in any one or more instances to insist upon strict
performance or observance of one or more covenants or conditions hereof, shall
in any way be, or be construed to be, a waiver thereof or prevent such party's
rights to require at a later time the performance or observance of such
covenants or conditions, or otherwise prejudice such party's rights, powers or
remedies.
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<PAGE>
11.4. Company Information. For so long as the Purchasers shall own
-------------------
Preferred or Warrants, the Company shall furnish to each Purchaser owning
Preferred or Warrants (i) for the first three quarters of each fiscal year
reports of its business and operations (including unaudited quarterly financial
statements) and (ii) for each fiscal year, an annual report of its business and
operations (including financial statements which financial statements shall be
audited commencing for the year ended December 31, 1989 and all subsequent
years). The Company shall, from time to time prior to the Closing, provide to
the Purchaser such other information respecting the business operations,
financial condition or assets of the Company as the Purchaser may reasonably
request.
11.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES THEREOF.
11.6. Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
11.7. Expenses and Fees. The Company shall pay all costs and expenses
-----------------
in connection with the negotiation, preparation, printing, typing, reproduction,
execution and delivery of this Agreement, the Certificate of Designation, the
Warrant Agreement and the Registration Rights Agreement, any amendment or
supplement to or modification of any of the foregoing and any and all other
documents furnished pursuant hereto or thereto or in connection herewith or
therewith including the reasonable fees and disbursements of Andrews & Kurth,
except for the fees of counsel who render the opinions specified in Sections 8
and 9 hereof (which fees shall be paid by the Purchaser incurring such fees),
all costs and expenses in connection with the administration of this Agreement
and all reasonable costs and expenses (including, without limitations attorneys
fees and expenses), if any, in connection with the enforcement of this
Agreement, the Certificate of Designation, the Warrant Agreement or any other
agreement furnished pursuant hereto or thereto or in connection herewith or
therewith; provided that the Company shall not be obligated to pay any amounts
in accordance with the performance of the registration rights granted in Section
8 hereof except as provided therein.
11.8. Delivery. The Purchasers hereby appoints the Partnership as its agent
--------
to accept delivery of the Purchaser Units at the Closing and to execute a
receipt for such Units on the Purchaser's and the Partnership's behalf.
11.9. Lost, Etc., Certificates Evidencing Preferred Certificates;
-----------------------------------------------------------
Exchange of Certificates. Upon receipt of evidence satisfactory to the Company
- ------------------------
of the loss, theft, destruction or mutilation of any certificate evidencing any
shares of Preferred held by the Purchaser or the Partnership, and in case of
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Company, or, in the case of such mutilation, upon surrender and cancellation
of such certificate, the Company will make and deliver in lieu of such
certificate one or more new certificates of the same series and
-19-
<PAGE>
in such denomination or denominations as the Purchaser or the Partnership, as
the case may be, may request for the same aggregate number of shares of
Preferred evidenced by the certificate so lost, stolen, destroyed or mutilated,
less the number of shares of Preferred, if any, originally evidenced by such
certificate that have theretofore been redeemed, and registered in such name or
names as the Purchaser or the Partnership may request. Replacement of lost,
stolen or mutilated Warrant Certificates shall be governed by the Warrant
Agreement.
Upon surrender by the Purchaser, or the Partnership or their respective
nominee of any certificate evidencing any shares of Preferred for exchange at
the office of the Company, the Company at its expense (exclusive of applicable
transfer taxes if any) will issue in exchange therefor one or more new
certificates of the same series and in such denomination or denominations as
such Purchaser may request for the same aggregate number of shares of Preferred
originally evidenced by the certificate so surrendered, less the number of
shares of Preferred, if any, evidenced by such surrendered certificate that have
theretofore been redeemed, and registered in such name or names as such
Purchaser or the Partnership may request.
11.10. Amendments; Waiver. This Agreement may be amended only with, and
------------------
any provision of this Agreement may be waived only by, the written consent of
the holders of at least 66-2/3% of the aggregate Stated Value of the Preferred;
provided however, that no such amendment or waiver of this Section 11.10 shall
be effective without the written consent of the holders of 100% of the
outstanding Preferred.
-20-
<PAGE>
EXECUTED as of the date first above written by the Company, the Partnership
and each of the Purchasers listed in Schedule I hereto by their attorney-in-fact
pursuant to the power of attorney granted in each of the Subscription
Agreements.
HYBRID FAX, INC.
By:/s/Edward R. Prince III
--------------------------
Title: President
---------------
FIRST STAGE PARTNERS
By: /s/Douglas Y. Bech
----------------------------
Administrative Partner
THE PURCHASERS LISTED IN
SCHEDULE I HERETO
By:/s/ Douglas Y. Bech
------------------------------
Douglas Y. Bech, Attorney-in-fact
-21-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Amount No. of Shares
of of No. of
Partner Subscription Series A Pfd. Warrants
-------- ------------ ------------- --------
<S> <C> <C> <C>
Douglas Y. Bech
Andrews & Kurth
4200 Texas Commerce Tower
Houston, Texas 77002 $40,000 53,333 13,334
Cornerstone Management
3000 Sand Hill Road
Bldg. 3, Suite 260
Menlo Park, California 94025
Attn: J. Michael Gullard $10,000 13,333 3,334
Polly C. Draper
3122 P Street, N.W.
Washington, D.C 20007 $10,000 13,333 3,334
Timothy C. Draper
Draper Associates
3000 Sand Hill Road
Building 4, Suite 235
Menlo Park, California 94025 $10,000 13,333 3,334
Janice P. Edwards/(1)/
232 Oak Ridge Ave.
Summit, New Jersey 07901 $10,000 13,333 3,334
Thomas L. Healey
Andrews & Kurth
4200 Texas Commerce Tower
Houston, Texas 77002 $15,000 20,000 5,000
John H. Harris
2511B Nantucket
Houston, Texas 77057 $10,000 13,333 3,334
Paul E. Lego
1580 Hollowtree Drive
Pittsburgh, Pennsylvania 15241 $20,000 26,666 6,667
</TABLE>
- --------------------------
/(1)/Interest assigned by Charles M. Edwards, III to wife.
-22-
<PAGE>
<TABLE>
<CAPTION>
Amount No. of Shares
of of No. of
Investor Subscription Series A Pfd. Warrants
-------- ------------ ------------- --------
<S> <C> <C> <C>
Judy E. Levin/(2)/ $ 5,000 6,667 1,667
c/o Suzanne C. Levin
1103 Post Oak Park
Houston, Texas 77027
Jennifer L. Levin/(2)/ $ 5,000 6,666 1,667
c/o Suzanne C. Levin
1103 Post Oak Park
Houston, Texas 77027
Barry R. Miller $ 10,000 13,333 3,334
Andrews & Kurth
4200 Texas Commerce Tower
Houston, Texas 77002
Dr. D. Elliot Parks $ 10,000 13,333 3,334
Johnson & Johnson
Biotechnology Center
P.O. Box 8289
La Jolla, California 92038
Larry B. Phillips III $ 10,000 13,333 3,334
Andrews & Kurth
4200 Texas Commerce Tower
Houston, Texas 77002
Edward R. Prince, Jr. $ 40,000 53,333 13,334
11550 North Lou-Al
Houston, Texas 77024
Richard D. Tucker $ 10,000 13,333 3,334
P.O. Box 657
Hillsboro, Texas 76445
Van Saun Associates, Inc. $ 10 000 13,333 3,334
P.O. Box 509 -------- ------- ------
Middletown, Conn. 06457
Total $225,000 299,995 75,009
</TABLE>
- ---------------------------------
/(2) /Interest assigned by Suzanne C. Levin to daughters.
-23-
<PAGE>
EXHIBIT 10.10
HYBRID FAX, INC.
_______________________
PREFERRED STOCK PURCHASE AGREEMENT
Dated as of December 16, 1988
_______________________
For the Purchase of
336,000 Shares of Series A Preferred Stock
________________________________________________________________________________
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
--------------------------------------------------------------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE
- --------------------------------------------------------------------------------
CONFLICT OF LAWS PROVISIONS THEREOF.
- ------------------------------------
<PAGE>
Preferred Stock Purchase Agreement
HYBRID FAX, INC.
Dated as of December 16, 1988
Hybrid Fax, Inc., a Delaware corporation (the "Company"), each of the
purchasers listed in Schedule I hereto (the "Purchasers") and First Stage
Partners, a Texas general partnership whose partners consist of the Purchasers
and certain existing holders of the Company's Series A Preferred Stock (the
"Partnership") have entered into this Agreement for the purpose of the
Purchasers purchasing, and the Company issuing, certain shares of the Company's
Series A Preferred Stock.
1. Authorization of the Securities. The Company has duly authorized the
-------------------------------
issuance and sale of up to 360,000 additional shares of the Company's Series A
Preferred Stock (the "Preferred") par value $.01 per share. Subscriptions have
been rounded as to the number of shares as provided in Schedule I. The Preferred
shall have the designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions set forth in the
Certificate of Designation (the "Certificate of Designation") of the Company in
the form previously delivered to each of the Purchasers. The Preferred shall,
upon the terms and conditions set forth in the Certificate of Designation, be
convertible into shares of Common Stock of the Company, par value $.01 per share
(the "Common Stock") at an initial conversion rate of one share for one share,
subject to adjustment as provided in the Certificate of Designation.
2. Purchase and Sale of the Shares.
-------------------------------
(a) Each Purchaser has executed and delivered to the Company, and the
Company has accepted, a Subscription Agreement and Power of Attorney (the
"Subscription Agreement") pursuant to which such Purchaser has subscribed for
the purchase of a number of shares of Preferred in the amounts set forth
opposite such Purchaser's name in Schedule I hereto. An amount equal to 25% of
the purchase price has been paid in to the Company by the Purchasers upon the
acceptance of the Subscription Agreement. Subject to the terms and conditions of
this Agreement and the Subscription Agreement, the Company shall issue and sell
to the Purchasers and each Purchaser shall purchase from the Company, at the
Closing (as defined below), 25% of the Shares specified opposite the Purchaser's
name in Schedule I hereof (the "Purchaser Shares") for a purchase price of
$.8333333 per Share in cash. Thereafter, the remainder of the purchase price
will be paid and the remaining shares will be issued.
-1-
<PAGE>
(b) The Purchaser Shares shall be evidenced by Preferred stock
certificates. Shares to be issued to the Purchasers will be issued in the whole
numbers of each as set forth in Schedule I hereto.
3. Closing.
-------
(a) The closing of the acceptance of subscriptions and the sale and
purchase of 25% of the Purchaser Shares (the "Closing") to be purchased by the
Purchasers shall take place at the offices of the Company in Redwood City,
California at 3:00 p.m. on December 16, 1988, or on such other business day on
or prior to December 31, 1988 (the "Closing Date"). The Closing shall not occur
unless the Company has accepted subscriptions for the purchase of Purchaser
Shares of at least $150,000 in the aggregate. At the Closing, each Purchaser
shall deliver 25% of the purchase price owing on the Purchaser Shares, which
payment shall be made in personal or cashier's check or wire transfer to the
account of the Company.
(b) The closing of the sale and purchase of the remaining Purchaser'
Shares subscribed for but not issued (the "Second Closing"), shall take place at
the offices of the Company at 3:00 p.m. on January 16, 1989, or such other
business day not later than January 31, 1989 (the "Second Closing Date"). The
failure of any Purchaser to deliver the balance of his purchase price shall not
effect the obligations of the Company, the Partnership and the remaining
Purchasers to consummate the Second Closing with respect to all other Purchaser
Shares.
(c) If the Closing fails to occur on or before December 31, 1988, each of
the Purchaser and the Company shall, at its election and notwithstanding
anything to the contrary contained in this Agreement, be relieved of all further
obligations under this Agreement, and all funds paid to the Company by the
Purchasers shall be returned to the Purchasers without interest.
(d) At the Closing and the Second Closing, each Purchaser shall, upon
issuance by the Company, contribute the shares of Preferred purchased by such
Purchaser to the Partnership in accordance with Section 4.2(a) of the Agreement
of Partnership of the Partnership dated as of the date hereof which is
substantially in the form provided to each of the Purchasers. By execution of
this Agreement, each Purchaser hereby assigns and conveys, effective at Closing,
all right, title and interest in the Purchaser Shares to the Partnership.
(e) At the Closing and the Second Closing, the Company will deliver the
shares of Preferred purchased hereby by each of the Purchasers by delivering to
the Partnership, on behalf of each Purchaser, a single Preferred Stock
Certificate dated the Closing Date, in the case of Purchaser Shares issued at
the Closing, or the Second Closing Date, in the case of Purchaser Shares issued
at the Second Closing, and registered in the name of Douglas Y. Bech, as trustee
for the Partnership, against delivery to the Company of the portion of the
purchase price due therefore as provided in Sections 2(a) and 2(b) hereof. The
Partnership shall accept the Certificates at Closing and at the Second Closing
on behalf of the Purchaser.
-2-
<PAGE>
(f) By delivering payment for the portion of the purchase price for the
Purchaser Shares due on such date, each Purchaser shall be deemed to have
confirmed as of the Closing Date or the Second Closing Date, as the case may be,
that the representations and warranties made by it in Section 7 of this
Agreement and in the Subscription Agreement remain accurate in all material
respects as of the Closing Date or the Second Closing Date, as the case may be,
and that such Purchaser has performed all of its obligations to be performed
under this Agreement and the Subscription Agreement on or prior to such date.
4. Conditions to Purchase. The obligation of the Purchaser to purchase
----------------------
and pay for the Purchaser Shares at the Closing shall be subject to the
fulfillment, or the waiver by the Purchaser, prior to or at the Closing, of the
following conditions:
(a) all representations and warranties and other statements of the Company
herein shall be, at and as of the Closing Date, after giving effect to the
transactions contemplated by this Agreement, true and correct in all material
respects;
(b) the Company shall have performed and complied with all of its
obligations and conditions hereunder to be performed on or prior to the Closing
Date in all material respects;
(c) the Company shall have received prior to the Closing Date pursuant to
this Agreement and the several Subscription Agreements executed and delivered by
each of the Purchasers ("Subscription Agreement") cash gross proceeds from the
issuance of the Purchaser Shares of at least $150,000; and
(d) the Administrative Partners of the Partnership shall have been
furnished with the favorable opinion, dated the Closing Date and the Second
Closing Date and addressed to the Purchaser from Andrews & Kurth, counsel for
the Company, in form and substance satisfactory to the Administrative Partners
of the Partnership.
Such conditions stated in this Section 4 shall also be satisfied as of the
Second Closing with respect to the Purchaser Shares to be issued on such date.
5. Conditions to Sale. The obligation of the Company to issue and sell
------------------
the Purchaser Shares to the Purchaser at the Closing shall be subject to the
fulfillment, or the waiver by the Company, prior to or at the Closing, of the
following conditions:
(a) all representations and warranties and other statements of the
Purchaser herein and in the Subscription Agreement shall be, at and as of the
Closing Date, after giving effect to the transactions contemplated by this
Agreement, true and correct in all material respects; and
(b) the Purchaser shall have performed and complied with all of its
obligations and conditions hereunder to be performed, on or prior to the Closing
Date in all material respect.
-3-
<PAGE>
6. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Purchaser as follows:
(a) The Company has been duly incorporated and organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own its
properties and conduct its business as described in the Memorandum and the
Business Plan (as defined in the Subscription Agreement); the Company has been
(or at the Closing Date will be) duly qualified as a foreign corporation for the
transaction of business and is (or at the Closing Date will be) in good
standing, under the laws of each other jurisdiction in which the Company owns or
leases properties, or conducts any business so as to require such qualification,
other than where the failure to be so qualified or in good standing would not
have a material adverse effect on the Company. The Company has heretofore
delivered or prior to the Closing will deliver to the Purchaser a substantially
complete and correct copy of, and the Company has all requisite corporate power
and authority to enter into and perform all of its obligations under, this
Agreement, the Subscription Agreements, the Certificate of Designation (as filed
with the Secretary of State of the State of Delaware) together with any
exhibits, schedules or attachments thereto (collectively, the "Documents").
(b) All of the Common Stock of the Company outstanding as of the date
hereof has been, and all of the Common Stock and Preferred of the Company
outstanding on the Closing Date will be, duly and validly authorized and issued,
fully paid and non-assessable; the authorized capital stock of the Company
immediately prior to the Closing will consist of: (i) 5,000,000 shares of Common
Stock, par value $.01 per share, of which 890,000 shares will be issued and
outstanding and (ii) 3,000,000 shares of Preferred Stock, par value $.01 per
share, of which 299,995 shares will be issued and outstanding. Except (i) for up
to 200,000 shares of Common Stock reserved or available for sale to certain
future employees, officers, consultants and directors of the Company, (ii) as
provided for on the Certificate of Designation and (iii) Warrants issued
pursuant to that certain Warrant Agreement dated August 31, 1988 among the
Company and certain investors (the "Warrant Agreement") to purchase an aggregate
75,009 shares of the Company's Common Stock, (a) there are no outstanding
subscriptions, warrants, options, calls or commitments of any character relating
to or entitling any person to purchase or otherwise acquire from the Company any
capital stock of the Company, (b) there are no obligations or securities
convertible into or exchangeable for any shares of capital stock of the Company
or any commitments of any character relating to or entitling any person to
purchase or otherwise acquire any such obligations or securities; (c) there are
no preemptive or similar rights to subscribe for or to purchase any capital
stock of the Company; and (d) the Company has not entered into any agreement to
register its equity or debt securities under the Securities Act of 1933 as
amended (the "Securities Act");
(c) The execution, delivery and performance by the Company of this
Agreement and the Documents and the consummation by the Company of the
transactions contemplated thereby have been or, prior to the Closing Date will
be, duly authorized by all necessary corporate action on the part of the
Company; this Agreement has been duly executed and delivered by the Company and
is
-4-
<PAGE>
a valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement thereof is
subject to general principles of equity (whether applied in a proceeding at law
or in equity and except that enforcement of any indemnification and provisions
contained in such Documents may be limited or denied on the basis of federal or
applicable state securities laws and the public policies underlying such laws;
the Preferred has been duly authorized by the Company for issuance and sale
pursuant to this Agreement and the Certificate of Designation and, upon the
issuance thereof in accordance with this Agreement, and the Certificate of
Designation, will be entitled to the benefits of the Certificate of Designation
and the related certificates;
(d) The issue and sale of the Preferred hereunder on the Closing Date and
the execution and delivery of, and the compliance by the Company with all of the
provisions of this Agreement and the Certificate of Designation and the
consummation of the transactions herein and therein contemplated will not result
in a breach or violation of any of the terms or provisions off or constitute a
default under, or result in the creation of any lien in respect of any property
or assets of the Company under the Certificate of Incorporation or By-Laws of
the Company, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the Company
is bound, or any statute or law to which the Company or any of its properties
are subject or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its properties; and,
assuming the accuracy in all material respects of the representations of the
Purchaser set forth in Section 7 hereof, no consent, approval, authorization,
order, registration or qualification of or with any such court or governmental
agency or body is required for validity of the execution and delivery of or for
the performance by the Company of this Agreement, the issue and sale of the
Preferred constituting the Purchaser Shares or the placement of the Purchaser
Shares or the consummation by the Company of the other transactions contemplated
by this Agreement, the Preferred constituting the Purchaser Shares or the
Certificate of Designation, except such as may be required under state
securities or Blue Sky laws in connection with the placement of the Shares and
except such as may be required under the Securities Act and such state
securities or Blue Sky laws in connection with subsequent resales by purchasers
in such placement;
(e) There are no legal or governmental proceedings pending to which the
Company is a party or of which any of its properties is the subject, or which
challenge the validity or legality of this Agreement, the other Documents or the
transactions contemplated hereby or thereby; and, to the best of the Company's
knowledge, no such proceedings are threatened by governmental authorities or by
any other persons; and
(f) On the Closing Date, the Company will not to its knowledge be in
violation of any statutes, laws, ordinances, governmental rules or regulations
or any judgment, order or decree (federal, state, local or foreign) to which it
is subject or have failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership or operation of its
-5-
<PAGE>
properties or the conduct of its business (including, without limitation,
matters relating to environmental laws or regulations), except for such
violations and failures to obtain such licenses, permits, franchises or other
governmental authorizations that would not, individually or in the aggregate,
have a material adverse effect on the business, results of operations or
financial condition of the Company (whether because such license, permit,
franchise or other governmental authorization will be obtained within a
reasonable time after the Closing Date or otherwise).
7. Representations and Warranties of the Purchasers.
------------------------------------------------
Each Purchaser severally represents the following to the Company and
the Partnership:
(a) Each Purchaser has full power and authority to enter into this
Agreement, the Subscription Agreement and the Partnership Agreement, and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Each of the Agreement, the
Subscription Agreement and the Partnership Agreement and the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of each Purchaser, and each of this Agreement, the
Subscription Agreement and the Partnership Agreement is a legal, valid and
binding obligation of such Purchaser, enforceable against the purchaser in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement thereof is
subject to general principles of equity (whether applied in a proceeding at law
or in equity), and except that enforcement of the indemnification and
contribution provisions of this Agreement may be limited or denied on the basis
of federal or applicable state securities laws and the public policies
underlying such laws.
(b) Each Purchaser and, if he has engaged one, Purchaser Representative
(as defined in the Subscription Agreement) have been furnished, prior to the
date hereof, a copy of the Offering Documents (as defined in the Subscription
Agreement), (ii) the Company has made available to the Purchaser and his
Purchaser Representative (if any) the opportunity to ask questions of, receive
answers and to obtain any additional information necessary to verify the
accuracy of the information set forth in the Offering Documents, and the
Purchaser and his Purchaser Representative (if any) did receive all such
information from the Company concerning the terms and conditions of the offering
and (iii) each Purchaser and his Purchaser Representative (if any) together have
such knowledge and experience in financial and business matters necessary to be
able to analyze the merits and risks of this investment.
(c) The Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(d) Each Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future,
-6-
<PAGE>
to sell the Preferred (or the Common Stock issuable upon exercise) for which
such Purchaser hereby subscribes. Each Purchaser is able to bear the economic
risk of this investment and, consequently, without limiting the generality of
the foregoing, is able to hold the Preferred (and the Common Stock issuable upon
conversion) for an indefinite period of time and has a sufficient net worth to
sustain a loss of the entire investment in the Company in the event such loss
should occur.
(e) Each Purchaser is acquiring the Preferred for his own account for
investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred (or the Common Stock issuable upon
conversion).
(f) Each Purchaser received no representations or warranties (other than
any contained in this Agreement) from the Company or its employees or agents, or
any other person and, in making my investment decision, and such Purchaser is
relying solely on the information contained in the Offering Documents and
investigations made by such Purchaser or (if applicable) his Purchaser
Representative.
(g) Each Purchaser acknowledges that there are substantial restrictions on
the transferability of the Preferred (and the Common Stock issuable upon the
conversion thereof). Since the Preferred (and the Common Stock issuable upon
conversion thereof) will not be, and the Purchaser has no right to require that
they be registered under the 1933 Act or qualified pursuant to applicable state
securities law (except as provided in this Agreement), the Preferred (and the
Common Stock issuable upon conversion thereof) may not be, and each Purchaser
agrees that they shall not be sold unless such sale is exempt from such
registration under the 1933 Act, the Securities Act of Texas and any other
applicable state Blue Sky law or regulation. Each Purchaser further acknowledges
that the Company is under no obligation to aid me in obtaining any exemption
from the registration requirements. Each Purchaser acknowledges that such
Purchaser shall be responsible for compliance with all conditions on transfer
imposed by any securities administrator of any state and for any expenses
incurred by the Company for legal or accounting services in connection with
reviewing such a proposed transfer and/or issuing opinions in connection
therewith.
8. Registration Rights.
-------------------
8.1 Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
Holders of 50% of the issued or issuable Registrable Securities (the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed
-7-
<PAGE>
offering of such shares would be reasonably estimated to exceed $3,000,000, the
Company will (i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders and (ii) as soon as
practicable, use its best efforts to effect such registration (including,
without limitation, appropriate qualification under Blue Sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company; provided, however, that the Company shall not
be obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 8.1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six
months after the effective date of the Company's first registered public
offering of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations contained in Rule 144 promulgated by the Securities and
Exchange Commission or such similar exemption from registration
requirements of the Act;
(D) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date
six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than
a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan), provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement
to become effective;
(E) After the Company has effected one such registration
pursuant to this paragraph 8.1(a), and such registrations have been
declared or ordered effective; or
(F) If the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith
judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company or its shareholders for a registration statement
to be filed in the near future, in which case the
-8-
<PAGE>
Company's obligation to use its best efforts to register, qualify or comply
under this Section 8.1 shall be deferred for a period not to exceed 120
days from the date of receipt of the written request from the Initiating
Holders.
Subject to the foregoing clauses (A) through (F), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 8.1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 8.1(a)(i). In such event, the right of any Holder to registration
pursuant to this Section 8.1 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 8.1, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited as provided herein. The Company shall
(together with all Holders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter(s) selected for such underwriting by a majority in interest
of the Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 8.1, if the managing
underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders participating and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
8.2 Registration Form S-3.
---------------------
(a) If any Holder or Holders holding in the aggregate not less than
15% of the aggregate number of shares of outstanding Preferred and Common Stock
issued upon the conversion of the Preferred request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of the Registrable Securities the reasonably anticipated
aggregate price to the public of which, net of underwriting discounts and
commissions, would
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<PAGE>
exceed $500,000, and the Company is then entitled to use Form S-3 under
applicable Commission rules to register the Registrable Securities for such an
offering, the Company shall use its best efforts to cause such Registrable
Securities to be registered for the offering on such form and to cause such
Registrable Securities to be qualified in such jurisdictions as the Holder or
Holders may reasonably request; provided, however, that the Company shall not be
required to effect more than one registration pursuant to this Section 8.3 in
any six month period. The substantive provisions of Section 8.5 shall be
applicable to each registration initiated under this Section 8.3.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this Section 8.3: (i) in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in effecting such registration, qualification or compliance unless
the Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act; (ii) if the Company, within ten (10) days of
the receipt of the request of the Initiating Holders, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within ninety (90) days of receipt of such request (other than with
respect to a registration statement relating to Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities); (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on the date six (6) months immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective or (iv) if the Company shall furnish to such
Holder a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for registration statements to be filed in
the near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 120 days
from the receipt of the request to file such registration by such Holder.
8.3 Optional Registrations. If at any time or times after the Closing
----------------------
Date, the Company shall determine to register any of its securities (for itself
or for any other securities holder of the Company) under the Securities Act or
any successor legislation (other than a registration relating to stock option
plans, employee benefit plans or a Rule 145 transaction), and in connection
therewith the Company may lawfully register its Common Stock, the Company will
promptly give written notice thereof to the then holders (the "Holders") of all
issued or issuable Registrable securities (as hereinafter defined) and will use
its best efforts to include in such registration and to effect the registration
under the Securities Act of all Registrable Securities which such Holders may
request in writing delivered to the Company within 15 days after receipt by such
Holder of the notice given by the Company; provided, however, if the managing
underwriter for the Company advises the Company in writing that including all or
part of the Registrable Shares in such offering will adversely affect the
marketing of the proposed offering, then, in connection with any such
underwritten offering by the Company of any of its securities, such registration
of Registrable
-10-
<PAGE>
Securities shall be limited to not less than 10% of the total
number of shares to be sold in the case of an initial public offering of the
Company's securities, and 20% of the total number of shares to be sold in the
case of a subsequent offering; further provided, however, that such limited
number of shares of Common Stock in such offering, which shares shall be taken
from those owned (or obtainable upon the exercise of rights with respect to
other securities) by a group of holders requesting registration consisting of
the Holders and other holders having similar registration rights to those of the
Holders, and such limitation shall be imposed upon the Holders and such other
holders pro rata on the basis of the total number of (i) shares of Registrable
Securities owned by the requesting Holders and (ii) shares of Common Stock
owned, or obtainable by them upon the exercise of rights with respect to other
securities, by such other requesting holders. In the event of such a
limitation, shares of persons not having similar registration rights will not be
included in such registration. The Company shall have the right to select the
managing underwriter or underwriters for any underwritten offering made pursuant
to a registration under this Section 8.3 hereof.
8.4 Registrable Securities. For the purposes of these provisions, the term
----------------------
"Registrable Securities" shall mean (i) the Common Stock issued or issuable upon
conversion of the Preferred (the "Conversion Stock") and (ii) any Common Stock
issued or issuable with respect to the Common Stock described in clause (i) by
way of a stock dividend or stock split.
8.5 Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in connection
with (i) one registration pursuant to Section 8.1, and (ii) three registrations
pursuant to Section 8.3, shall be borne by the Company, except that the Holders
shall bear underwriting commissions and discounts attributable to their
Registrable Securities being registered and the fees and expenses of separate
counsel, if any, for such Holders. Unless otherwise stated, all Selling Expenses
relating to securities registered on behalf of the Holders and all other
Registration Expenses shall be borne by the Holders of such securities pro rata.
If the Company includes in such registration any securities to be offered by it,
all expenses shall be borne by the Company,
(b) A proportionate share of the expenses of the registration and offering
incurred in connection with (i) a registration pursuant to Section 8.2 and (ii)
any registration pursuant to Section 8.3 after the third registration
thereunder, shall be borne pro rata by the Holder or Holders requesting the
registration on the basis of the ratio of the number of their shares so
registered to the total number of shares included in such registration.
8.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Purchasers under Sections 8.1, 8.2 and 8.3 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by a
Purchaser provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, and (ii) such assignee or transferee
acquires at least 5,000 shares of the Registrable Securities (appropriately
adjusted for Recapitalizations). Notwithstanding the
-11-
<PAGE>
foregoing, the rights to cause the Company to register securities may be
assigned to any constituent partner of the Partnership, without compliance with
item (ii) above, provided notice thereof is promptly given to the Company.
8.7 Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriter or underwriters of any proposed firm underwritten offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten offering for a period of up to 90 days
beginning on the effective date of the registration statement, provided that the
Company's officers and directors and each holder of 10% or more of the Company's
issued and outstanding Common Stock also agree to such limitations. The Holders
shall upon request execute a written agreement confirming and agreeing as to the
foregoing.
8.8 Registration Indemnification. In the event of any Registration under
----------------------------
the Act pursuant to these provisions of Registrable Securities of any Holder,
the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which such Holder or such underwriter or controlling person
may become subject under the Act or otherwise, insofar an 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or such underwriter specifically for use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnity and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or
-12-
<PAGE>
omission was made in reliance upon and in conformity with information furnished
to the Company through an instrument duly executed by the Holder specifically
for use in the preparation of such registration statement, preliminary
prospectus or final prospectus or such amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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
for any legal or other expenses incurred by the latter in connection with the
defense thereof.
9. Right of First Purchase.
-----------------------
9.1. Right of First Purchase. The Company hereby grants to each
-----------------------
Purchaser the right to first purchase for a number of shares of the same class
of New Securities (as defined in this Section 9.1) which the Company may, from
time to time, propose to sell and issue. Each Purchaser shall be entitled to
purchase a number of shares of the class of New Securities sufficient to
maintain his pro rata ownership in the Company after taking into account the
proposed issuance by the Company, which pro rata ownership is equal to the ratio
that the sum of the number of shares of Preferred, the number of outstanding
shares of Conversion Stock) then held by such Purchaser bears to the sum of the
total number of shares of Common Stock then outstanding ant the number of shares
of Conversion Stock or Common Stock issuable upon conversion of the then
outstanding Preferred.
(a) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company including Common Stock and Preferred Stock, whether
now authorized or not, and rights, options or warrants to purchase said shares
of Common Stock or Preferred Stock, and securities of any type whatsoever that
are, or may become, convertible into said shares of Common Stock or Preferred
Stock. Notwithstanding the foregoing, "New Securities" does not include (i) the
shares of Preferred issued pursuant to this Agreement or the Conversion Stock,
(ii) securities offered to the public generally pursuant to a registration
statement or pursuant to Regulation A under the Securities Act, (iii) securities
issued in the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization whereby the
Company or its shareholders own not less than fifty-one percent (51%) of the
voting power of the surviving or successor corporation, (iv) shares of the
Company's Common Stock or related options exercisable for such Common Stock
issued to employees, officers and directors of, and consultants, customers, and
vendors to, the Company, pursuant to any arrangement approved by the Board of
Directors of the Company, (v) stock issued pursuant to any rights or agreements,
including without limitation convertible securities, options and warrants,
provided that the rights of first purchase established by
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<PAGE>
this Section 9.1 apply with respect to the initial sale or grant by the Company
of such rights or agreements, or (vi) stock issued in connection with any stock
split, stock dividend or recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Company shall include with such notice a
brief summary of the business plan of the Company. Each Purchaser shall have ten
(10) days from the date of receipt of any such notice to agree to purchase up to
the Purchaser's share (calculated in accordance with Section 9.1(a)) of such
New Securities for the price - and upon the terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased. The Company shall notify each Purchaser of any
material revision to the price and terms of the issuance of New Securities and
Purchasers shall be entitled to 10 additional days in order to respond to the
Company.
(c) In the event a Purchaser fails to exercise such right of first
purchase within said 10 day period, the Company shall have 120 days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within 60 days from the date of said
agreement) to sell the New Securities not elected to be purchased by Purchasers
at the price and upon the terms no more favorable to the purchasers of such
securities than specified in the Company's notice. In the event the Company has
not sold the New Securities or entered into an agreement to sell the New
Securities within said 120 day period (or sold and issued New Securities in
accordance with the foregoing within 60 days for the date of said agreement),
the Company shall not thereafter issue or sell any of such New Securities,
without offering securities in the manner provided above.
(d) The right of first purchase granted under this Agreement shall expire
upon the first to occur of the following (i): the closing of the first public
offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared effective
by, the Commission under the Securities Act; or (ii) as to a Purchaser if such
Purchaser no longer holds at least 5,000 shares of Preferred and/or Conversion
Stock (appropriately adjusted for Recapitalizations).
(e) The right of first purchase hereunder is not assignable except by each
of such Purchasers to any wholly-owned subsidiary or constituent partner who
acquires at least 5,000 shares (appropriately adjusted for Recapitalizations).
(f) Notwithstanding anything to the contrary contained in this Section 9,
in the event the New Securities proposed to be issued by the Company are to be
convertible into shares of Common Stock, the right of first purchase granted
pursuant to this Section 9 shall, at the Company's option, apply to the purchase
of a pro rata number of shares of Common Stock into which the pro rata number of
shares of New Securities the Purchaser otherwise would have been entitled would
be
-14-
<PAGE>
convertible. Substitution of Common Stock in lieu of an offer of New
Securities shall be indicated in the Company's notice to Purchasers pursuant to
Section 9(b) hereof. Failure of a Purchaser to effect his right of first
purchase of such Common Stock shall entitle the Company to issue any New
Securities on any such terms as the Company shall approve, provided that such
conversion right shall be limited to a maximum number of shares as presumed in
the Company's notice to Purchasers.
10. Restrictions on Transfer; Other Agreements.
------------------------------------------
10.1. Restrictive Legend. (a) The Purchaser Shares shall (unless their
------------------
disposition is otherwise permitted by the provisions of this Section 10) be
subject to stop transfer instructions and shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"This security has not been registered under the Securities Act of
1933, as amended, and may not be offered, sold or otherwise transferred,
pledged or hypothecated unless and until registered under such act, or
unless such offer, sale, transfer, pledge or hypothecation is exempt from
registration or is otherwise in compliance with such act. The
transferability of this security is also subject to restrictions contained
in a Purchase Agreement which agreements the Company will furnish to the
holder of this security upon request."
(b) The Company hereby agrees that it will, upon the Purchasers request,
eliminate the foregoing legend and stop transfer instructions if, in the written
opinion of counsel (which counsel and opinion (in form, scope ant substance)
shall be satisfactory to the Company), the Purchaser is entitled, without
limitation as to manner or sales to sell the Purchaser Shares without
registration under the Securities Act by reason of Rule 144 thereunder (or any
successor provision).
10.2. Restrictions on Transfer. The Purchasers by acquiring any of the
------------------------
Purchaser Shares hereunder, hereby covenants and agrees that, except as herein
provided, it will not directly or indirectly offer for sale or sell (within the
meaning of the Securities Act) any of the Purchaser Shares.
(a) The Purchaser may offer or sell the Purchaser Shares pursuant to:
(i) an effective registration statement under the Securities Act
("Registration Statement") filed by the Company under Section 8 hereof, or
(ii) an exemption from registration under the Securities Act,
provided that prior to any such proposed transfer of the Purchaser Shares,
the Purchaser shall give written notice to the Company of the Purchaser's
intention to effect such transfer, which notice shall be accompanied by
such evidence as may be reasonably satisfactory to the Company that the
proposed transfer of the Purchaser Shares may be effected without
registration under the
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<PAGE>
Securities Acts whereupon the Purchaser shall be entitled to transfer the
Purchaser Shares in accordance with the terms of the notice delivered by
the Purchaser to the Company, or
(iii) the provisions of Rule 144 under the Securities Act, if
applicable.
(b) Any offer or sale of the Purchaser Shares shall be made in accordance
with the Federal and state securities laws (including the prospectus delivery
requirements of the Securities Act), if applicable.
(c) Notwithstanding any provision in this Section 10 to the contrary, the
Partnership shall be permitted to transfer Preferred to any withdrawing partner
thereof or as a result of the liquidation of the Partnership, all in accordance
with the Partnership Agreement. Such securities transferred by the Partnerahip
pursuant to this paragraph shall remain subject to the other provisions of this
Section 10.
(d) Each of the Purchaser Shares transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 10.1 above except as
provided in Section 8 or if, in the opinion of the legal counsel referred to
above (which counsel and opinion (in form, scope and substance) shall be
satisfactory to the Company), such legend is not required in order to establish
compliance with any provisions of the Securities Act.
11. Miscellaneous.
-------------
11.1. Notices; Payments. Except as otherwise provided in this
-----------------
Agreement, all notices, requests, claims, demands, waivers and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered by hand, if delivered personally or by
courier, or five business days after being deposited in the mail (registered or
certified mails postage prepaid, return receipt requested) properly addressed as
set forth below. Any such notice or other communication shall be addressed (a)
if to the Purchasers at the address included in their respective Subscription
Agreement or at such other address as the Purchaser shall have furnished to the
Company in writing, (b) if to the Partnership, at such address provided in the
Partnership Agreement, (c) if to any subsequent holder of any of the Purchaser
Shares, at such address as shown on the Security Register of the Company
maintained pursuant to the Certificate of Designation or (d) if to the Company,
to Hybrid Fax, Inc., 1733 Woodside Road, Suite 335, Redwood City, California
94061, Attention: President, with a copy to: Douglas Y. Bech, Andrews & Kurth,
4200 Texas Commerce Tower, Houston, Texas 77002, or to such other address and/or
to the attention of such other copied person as the Company shall have furnished
to the Purchaser, the Partnership and each such other holder in writing.
11.2. Headings; Schedules and Exhibits. The headings herein are for
--------------------------------
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect
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<PAGE>
any of the provisions hereof. The schedules and exhibits attached hereto, and
the certificates and other documents delivered as specified herein, are
expressly made a part of this Agreement.
11.3. Effect of Agreement.
-------------------
(a) This Agreement, including the representations and warranties contained
herein and the annexes, schedules, exhibits, certificates, opinions and other
documents referred to herein or delivered pursuant hereto, and the Subscription
Agreements contain the entire agreement between the Purchaser and the Company
with respect to the subject matter contained herein and supersede all prior
agreements and understandings, oral and written, with respect thereto. No
representations and warranties other than those contained herein or in any such
annex, schedule, exhibit, certificate, opinion or other document shall be deemed
to have been made by the Purchaser or the Company with respect to this
Agreement, the Subscription Agreements and the Purchaser Shares. All of the
representations and warranties contained herein and in the Subscription
Agreements or in any such annex, schedule, exhibit, certificate or opinion or
other document shall survive the Closing, regardless of any investigation that
may have been or may be made (or any statements made in respect thereof) at any
time by or on behalf of the party to whom such representations and warranties
are made.
(b) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns but, except
as otherwise provided herein, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
(c) No right, power or remedy granted under this Agreement is intended to
be exclusive, but each shall be cumulative and in addition to any other rights,
powers or remedies referred to in this Agreement or otherwise available at law
or in equity; and the exercise or beginning of exercise by any party hereto of
any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by such party of any or all such other rights,
powers or remedies. No waiver by any party hereto, and no failure or delay on
the part of such party in any one or more instances to insist upon strict
performance or observance of one or more covenants or conditions hereof, shall
in any way be, or be construed to be, a waiver thereof or prevent such party's
rights to require at a later time the performance or observance of such
covenants or conditions, or otherwise prejudice such party's rights, powers or
remedies.
11.4. Company Information. For so long as the Purchasers shall own
-------------------
Preferred, the Company shall furnish to each Purchaser owning Preferred (i) for
the first three quarters of each fiscal year reports of its business and
operations (including unaudited quarterly financial statements) and (ii) for
each fiscal year, an annual report of its business and operations (including
financial
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<PAGE>
statements which financial statements shall be audited commencing for the year
ended December 31, 1989 and all subsequent years). The Company shall, from time
to time prior to the Closing, provide to the Purchaser such other information
respecting the business operations, financial condition or assets of the Company
as the Purchaser may reasonably request.
11.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES THEREOF.
11.6. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
11.7. Expenses and Fees. The Company shall pay all costs and expenses
-----------------
in connection with the negotiation, preparation, printing, typing, reproduction,
execution and delivery of this Agreement, any amendment or supplement to or
modification of any of the foregoing and any and all other documents furnished
pursuant hereto or thereto or in connection herewith or therewith including the
reasonable fees and disbursements of Andrews & Kurth, except for the fees of
counsel who render the opinions specified in Sections 8 and 9 hereof (which fees
shall be paid by the Purchaser incurring such fees), all costs and expenses in
connection with the administration of this Agreement and all reasonable costs
and expenses (including, without limitations attorneys fees and expenses), if
any, in connection with the enforcement of this Agreement or any other agreement
furnished pursuant hereto or thereto or in connection herewith or therewith;
provided that the Company shall not be obligated to pay any amounts in
accordance with the performance of the registration rights granted in Section 8
hereof except as provided therein.
11.8. Delivery. The Purchasers hereby appoints the Partnership as its
--------
agent to accept delivery of the Purchaser Shares at the Closing and to execute a
receipt for such Shares on the Purchaser's and the Partnership's behalf.
11.9. Lost, Etc., Certificates Evidencing Preferred Certificates;
-----------------------------------------------------------
Exchange of Certificates. Upon receipt of evidence satisfactory to the Company
- ------------------------
of the loss, theft, destruction or mutilation of any certificate evidencing any
shares of Preferred held by the Purchaser or the Partnership, and in case of
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Company, or, in the case of such mutilation, upon surrender and cancellation
of such certificate, the Company will make and deliver in lieu of such
certificate one or more new certificates of the same series and in such
denomination or denominations as the Purchaser or the Partnership, as the case
may be, may request for the same aggregate number of shares of Preferred
evidenced by the certificate so lost, stolen, destroyed or mutilated, less the
number of shares of Preferred, if any, originally evidenced by such certificate
that have theretofore been redeemed, and registered in such name or names as the
Purchaser or the Partnership may request.
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<PAGE>
Upon surrender by the Purchaser, or the Partnership or their respective
nominee of any certificate evidencing any shares of Preferred for exchange at
the office of the Company, the Company at its expense (exclusive of applicable
transfer taxes if any) will issue in exchange therefor one or more new
certificates of the same series and in such denomination or denominations as
such Purchaser may request for the same aggregate number of shares of Preferred
originally evidenced by the certificate so surrendered, less the number of
shares of Preferred, if any, evidenced by such surrendered certificate that have
theretofore been redeemed, and registered in such name or names as such
Purchaser or the Partnership may request.
11.10. Amendments; Waiver. This Agreement may be amended only with, and
------------------
any provision of this Agreement may be waived only by, the written consent of
the holders of at least 66-2/3% of the aggregate Stated Value of the Preferred;
provided however, that no such amendment or waiver of this Section 11.10 shall
be effective without the written consent of the holders of 100% of the
outstanding Preferred.
11.11. Restriction for Pennsylvania Residents. If Purchaser is a
--------------------------------------
Pennsylvania resident, such Purchaser agrees, in addition to any other
agreements contained herein, that he will not sell any shares of Preferred
purchased pursuant hereto for a period of twelve (12) months, beginning on the
date such securities were purchased from the Company, except as permitted by the
regulations of the Pennsylvania Securities Commission or as otherwise permitted
under the Pennsylvania Securities Act of 1972.
EXECUTED as of the date first above written by the Company, the Partnership
and each of the Purchasers listed in Schedule I hereto by their attorney-in-fact
pursuant to the power of attorney granted in each of the Subscription
Agreements.
HYBRID FAX, Inc.
By: Rudy Prince
------------------------
Title: President
------------------------
FIRST STAGE PARTNERS
By: Douglas Y. Bech
-----------------------------
Administrative Partner
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<PAGE>
THE PURCHASERS LISTED IN
SCHEDULE I HERETO
By: Douglas Y. Bech
---------------------------------
Douglas Y. Bech, Attorney-in-fact
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<PAGE>
SCHEDULE I
Hybrid Fax, Inc.
Series A Preferred Stock Investors
Offering of December 27, 1988
Unless otherwise noted, one-half of the number of shares referenced below were
issued and fully paid at the First Closing (December 27, 1988) and one-half are
to be issued and fully paid at the Second Closing (January 31, 1989).
<TABLE>
<CAPTION>
No. of Shares
Amount of of
Investor Investment Series A Pfd.
-------- ---------- -------------
<S> <C> <C>
Douglas Y. Bech $10,000 12,000
Houston, Texas
Sandra J. Basel 10,000 12,000
San Jose, California/(1)/
Rebecca S. Draper 10,000 12,000
Menlo Park, California/(2)/
Timothy C. Draper 10,000 12,000
Menlo Park, California
Charles E. Edwards IRA Rollover 10,000 12,000
Account No.4815600369
c/oMTrust, Houston, Texas/(2)/
Janice P. Edwards/(3)/ 2,500 3,000
Custodian for Melanie L. Edwards
Summit, New Jersey
Janice P. Edwards/(3)/ 2,500 3,000
Custodian for Meghan E.A. Edwards
Summit, New Jersey
Evergreen Consolidated Inc. 10,000 12,000
Houston, Texas
Peter M. and Marian S. Hendricks,Trustees 15,000 18,000
Sausalito, California
Craig Minor 10,000 12,000
Houston, Texas
</TABLE>
/(1)/ All shares issues and fully paid at the Second Closing (January 31, 1989).
/(2)/ All shares issued and fully paid at the First Closing (December 27, 1988).
/(3)/ Transferred by Charles M. Edwards, III
<PAGE>
<TABLE>
<CAPTION>
No. of Shares
Amount of of
Investor Investment Series A Pfd.
-------- ---------- -------------
<S> <C> <C>
Rick Moreno $ 10,000 12,000
Burlingame, California
Robert L. Newman 20,000 24,000
Hillsborough, California
Dr. D. Elliot Parks 5,000 6,000
La Jolla, California
Larry B. Phillips, III 5,000 6,000
Houston, Texas
Steven M. Philley 20,000 24,000
Houston, Texas
Robert E. Powers 10,000 12,000
San Francisco, California
Edward R. Prince, Jr. 20,000 24,000
Houston, Texas
William F. Rooney 20,000 24,000
Pittsburgh, Pennsylvania/(1)/
Leo R. Schlinkert 50,000 60,000
Brooklyn, New York
Rosamond P. Smythe 10,000 12,000
San Francisco, California
Richard or Martha Stipanovic 10,000 12,000
Bellaire, Texas
Richard D. Tucker 10,000 12,000
Hillsboro, Texas -------- -------
Total /(2)/ $280,000 336,000
======== =======
</TABLE>
/(1)/ All shares issued and fully paid at the Second Closing (January 31, 1989).
/(2)/ 162,000 shares issued and fully paid at the First Closing (December 27,
1988) and 174,000 shares issued and fully paid at the Second Closing (January
31, 1989).
I-2
<PAGE>
Exhibit 10.11
Preferred Stock Purchase Agreement
HYBRID FAX, INC.
Dated as of June 22, 1989
This PREFERRED STOCK PURCHASE AGREEMENT dated as of June 22, 1989 by and
between Hybrid Fax, Inc., a Delaware corporation (the "Company") and David A.
Brewer (the "Purchaser") is entered into in connection with the resolution of
certain matters under an Employee Stock Purchase Agreement dated as of October
1, 1988 by and between the Company and Purchaser (the "Old Stock Agreement").
1. Repurchase of Common Stock. Pursuant to Section 3 of the Old Stock
--------------------------
Agreement, Purchaser agrees to sell, and the Company agrees to buy, 55,000
shares of the Company's Common Stock issued to Purchaser pursuant to the Old
Stock Agreement. The purchase price for such repurchase shall be $.01 per share.
Purchaser and the Company agree that the remaining 25,000 shares of Common Stock
held by Purchaser pursuant to the Old Stock Agreement shall remain valid and
outstanding in the hands of Purchaser free of any further claim for repurchase
pursuant to Section 3 of the Old Stock Agreement, but subject to such other
provisions of the Old Stock Agreement as may remain applicable to such shares.
2. Authorization of the Securities. The Company has duly authorized the
-------------------------------
issuance and sale to Purchaser of 55,000 additional shares of the Company's
Series A Preferred Stock (the "Preferred") par value $.01 per share. The
Preferred shall have the designations, powers, preferences and relative and
other special rights and the qualifications, limitations and restrictions set
forth in the Certificate of Designation (the "Certificate of Designation") of
the Company as filed with the Secretary of State of the State of Delaware with
respect to the Series A Preferred Stock.
3. Purchase and Sale of the Shares. Purchaser hereby subscribes for, and
-------------------------------
agrees to purchase, and the Company agrees to issue, 55,000 shares of Preferred
for a purchase price of $.833333 per share. The Company acknowledges payment in
full of the purchase price.
4. Other Purchasers of Preferred. Purchaser acknowledges that certain
-----------------------------
rights and covenants set forth herein with respect to the Preferred purchased
hereunder by Purchaser are similar to other rights and covenants that holders of
other outstanding shares of Preferred are subject.
<PAGE>
5. Representations of the Purchaser. Purchaser represents the following
--------------------------------
to the Company:
(a) Purchaser has full power and authority to enter into this Agreement,
and to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Agreement is a legal, valid
and binding obligation of such Purchaser, enforceable against the purchaser in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement thereof is
subject to general principles of equity (whether applied in a proceeding at law
or in equity), and except that enforcement of the indemnification and
contribution provisions of this Agreement may be limited or denied on the basis
of federal or applicable state securities laws and the public policies
underlying such laws.
(b) The Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for current
needs and possible personal contingencies, and has no need, and anticipates no
need in the foreseeable future, to sell the Preferred (or the Common Stock
issuable upon exercise) for which such Purchaser hereby subscribes. Purchaser is
able to bear the economic risk of this investment and, consequently, without
limiting the generality of the foregoing, is able to hold the Preferred (and the
Common Stock issuable upon conversion) for an indefinite period of time and has
a sufficient net worth to sustain a loss of the entire investment in the Company
in the event such loss should occur.
(d) Purchaser is acquiring the Preferred for his own account for
investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred (or the Common Stock issuable upon
conversion).
(e) Purchaser acknowledges that there are substantial restrictions on the
transferability of the Preferred (and the Common Stock issuable upon the
conversion thereof). Since the Preferred (and the Common Stock issuable upon
conversion thereof) will not be, and the Purchaser has no right to require that
they be, registered under the 1933 Act or qualified pursuant to applicable state
securities law (except as provided in this Agreement), the Preferred (and the
Common Stock issuable upon conversion thereof) may not be, and Purchaser agrees
that they shall not be, sold unless such sale is exempt from such registration
under the 1933 Act, the Securities Act of Texas and any other applicable state
blue sky law or regulation. Each Purchaser further acknowledges that the
Company is under no obligation to aid me in obtaining any exemption from the
registration requirements. Purchaser acknowledges that Purchaser shall be
responsible for compliance with all conditions on transfer imposed by any
securities administrator of any state and for any expenses incurred by the
Company for legal or accounting services in connection with reviewing such a
proposed transfer and/or issuing opinions in connection therewith.
-2-
<PAGE>
6. Registration Rights.
-------------------
6.1 Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Holders of 50% of the issued or issuable Registrable Securities (the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders and (ii)
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, appropriate qualification under blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 6.1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six months
after the effective date of the Company's first registered public offering
of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations contained in Rule 144 promulgated by the Securities and
Exchange Commission or such similar exemption from registration
requirements of the Act;
(D) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to
-3-
<PAGE>
an employee benefit plan), provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement
to become effective;
(E) After the Company has effected one such registration pursuant to
this paragraph 6.1(a), and such registrations have been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best
efforts to register, qualify or comply under this Section 6.1 shall be
deferred for a period not to exceed 120 days from the date of receipt of
the written request from the Initiating Holders. Subject to the foregoing
clauses (A) through (F), the Company shall file a registration statement
covering the Registrable Securities so requested to be registered as soon
as practicable after receipt of the request or requests of the Initiating
Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 6.1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 6.1(a)(i). In such event, the right of any Holder to registration
pursuant to this Section 6.1 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 6.1, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited as provided herein. The Company shall
(together with all Holders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter(s) selected for such underwriting by a majority in interest
of the Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 6.1, if the managing
underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders participating and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration, and such Registrable Securities shall
not be transferred in a public distribution prior to 90 days after the effective
date of such registration, or such other shorter period of time as the
underwriters may require.
-4-
<PAGE>
6.2 Registration on Form S-3.
------------------------
(a) If any Holder or Holders holding in the aggregate not less than 15% of
the aggregate number of shares of outstanding Preferred and Common Stock issued
upon the conversion of the Preferred request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of the Registrable Securities the reasonably anticipated
aggregate price to the public of which, net of underwriting discounts and
commissions, would exceed $500,000, and the Company is then entitled to use Form
S-3 under applicable Commission rules to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
Section 6.3 in any six month period. The substantive provisions of Section 6.5
shall be applicable to each registration initiated under this Section 6.2.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this Section 6.2: (i) in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in effecting such registration, qualification or compliance unless
the Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act; (ii) if the Company, within ten (10) days of
the receipt of the request of the Initiating Holders, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within ninety (90) days of receipt of such request (other than with
respect to a registration statement relating to Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities); (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on the date six (6) months immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or (iv) if the Company shall furnish to such
Holder a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for registration statements to be filed in
the near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 120 days
from the receipt of the request to file such registration by such Holder.
6.3 Optional Registrations. If at any time or times after the Closing
----------------------
Date, the Company shall determine to register any of its securities (for itself
or for any other securities holder of the Company) under the Securities Act or
any successor legislation (other than a registration relating to stock option
plans, employee benefit plans or a Rule 145 transaction), and in connection
therewith the Company may lawfully register its Common Stock, the Company will
promptly give written
-5-
<PAGE>
notice thereof to the then holders (the "Holders") of all issued or issuable
Registrable Securities (as hereinafter defined) and will use its best efforts to
include in such registration and to effect the registration under the Securities
Act of all Registrable Securities which such Holders may request in writing
delivered to the Company within 15 days after receipt by such Holder of the
notice given by the Company; provided, however, if the managing underwriter for
the Company advises the Company in writing that including all or part of the
Registrable Shares in such offering will adversely affect the marketing of the
proposed offering, then, in connection with any such underwritten offering by
the Company of any of its securities, such registration of Registrable
Securities shall be limited to not less than 10% of the total number of shares
to be sold in the case of an initial public offering of the Company's
securities, and 20% of the total number of shares to be sold in the case of a
subsequent offering; further provided, however, that such limited number of
shares of Common Stock in such offering, which shares shall be taken from those
owned (or obtainable upon the exercise of rights with respect to other
securities) by a group of holders requesting registration consisting of the
Holders and other holders having similar registration rights to those of the
Holders, and such limitation shall be imposed upon the Holders and such other
holders pro rata on the basis of the total number of (i) shares of Registrable
Securities owned by the requesting Holders and (ii) shares of Common Stock
owned, or obtainable by them upon the exercise of rights with respect to other
securities, by such other requesting holders. In the event of such a limitation,
shares of persons not having similar registration rights will not be included in
such registration. The Company shall have the right to select the managing
underwriter or underwriters for any underwritten offering made pursuant to a
registration under this Section 6.3 hereof.
6.4 Registrable Securities. For the purposes of these provisions, the term
----------------------
"Registrable Securities" shall mean (i) the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock of the Company (the "Conversion
Stock") and (ii) any Common Stock issued or issuable with respect to the Common
Stock described in clause (i) by way of a stock dividend or stock split.
6.5 Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in connection
with (i) one registration pursuant to Section 6.1, and (ii) three registrations
pursuant to Section 6.3, shall be borne by the Company, except that the Holders
shall bear underwriting commissions and discounts attributable to their
Registrable Securities being registered and the fees and expenses of separate
counsel, if any, for such Holders. Unless otherwise stated, all Selling Expenses
relating to securities registered on behalf of the Holders and all other
Registration Expenses shall be borne by the Holders of such securities pro rata.
If the Company includes in such registration any securities to be offered by it,
all expenses shall be borne by the Company.
(b) A proportionate share of the expenses of the registration and offering
incurred in connection with (i) a registration pursuant to Section 6.2 and (ii)
any registration pursuant to Section 6.3 after the third registration
thereunder, shall be borne pro rata by the Holder or Holders requesting
-6-
<PAGE>
the registration on the basis of the ratio of the number of their shares so
registered to the total number of shares included in such registration.
6.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Purchasers under Sections 6.1, 6.2 and 6.3 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by
Purchaser provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, and (ii) such assignee or transferee
acquires at least 5,000 shares of the Registrable Securities (appropriately
adjusted for Recapitalizations).
6.7 Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriters or underwriters of any proposed firm underwritten offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten offering for a period of up to 90 days
beginning on the effective date of the registration statement, provided that the
Company's officers and directors and each holder of 10% or more of the Company's
issued and outstanding Common Stock also agree to such limitations. The Holders
shall upon request execute a written agreement confirming and agreeing as to the
foregoing.
6.8 Registration Indemnification. In the event of any Registration under
----------------------------
the Act pursuant to these provisions of Registrable Securities of any Holder,
the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which such Holder or such underwriter or controlling person
may become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or such underwriter specifically for use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have
-7-
<PAGE>
received an undertaking satisfactory to it and its counsel from each Holder, to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in the preceding paragraph) the Company, each director of the Company,
each officer of the Company who shall sign such registration statement and any
person who controls the Company within the meaning of the Act, with respect to
any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company through an instrument duly
executed by the Holder specifically for use in the preparation of such
registration statement, preliminary prospectus or final prospectus or such
amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
7. Right of First Purchase.
-----------------------
7.1. Right of First Purchase. The Company hereby grants to Purchaser
-----------------------
the right to first purchase for a number of shares of the same class of New
Securities (as defined in this Section 7.1) which the Company may, from time to
time, propose to sell and issue. Purchaser shall be entitled to purchase a
number of shares of the class of New Securities sufficient to maintain his pro
rata ownership in the Company after taking into account the proposed issuance by
the Company, which pro rata ownership is equal to the ratio that the sum of the
number of shares of Preferred (or the number of outstanding shares of Conversion
Stock) then held by Purchaser bears to the sum of the total number of shares of
Common Stock then outstanding and the number of shares of Conversion Stock or
Common Stock issuable upon conversion of the then outstanding Preferred.
(a) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company including common stock and preferred stock, whether
now authorized or not, and rights, options or warrants to purchase said shares
of Common Stock or preferred stock, and securities of any type whatsoever that
are, or may become, convertible into said shares of Common Stock or preferred
stock. Notwithstanding the foregoing, "New Securities" does not include (i) the
shares of Preferred issued pursuant to this Agreement or the Conversion Stock,
(ii) securities offered to the public generally pursuant to a registration
statement or pursuant to Regulation A under the Securities Act, (iii) securities
issued in the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization whereby the
Company or
-8-
<PAGE>
its shareholders own not less than fifty-one percent (51%) of the voting power
of the surviving or successor corporation, (iv) shares of the Company's Common
Stock or related options exercisable for such Common Stock issued to employees,
officers and directors of, and consultants, customers, and vendors to, the
Company, pursuant to any arrangement approved by the Board of Directors of the
Company, (v) stock issued pursuant to any rights or agreements, including
without limitation convertible securities, options and warrants, provided that
the rights of first purchase established by this Section 7.1 apply with respect
to the initial sale or grant by the Company of such rights or agreements, or
(vi) stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, its shall give Purchaser written notice of its intention, describing
the type of New Securities, and the price and terms upon which the Company
proposes to issue the same. The Company shall include with such notice a brief
summary of the business plan of the Company. Purchaser shall have ten (10) days
from the date of receipt of any such notice to agree to purchase up to the
Purchaser's share (calculated in accordance with Section 7.1(a)) of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. The Company shall notify Purchaser of any material revision to
the price and terms of the issuance of New Securities and Purchaser shall be
entitled to 10 additional days in order to respond to the Company.
(c) In the event Purchaser fails to exercise such right of first purchase
within said 10 day period, the Company shall have 120 days thereafter to sell or
enter into an agreement (pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within 60 days from the date of said
agreement) to sell the New Securities not elected to be purchased by Purchaser
at the price and upon the terms no more favorable to the purchasers of such
securities than specified in the Company's notice. In the event the Company has
not sold the New Securities or entered into an agreement to Sell the New
Securities within said 120 day period (or sold and issued New Securities in
accordance with the foregoing within 60 days from the date of said agreement),
the Company shall not thereafter issue or sell any of such New Securities,
without offering securities in the manner provided above.
(d) The right of first purchase granted under this Agreement shall expire
upon the first to occur of the following: (i) the closing of the first public
offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared effective
by, the Commission under the Securities Act; or (ii) as to Purchaser if
Purchaser no longer holds at least 5,000 shares of Preferred and/or Conversion
Stock (appropriately adjusted for Recapitalizations).
(e) The right of first purchase hereunder is not assignable except by
Purchaser to any wholly-owned subsidiary or constituent partner who acquires at
least 5,000 shares (appropriately adjusted for Recapitalizations).
-9-
<PAGE>
(f) Notwithstanding anything to the contrary contained in this Section 7,
in the event the New Securities proposed to be issued by the Company are to be
convertible into shares of Common Stock, the right of first purchase granted
pursuant to this Section 7 shall, at the Company's option, apply to the purchase
of a pro rata number of shares of Common Stock into which the pro rata number of
shares of New Securities Purchaser otherwise would have been entitled would be
convertible. Substitution of Common Stock in lieu of an offer of New Securities
shall be indicated in the Company's notice to Purchasers pursuant to Section
7(b) hereof. Failure of a Purchaser to effect his right of first purchase of
such Common Stock shall entitle the Company to issue any New Securities on any
such terms as the Company shall approve, provided that such conversion right
shall be limited to a maximum number of shares as presumed in the Company's
notice to Purchaser.
8. Restrictions on Transfer; Other Agreements.
------------------------------------------
8.1. Restrictive Legend.
------------------
(a) The Purchaser Shares shall (unless their disposition is otherwise
permitted by the provisions of this Section 8) be subject to stop transfer
instructions and shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This security has not been registered under the Securities Act of
1933, as amended, and may not be offered, sold or otherwise transferred,
pledged or hypothecated unless and until registered under such act, or
unless such offer, sale, transfer, pledge or hypothecation is exempt from
registration or is otherwise in compliance with such act. The
transferability of this security is also subject to restrictions contained
in a Purchase Agreement which agreements the Company will furnish to the
holder of this security upon request."
(b) The Company hereby agrees that it will, upon the Purchaser's request,
eliminate the foregoing legend and stop transfer instructions if, in the written
opinion of counsel (which counsel and opinion (in form, scope and substance)
shall be satisfactory to the Company), the Purchaser is entitled, without
limitation as to manner or sales to sell the Purchaser Shares without
registration under the Securities Act by reason of Rule 144 thereunder (or any
successor provision).
8.2. Restrictions on Transfer. The Purchaser by acquiring any of the
------------------------
Purchaser Shares hereunder, hereby covenants and agrees that, except as herein
provided, it will not directly or indirectly offer for sale or sell (within the
meaning of the Securities Act) any of the Purchaser Shares.
(a) The Purchaser may offer or sell the Purchaser Shares pursuant to:
(i) an effective registration statement under the Securities Act
("Registration Statement") filed by the Company under Section 6 hereof, or
-10-
<PAGE>
(ii) an exemption from registration under the Securities Act,
provided that prior to any such proposed transfer of the Purchaser Shares,
the Purchaser shall give written notice to the Company of the Purchaser's
intention to effect such transfer, which notice shall be accompanied by
such evidence as may be reasonably satisfactory to the Company that the
proposed transfer of the Purchaser Shares may be effected without
registration under the Securities Acts whereupon the Purchaser shall be
entitled to transfer the Purchaser Shares in accordance with the terms of
the notice delivered by the Purchaser to the Company, or
(iii) the provisions of Rule 144 under the Securities Act, if
applicable.
(b) Any offer or sale of the Purchaser Shares shall be made in accordance
with the Federal and state securities laws (including the prospectus delivery
requirements of the Securities Act), if applicable.
(c) Each of the Purchaser Shares transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 8.1 above except as
provided in Section 6 or if, in the opinion of the legal counsel referred to
above (which counsel and opinion (in form, scope and substance) shall be
satisfactory to the Company), such legend is not required in order to establish
compliance with any provisions of the Securities Act.
9. Miscellaneous.
-------------
9.1. Notices; Payments. Except as otherwise provided in this
-----------------
Agreement, all notices, requests, claims, demands, waivers and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered by hand, if delivered personally or by
courier, or five-business days after being deposited in the mail (registered or
certified mails postage prepaid, return receipt requested) properly addressed as
set forth below. Any such notice or other communication shall be addressed (a)
if to the Purchaser, at such address as the Purchaser shall have furnished to
the Company in writing, (b) if to any subsequent holder of any of the Purchaser
Shares, at such address as shown on the Security Register of the Company
maintained pursuant to the Certificate of Designation or (d) if to the Company,
to Hybrid Fax, Inc., 978 Hamilton Court, Menlo Park, California 94025,
Attention: President, with a copy to: Douglas Y. Bech, Andrews & Kurth, 4200
Texas Commerce Tower, Houston, Texas 77002, or to such other address and/or to
the attention of such other copied person as the Company shall have furnished to
the Purchaser and each such other holder of Preferred in writing.
9.2. Headings; Schedules and Exhibits. The headings herein are for
--------------------------------
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The
schedules and exhibits attached hereto, and the Certificates and other documents
delivered as specified herein, are expressly made a part of this Agreement.
-11-
<PAGE>
9.3 Effect of Agreement. This Agreement shall inure to the benefit of and
-------------------
be binding upon the parties hereto and their respective successors and permitted
assigns but, except as otherwise provided herein, neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either of
the parties hereto without the prior written consent of the other party. Nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. No right, power or remedy granted under this Agreement is intended to
be exclusive, but each shall be cumulative and in addition to any other rights,
powers or remedies referred to in this Agreement or otherwise available at law
or in equity; and the exercise or beginning of exercise by any party hereto of
any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by such party of any or all such other rights,
powers or remedies. No waiver by any party hereto, and no failure or delay on
the part of such party in any one or more instances to insist upon strict
performance or observance of one or more covenants or conditions hereof, shall
in any way be, or be construed to be, a waiver thereof or prevent such party's
rights to require at a later time the performance or observance of such
covenants or conditions, or otherwise prejudice such party's rights, powers or
remedies.
9.4. Company Information. For so long as the Purchaser shall own
-------------------
Preferred, the Company shall furnish to each Purchaser owning Preferred (i) for
the first three quarters of each fiscal year reports of its business and
operations (including unaudited quarterly financial statements) and (ii) for
each fiscal year, an annual report of its business and operations (including
financial statements which financial statements shall be audited commencing for
the year ended December 31, 1989 and all subsequent years). The Company shall,
from time to time prior to the Closing, provide to the Purchaser such other
information respecting the business operations, financial condition or assets of
the Company as the Purchaser may reasonably request.
9.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES THEREOF.
9.6. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
9.8. Delivery. The Purchasers hereby acknowledges delivery of a
--------
certificate evidencing the Purchaser Shares.
9.9. Lost, Etc., Certificates Evidencing Preferred Certificates:
-----------------------------------------------------------
Exchange of Certificates. Upon receipt of evidence satisfactory to the Company
- ------------------------
of the loss, theft, destruction or mutilation of any certificate evidencing any
shares of Preferred held by the Purchaser, and in case of loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the Company,
or, in the case of such mutilation, upon surrender and cancellation of such
Certificate, the Company will make and
-12-
<PAGE>
deliver in lieu of such certificate one or more new certificates of the same
series and in such denomination or denominations as the Purchaser may request
for the same aggregate number of shares of Preferred evidenced by the
certificate so lost, stolen, destroyed or mutilated, less the number of shares
of Preferred, if any, originally evidenced by such certificate that have
theretofore been redeemed, and registered in such name or names as the Purchaser
may request.
Upon surrender by the Purchaser of any certificate evidencing any shares of
Preferred for exchange at the office of the Company, the Company at its expense
(exclusive of applicable transfer taxes if any) will issue in exchange therefor
one or more new certificates of the same series and in such denomination or
denominations as such Purchaser may request for the same aggregate number of
shares of Preferred originally evidenced by the Certificate so surrendered, less
the number of shares of Preferred, if any, evidenced by such surrendered
certificate that have theretofore been redeemed, and registered in such name or
names as such Purchaser may request.
9.10. Amendments: Waiver. Any provision of Section 6 through 9 of this
------------------
Agreement may be amended upon, and any provision of Section 6 through 9 of this
Agreement may be waived only by, the written consent of the holders of at least
66-2/3% of the aggregate Stated Value of the Preferred; provided however, that
no such amendment or waiver of this Section 9.10 shall be effective without the
written consent of the holders of 100% of the outstanding Preferred.
EXECUTED as of the date first above written by the Company and the
Purchaser.
/s/ David A. Brewer
-------------------
DAVID A. BREWER ("Purchaser")
HYBRID FAX, INC.
By: /s/ Edward R. Prince III
------------------------
Title: President
----------------------
-13-
<PAGE>
EXHIBIT 10.12
- --------------------------------------------------------------------------------
PLEASE COMPLETE PAGES 3, 4 AND 5 AND RETURN TWO COPIES OF THIS AGREEMENT TO
THE COMPANY TOGETHER WITH YOUR CHECK BY JANUARY 31, 1991.
- --------------------------------------------------------------------------------
JETFAX, INC.
Subscription and Stock Purchase Agreement
TO: JetFax, Inc.
978 Hamilton Court
Menlo Park CA 94025
Attn: President
Gentlemen:
The undersigned has received the letter of Rudy Prince dated December 27,
1990 (the "Offer") offering a maximum of 75,000 shares of Series A Preferred
Stock ("Preferred Stock"), together with certain warrants described herein, of
JetFax, Inc., a Delaware corporation (formerly Hybrid Fax, Inc.) ("Company") to
current holders of the Company's Series A Preferred Stock. The undersigned also
acknowledges the previous receipt of information concerning the Company in the
form of the Company's Annual Report for the year ended March 31, 1990, the
Confidential offering memorandum dated August 17, 1990 related to the offer for
sale of Series C preferred Stock (and related amendments) and the Quarterly
Report of the Company for the quarter ended September 30, 1990 (collectively,
the "Company Documents"), each of which having been mailed by the Company to you
as a holder of Series A Preferred Stock.
The undersigned ("Purchaser") hereby subscribes for, and agrees to
purchase, one share of Preferred Stock for each $1.50 of the amount of
investment set forth in the space provided on the signature page below.
Additionally in the event this subscription is accepted by the Company, for each
two shares of Preferred Stock subscribed for hereby, the purchaser will receive
a new warrant to purchase one share of Series A Stock at $1.50 per share (the
"New Warrants"). The New Warrants will expire on June 30, 1992. The
undersigned hereby tenders this Subscription and Stock Purchase Agreement (the
"Agreement") with a check in the amount of the aggregate subscription amount
payable to the order of "JetFax, Inc.")
This subscription shall be irrevocable and shall survive death,
disability, dissolution, liquidation or bankruptcy of Purchaser, subject,
however, to all of the terms and provisions contained in the Offer conditions
set forth herein.
Purchaser represents the following to the Company:
(a) Purchaser has full power and authority to enter into this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and binding
obligation of such Purchaser, enforceable against the purchaser in accordance
with its terms.
(b) Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Preferred Stock
<PAGE>
(or the Common Stock issuable upon conversion) for which such Purchaser hereby
subscribes. Purchaser is able to bear the economic risk of this investment and,
consequently, without limiting the generality of the foregoing, is able to hold
the Preferred Stock (and the Common Stock issuable upon conversion)for an
indefinite period of time and has a sufficient net worth to sustain a loss of
the entire investment in the Company in the event such loss should occur.
(d) Purchaser is acquiring the Preferred Stock for his own account
for investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred Stock (or the Common Stock issuable upon
conversion).
(e) Purchaser acknowledges that there are substantial restrictions on
the transferability of the Preferred Stock (and the Common Stock issuable upon
the conversion thereof). Since the Preferred Stock (and the Common Stock
issuable upon conversion thereof) will not be, and, except as provided in this
Agreement, the Purchaser has no right to require that they be, registered under
the 1933 Act or qualified pursuant to applicable state securities law, the
Preferred Stock (and the Common Stock issuable upon conversion thereof) may not
be, and Purchaser agrees that they shall not be, sold unless such sale is exempt
from such registration under the 1933 Act, the Securities Act of Texas and any
other applicable state blue sky law or regulation. Each Purchaser further
acknowledges that the Company is under no obligation to aid me in obtaining any
exemption from the registration requirements. Purchaser acknowledges that
Purchaser shall be responsible for compliance with all conditions on transfer
imposed by any securities administrator of any state and for any expenses
incurred by the Company for legal or accounting services in connection with
reviewing such a proposed transfer and/or issuing opinions in connection
therewith.
(f) Purchaser acknowledges the previous receipt of information
concerning the Company in the form of the Company's Annual Report for the year
ended march 31, 1990, the Confidential offering memorandum dated August 17, 1990
related to the offer for sale of series C Preferred Stock (and related
amendments) and the Quarterly Report of the Company for the quarter ended
September 30, 1990 (collectively, the "Company Documents"), each of which having
been mailed by the Company to Purchaser as a holder of Series A Preferred Stock.
Purchaser acknowledges that it has received all information concerning the
Company (including financial information) that Purchaser considers necessary or
desirable to make an informed business judgement concerning the risks and merits
of further investment in the Company. In this regard, Purchaser acknowledges
that it has reviewed the Company information.
Upon issuance of the Preferred Stock to Purchaser pursuant hereto, the
Company agrees that Purchaser shall have the same registration rights, and be
subject to the same restrictions on transfer (other than any right of repurchase
by the Company), with respect to such shares of Preferred Stock purchased
hereunder (and the Common stock issuable upon conversion thereof) as such
Purchaser has, or is subject to, with respect to other shares of Series A
Preferred Stock first purchased and currently held by such Purchaser and the
terms of such registration rights and restrictions on transfer (including any
agreement to restrict transfer for a limited period of time after a public
offering of any shares of the Company, but not including any right of the
Company to repurchase such shares in the event of proposed transfer) previously
granted to Purchaser in any stock purchase agreement pursuant to which Purchaser
first acquired Series A Preferred Stock are incorporated herein by reference.
-2-
<PAGE>
PLEASE COMPLETE THE FOLLOWING
The undersigned hereby represents and warrants to the Company that the
answers to the following questions are true and correct and that the Company may
rely on such answers in deciding whether to accept this subscription.
1. The undersigned subscriber is [_] a natural person, [_] a trust,
[_] a corporation, [_] a partnership, [_] other
(please specify)_____________________________________.
2. State principal occupation or business:
___________________________________.
3. The subscriber has a net worth (with my spouse and including home,
furnishings and automobiles) of:
(check whichever statement is applicable)
[_] less than or equal to $1,000,000; or
[_] more than $1,000,000 but less than $5,000,000; or
[_] more than $5,000,000.
4. The subscriber's investment in the Company [_] is [_] is not more than
20% of my net worth (including home, furnishing and automobiles).
5. If the subscriber is an entity, the subscriber [_] was [_] was not
formed specifically for the purpose of investing in the Company.
6. If the subscriber is an individual, the subscriber had an individual
income* in each of the last two years of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
7. If the subscriber is an individual, the subscriber reasonably expects
to have an individual income* in the current year of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
- -------------------------------------------------------------------------------
* Individual income is calculated for any year as follows: (i) individual
adjusted gross income (as reported on Subscriber's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber (as a limited partner) as
reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
-3-
<PAGE>
8. If the subscriber is an individual and married, the subscriber had
joint income* with his or her spouse in each of the last two years
of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
9. If the subscriber is an individual and married, the subscriber
reasonably expects to have joint income* with his or her spouse and
joint income in the current year of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
-4-
<PAGE>
PLEASE SIGN, DATE AND FURNISH THE BOXED INFORMATION
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Stock Purchase Agreement as of this _____ day of January, 1991.
SUBSCRIBER'S NAME AND MAILING ADDRESS: SUBSCRIBER'S RESIDENCE ADDRESS:
- ------------------------------------- -------------------------------------
(Name) (Street)
- ------------------------------------- -------------------------------------
(Street) (City) (State) (Zip)
SUBSCRIBER'S SOCIAL SECURITY OR
- ------------------------------------- TAX IDENTIFICATION NUMBER:
(City) (State) (Zip)
-------------------------------------
AMOUNT OF
SUBSCRIPTION: $_____________________
($1.50 for each share of Series A -------------------------------------
Preferred Stock; New Warrant to Signature of Subscriber
purchase one share of series A Stock
to be issued for each two shares Title (if executing for an entity):
subscribed for.)
------------------------------------
ACCEPTED this ___ day of January, 1991.
JETFAX, INC.
By: _______________________________
President
-5-
<PAGE>
EXHIBIT 10.13
------------------------------------------------------------------
PLEASE COMPLETE PAGES 8, 9 AND 10 AND RETURN TWO COPIES OF THIS
AGREEMENT TO THE COMPANY TOGETHER WITH YOUR CHECK.
------------------------------------------------------------------
HYBRID FAX, INC.
Subscription and Stock Purchase Agreement
TO: Hybrid Fax, Inc.
978 Hamilton Court
Menlo Park CA 94025
Attn: President
Gentlemen:
The undersigned has received the Confidential Private Placement Memorandum
dated July 17, 1989 (the "Memorandum") offering a minimum of 200,000 and a
maximum of 400,000 shares of Series B Preferred Stock ("Preferred Stock") of
Hybrid Fax, Inc., a Delaware corporation ("Company"), with a minimum investment
being $10,000 (except with respect to current holders of the Company's Series A
Preferred Stock and officers of the Company) and additional investment being
available in increments of $10,000. The offering, as set forth in the
Memorandum, has been extended and increased to a maximum of 550,000 shares of
Preferred Stock. The offering was initially closed in August 1989 with the
issuance of 219,838 shares of Preferred Stock. Since such closing, additional
shares of Preferred Stock have continued to be offered to a current shareholders
and a select group of qualified offerees. The undersigned acknowledges the
receipt with this Subscription and Stock Purchase Agreement of (i) the
Memorandum complete with appendices, (ii) the quarterly report of the Company
dated November 6, 1989 complete with financial statements and (iii) Supplement
No. 1 to the Memorandum offering a maximum of 550,000 shares of Preferred Stock
to be sold in this revised offering. The foregoing documents, together with any
material delivered by the Company therewith, are herein referred to as the
"Offering Documents".
The undersigned ("Purchaser") hereby subscribes for, and agrees to
purchase, one share of Preferred Stock for each $1.00 of the amount of
investment set forth in the space provided on the signature page below. The
undersigned hereby tenders this Subscription and Stock Purchase Agreement (the
"Agreement") with a check in the amount of the aggregate subscription amount
payable to the order of "Hybrid Fax, Inc."
Purchaser understands that, upon receipt and acceptance of this
subscription by the Company, the check tendered as payment for the subscription
amount for the Preferred Stock will be negotiated
<PAGE>
by the Company since subscriptions aggregating at least $200,000 in whole have
been received and accepted by the Company.
This subscription shall be irrevocable and shall survive death, disability,
dissolution, liquidation or bankruptcy of Purchaser, subject, however, to all of
the terms and provisions contained in the Offering Documents and the closing
conditions set forth herein. The Company shall have the right to accept or
reject this subscription, in whole or in part, and this subscription shall be
deemed to be accepted by the Company only by execution of this Agreement.
All capitalized terms used but not defined herein shall have the same
meaning as defined in the Memorandum.
If Purchaser is a beneficial holder of Series A Preferred Stock, Purchaser
hereby consents to the creation of a series of Preferred Stock in accordance
with the Memorandum.
Purchaser represents the following to the Company:
(a) Purchaser has full power and authority to enter into this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and binding
obligation of such Purchaser, enforceable against the purchaser in accordance
with its terms.
(b) Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Preferred Stock (or
the Common Stock issuable upon conversion) for which such Purchaser hereby
subscribes. Purchaser is able to bear the economic risk of this investment and,
consequently, without limiting the generality of the foregoing, is able to hold
the Preferred Stock (and the Common Stock issuable upon conversion)for an
indefinite period of time and has a sufficient net worth to sustain a loss of
the entire investment in the Company in the event such loss should occur.
(d) Purchaser is acquiring the Preferred Stock for his own account
for investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred Stock (or the Common Stock issuable upon
conversion).
(e) Purchaser acknowledges that there are substantial restrictions on
the transferability of the Preferred Stock (and the Common Stock issuable upon
the conversion thereof).
-2-
<PAGE>
Since the Preferred Stock (and the Common Stock issuable upon conversion
thereof) will not be, and, except as provided in this Agreement, the Purchaser
has no right to require that they be, registered under the 1933 Act or qualified
pursuant to applicable state securities law, the Preferred Stock (and the Common
Stock issuable upon conversion thereof) may not be, and Purchaser agrees that
they shall not be, sold unless such sale is exempt from such registration under
the 1933 Act, the Securities Act of Texas and any other applicable state blue
sky law or regulation. Each Purchaser further acknowledges that the Company is
under no obligation to aid me in obtaining any exemption from the registration
requirements. Purchaser acknowledges that Purchaser shall be responsible for
compliance with all conditions on transfer imposed by any securities
administrator of any state and for any expenses incurred by the Company for
legal or accounting services in connection with reviewing such a proposed
transfer and/or issuing opinions in connection therewith.
Upon issuance of the Preferred Stock to Purchaser pursuant hereto, the
Company agrees that Purchaser shall have the following registration rights with
respect to such shares of Preferred Stock purchased hereunder (and the Common
Stock issuable upon conversion thereof):
1. Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Holders of 50% of the issued or issuable Registrable Securities (the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders and (ii)
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, appropriate qualification under blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
-3-
<PAGE>
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six months
after the effective date of the Company's first registered public offering
of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations contained in Rule 144 promulgated by the Securities and
Exchange Commission or such similar exemption from registration
requirements of the Act;
(D) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(E) After the Company has effected one such registration pursuant to
this paragraph 1(a), and such registrations have been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best
efforts to register, qualify or comply under this Section 6.1 shall be
deferred for a period not to exceed 120 days from the date of receipt of
the written request from the Initiating Holders.
Subject to the foregoing clauses (A) through (F), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1(a)(i). In such event, the right of any Holder to registration pursuant
to this Section 1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 1, and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by a majority in interest of the
Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 1, if the managing
underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors
-4-
<PAGE>
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders participating and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
2. Optional Registrations. If at any time or times the Company
----------------------
shall determine to register any of its securities (for itself or for any other
securities holder of the Company) under the Securities Act or any successor
legislation (other than a registration relating to stock option plans, employee
benefit plans or a Rule 145 transaction), and in connection therewith the
Company may lawfully register its Common Stock, the Company will promptly give
written notice thereof to the then holders (the "Holders") of all issued or
issuable Registrable Securities (as hereinafter defined) and will use its best
efforts to include in such registration and to effect the registration under the
Securities Act of all Registrable Securities which such Holders may request in
writing delivered to the Company within 15 days after receipt by such Holder of
the notice given by the Company; provided, however, if the managing underwriter
for the Company advises the Company in writing that including all or part of the
Registrable Shares in such offering will adversely affect the marketing of the
proposed offering, then, in connection with any such underwritten offering by
the Company of any of its securities, such registration of Registrable
Securities shall be limited to not less than 10% of the total number of shares
to be sold in the case of an initial public offering of the Company's
securities, and 20% of the total number of shares to be sold in the case of a
subsequent offering; further provided, however, that such limited number of
shares of Common Stock in such offering, which shares shall be taken from those
owned (or obtainable upon the exercise of rights with respect to other
securities) by a group of holders requesting registration consisting of the
Holders and other holders having similar registration rights to those of the
Holders, and such limitation shall be imposed upon the Holders and such other
holders pro rata on the basis of the total number of (i) shares of Registrable
Securities owned by the requesting Holders and (ii) shares of Common Stock
owned, or obtainable by them upon the exercise of rights with respect to other
securities, by such other requesting holders. In the event of such a limitation,
shares of persons not having similar registration rights will not be included in
such registration. The Company shall have the right to select the managing
underwriter or underwriters for any underwritten offering made pursuant to a
registration under this Section 2 hereof.
-5-
<PAGE>
3. Registrable Securities. For the purposes of these provisions, the
----------------------
term "Registrable Securities" shall mean (i) the Common Stock issued or issuable
upon conversion of the Series A Preferred Stock of the Company and the Preferred
Stock (the "Conversion Stock"), (ii) the Common Stock issued or issuable upon
exercise of the Company's outstanding Common Stock Purchase Warrants, of which
warrants to purchase 75,009 shares are outstanding and (iii) any Common Stock
issued or issuable with respect to the Common Stock described in clauses (i) or
(ii) by way of a stock dividend or stock split.
4. Expenses of Registration.
-------------------------
(a) All expenses of the registration and offering incurred in
connection with (i) one registration pursuant to Section 1, and (ii) one
registration pursuant to Section 2, shall be borne by the Company, except that
the Holders shall bear underwriting commissions and discounts attributable to
their Registrable Securities being registered and the fees and expenses of
separate counsel, if any, for such Holders. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other Registration Expenses shall be borne by the Holders of such securities pro
rata. If the Company includes in such registration any securities to be offered
by it, all expenses shall be borne by the Company,
(b) A proportionate share of the expenses of the registration and
offering incurred in connection with any registration pursuant to Section 2
after the first registration thereunder, shall be borne pro rata by the Holder
or Holders requesting the registration on the basis of the ratio of the number
of their shares so registered to the total number of shares included in such
registration.
5. Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted Purchasers under Sections 1 and 2 may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Securities by a Purchaser
provided that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws, and (ii) such assignee or transferee acquires at
least 5,000 shares of the Registrable Securities (appropriately adjusted for
Recapitalizations).
6. Standoff Agreement. The Holders shall, if requested by the
------------------
managing underwriter or underwriters of any proposed firm underwritten offering
of securities by the Company, agree not to sell any of their Registrable
Securities or any other securities of the Company owned by such Holders in any
transaction other than pursuant to such underwritten offering for a period of up
to 90 days beginning on the effective date of the registration statement,
provided that the Company's officers and directors and each holder of 10% or
more of the Company's issued and outstanding Common Stock also agree to such
limitations. The Holders shall upon request execute a written agreement
confirming and agreeing as to the foregoing.
7. Registration Indemnification. In the event of any Registration
----------------------------
under the Act pursuant to these provisions of Registrable Securities of any
Holder, the Company will hold
-6-
<PAGE>
harmless such Holder and each underwriter of such securities and each other
person, if any, who controls such Holder or such underwriter within the meaning
of the Act, against any losses, claims, damages or liabilities to which such
Holder or such underwriter or controlling person may become subject under the
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 registration
statement, or any preliminary prospectus or final prospectus or amendment or
supplement thereto on the effective date thereof, 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;
and will reimburse such Holder and each such underwriter and each such
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; 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, or any
preliminary prospectus or final prospectus or amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Holder or such underwriter
specifically for use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company through an instrument duly executed by the Holder specifically for use
in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
-7-
<PAGE>
PLEASE COMPLETE THE FOLLOWING
The undersigned hereby represents and warrants to the Company that the answers
to the following questions are true and correct and that the Company may rely on
such answers in deciding whether to accept this subscription.
1. The undersigned subscriber is [ ] a natural person, [ ] a trust, [ ] a
corporation, [ ] a partnership, [ ] other (please specify)____________
______________________.
2. State principal occupation or business: _____________________________.
3. Please state educational background (schools, degrees, majors) of
person executing this Agreement:
______________________________________________________________________
_____________________________________________________________________.
4. In the last five years, the subscriber has invested in:
(check whichever statement is applicable)
[ ] venture capital private placements;
[ ] oil and gas or real estate private placements; or
[ ] other business investments:_____________________________________
______________________________________________________________________
_____________________________________________________________________.
(briefly describe type of investments)
5. Complete if subscriber is a trust, corporation or partnership:
The subscriber entity was not formed for the specific purpose of
investing in this offering and has net assets of:
(check whichever statement is applicable)
[ ] less than or equal to $5,000,000; or
[ ] more than $5,000,000.
-8-
<PAGE>
6. Complete if subscriber is a natural person:
I have a net worth (with my spouse and including home, furnishings and
automobiles) of:
(check whichever statement is applicable)
[ ] less than or equal to $1,000,000; or
[ ] more than $1,000,000.
7. Complete if subscriber is a natural person:
My investment in the Company [ ] is [ ] is not more than 10% of my net
worth (including home, furnishing and automobiles).
8. Complete if subscriber is a natural person:
I had an individual income* in each of the last two years of:
(check whichever statement is applicable)
[ ] less than $200,000; or
[ ] more than $200,000.
9. Complete if subscriber is a natural person:
I reasonably expect to have an individual income* in the current year
of:
(check whichever statement is applicable)
[ ] less than $200,000; or
[ ] more than $200,000.
- --------------------------------------------------------------------------------
* Individual income is calculated for any year as follows: (i) individual
adjusted gross income (as reported on Subscriber's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber (as a limited partner) as
reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
10. Complete if subscriber is a natural person and married:
I had joint income* with my spouse in each of the last two years of:
(check whichever statement is applicable)
[ ] less than or equal to $300,000; or
[ ] more than $300,000.
-9-
<PAGE>
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1964 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
11. Complete if subscriber is a natural person and married:
I reasonably expect to have joint income* with my spouse and joint
income in the current year of:
(check whichever statement is applicable)
[ ] less than or equal to $300,000; or
[ ] more than $300,000.
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
PLEASE SIGN, DATE AND FURNISH THE BOXED INFORMATION
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Stock Purchase Agreement as of this 12th day of December, 1989.
- ----------------------------------------- ---------------------------------
SUBSCRIBER'S NAME AND MAILING ADDRESS: SUBSCRIBER'S RESIDENCE ADDRESS:
- ----------------------------------------- ---------------------------------
(Name) (Street)
- ----------------------------------------- ---------------------------------
(Street) (City) (State) (Zip)
SUBSCRIBER'S SOCIAL SECURITY OR
- ----------------------------------------- TAX IDENTIFICATION NUMBER:
(City) (State) (Zip)
---------------------------------
- ----------------------------------------- ---------------------------------
AMOUNT OF INVESTMENT: ---------------------------------
SIGNATURE OF SUBSCRIBER
$ TITLE, IF SIGNING ON BEHALF OF AN
- ------------------------ ENTITY:
- -----------------------------------------
---------------------------------
-10-
<PAGE>
ACCEPTED this _________ day of December, 1989.
HYBRID FAX, INC.
By:_______________________________
President
-11-
<PAGE>
EXHIBIT 10.14
HYBRID FAX, INC.
Subscription and Stock Purchase Agreement
TO: Hybrid Fax, Inc.
1733 Woodside Road, Suite 335
Redwood City, CA 94061
Attn: President
Gentlemen:
The undersigned has received the Confidential Private Placement Memorandum
dated July 17, 1989 (the "Memorandum") offering a minimum of 200,000 and a
maximum of 400,000 shares of Series B Preferred Stock ("Preferred Stock") of
Hybrid Fax, Inc., a Delaware corporation ("Company"), with a minimum investment
being $20,000 (except with respect to current holders of the Company's Series A
Preferred Stock) and additional investment being available in increments of
$10,000. The undersigned also acknowledges the receipt with this Subscription
and Stock Purchase Agreement. The Memorandum, its appendices and any material
delivered by the Company therewith are herein referred to as the "Offering
Documents".
The undersigned ("Purchaser") hereby subscribes for, and agrees to
purchase, one share of Preferred Stock for each $1.00 of the amount of
investment set forth in the space provided on the signature page below. The
undersigned hereby tenders this Subscription and Stock Purchase Agreement (the
"Agreement") with a check in the amount of the aggregate subscription amount
payable to the order of "Hybrid Fax, Inc."
Purchaser understands that, upon receipt, the check tendered as payment for
the subscription amount for the Preferred Stock shall not be negotiated by the
Company until subscriptions aggregating at least $200,000 in whole are received
and accepted by the Company provided that, if minimum subscriptions are not
accepted by the Company by July 31, 1989, the check will be promptly returned to
the undersigned.
This subscription shall be irrevocable and shall survive death, disability,
dissolution, liquidation or bankruptcy of Purchaser, subject, however, to all of
the terms and provisions contained in the Offering Documents and the closing
conditions set forth herein. The Company shall have the right to accept or
reject this subscription, in whole or in part, and this subscription shall be
deemed to be accepted by the Company only by execution of this Agreement.
All capitalized terms used but not defined herein shall have the same
meaning as defined in the Memorandum.
<PAGE>
If Purchaser is a beneficial holder of Series A Preferred Stock, Purchaser
hereby consents to the creation of a series of Preferred Stock in accordance
with the Memorandum.
Purchaser represents the following to the Company:
(a) Purchaser has full power and authority to enter into this Agreement,
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement in a legal, valid and binding obligation of
such Purchaser, enforceable against the purchaser in accordance with its terms.
(b) Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for current
needs and possible personal contingencies, and has no need, and anticipates no
need in the foreseeable future, to sell the Preferred Stock (or the Common Stock
issuable upon conversion) for which such Purchaser hereby subscribes. Purchaser
is able to bear the economic risk of this investment and, consequently, without
limiting the generality of the foregoing, is able to hold the Preferred Stock
(and the Common Stock issuable upon conversion) for an indefinite period of time
and has a sufficient net worth to sustain a loss of the entire investment in the
Company in the event such loss should occur.
(d) Purchaser is acquiring the Preferred Stock for his own account for
investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred Stock (or the Common Stock issuable upon
conversion).
(e) Purchaser acknowledges that there are substantial restrictions on the
transferability of the Preferred Stock (and the Common Stock issuable upon the
conversion thereof). Since the Preferred Stock (and the Common Stock issuable
upon conversion thereof) will not be, and, except as provided in this Agreement,
the Purchaser has no right to require that they be, registered under the 1933
Act or qualified pursuant to applicable state securities law, the Preferred
Stock (and the Common Stock issuable upon conversion thereof) may not be, and
Purchaser agrees that they shall not be, sold unless such sale is exempt from
such registration under the 1933 Act, the Securities Act of Texas and any other
applicable state blue sky law or regulation. Each Purchaser further acknowledges
that the Company is under no obligation to aid me in obtaining any exemption
from the registration requirements. Purchaser acknowledges that Purchaser shall
be responsible for compliance with all conditions on transfer imposed by any
securities administrator of any state and for any expenses incurred by the
Company for legal or accounting services in connection with reviewing such a
proposed transfer and/or issuing opinions in connection therewith.
-2-
<PAGE>
Upon issuance of the Preferred Stock to Purchaser pursuant hereto, the
Company agrees that Purchaser shall have the following registration rights with
respect to such shares of Preferred Stock purchased hereunder (and the Common
Stock issuable upon conversion thereof):
1. Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Holders of 50% of the issued or issuable Registrable Securities (the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders and (ii)
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, appropriate qualification under blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six months
after the effective date of the Company's first registered public offering
of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations contained in Rule 144 promulgated by the Securities and
Exchange Commission or such similar exemption from registration
requirements of the Act;
(D) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration
statement pertaining to securities of the
-3-
<PAGE>
Company (other than a registration of securities in a Rule 145 transaction
or with respect to an employee benefit plan), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(E) After the Company has effected one such registration pursuant to
this paragraph 1(a), and such registrations have been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best
efforts to register, qualify or comply under this Section 1 shall be
deferred for a period not to exceed 120 days from the date of receipt of
the written request from the Initiating Holders.
Subject to the foregoing clauses (A) through (F), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1(a)(i). In such event, the right of any Holder to registration pursuant
to this Section 1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 1, and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by a majority in interest of the
Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 1, if the managing
underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders participating and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration, and
-4-
<PAGE>
such Registrable Securities shall not be transferred in a public distribution
prior to 90 days after the effective date of such registration, or such other
shorter period of time as the underwriters may require.
2. Optional Registrations. If at any time or times the Company shall
----------------------
determine to register any of its securities (for itself or for any other
securities holder of the Company) under the Securities Act or any successor
legislation (other than a registration relating to stock option plans, employee
benefit plans or a Rule 145 transaction), and in connection therewith the
Company may lawfully register its Common Stock, the Company will promptly give
written notice thereof to the then holders (the "Holders") of all issued or
issuable Registrable Securities (as hereinafter defined) and will use its best
efforts to include in such registration and to effect the registration under the
Securities Act of all Registrable Securities which such Holders may request in
writing delivered to the Company within 15 days after receipt by such Holder of
the notice given by the Company; provided, however, if the managing underwriter
for the Company advises the Company in writing that including all or part of the
Registrable Shares in such offering will adversely affect the marketing of the
proposed offering, then, in connection with any such underwritten offering by
the Company of any of its securities, such registration of Registrable
Securities shall be limited to not less than 10% of the total number of shares
to be sold in the case of an initial public offering of the Company's
securities, and 20% of the total number of shares to be sold in the case of a
subsequent offering; further provided, however, that such limited number of
shares of Common Stock in such offering, which shares shall be taken from those
owned (or obtainable upon the exercise of rights with respect to other
securities) by a group of holders requesting registration consisting of the
Holders and other holders having similar registration rights to those of the
Holders, and such limitation shall be imposed upon the Holders and such other
holders pro rata on the basis of the total number of (i) shares of Registrable
Securities owned by the requesting Holders and (ii) shares of Common Stock
owned, or obtainable by them upon the exercise of rights with respect to other
securities, by such other requesting holders. In the event of such a
limitation, shares of persons not having similar registration rights will not be
included in such registration. The Company shall have the right to select the
managing underwriter or underwriters for any underwritten offering made pursuant
to a registration under this Section 2 hereof.
3. Registrable Securities. For the purposes of these provisions, the term
----------------------
"Registrable Securities" shall mean (i) the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock of the Company and the Preferred
Stock (the "Conversion Stock"), (ii) the Common Stock issued or issuable upon
exercise of the Company's outstanding Common Stock Purchase Warrants, of which
warrants to purchase 75,009 shares are outstanding and (iii) any Common Stock
issued or issuable with respect to the Common Stock described in clauses (i) or
(ii) by way of a stock dividend or stock split.
-5-
<PAGE>
4. Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in connection
with (i) one registration pursuant to Section 1, and (ii) one registration
pursuant to Section 2, shall be borne by the Company, except that the Holders
shall bear underwriting commissions and discounts attributable to their
Registrable Securities being registered and the fees and expenses of separate
counsel, if any, for such Holders. Unless otherwise stated, all Selling Expenses
relating to securities registered on behalf of the Holders and all other
Registration Expenses shall be borne by the Holders of such securities pro rata.
If the Company includes in such registration any securities to be offered by it,
all expenses shall be borne by the Company.
(b) A proportionate share of the expenses of the registration and offering
incurred in connection with any registration pursuant to Section 2 after the
first registration thereunder, shall be borne pro rata by the Holder or Holders
requesting the registration on the basis of the ratio of the number of their
shares so registered to the total number of shares included in such
registration.
5. Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Purchasers under Sections 1 and 2 may be assigned to
a transferee or assignee reasonably acceptable to the Company in connection with
any transfer or assignment of Registrable Securities by a Purchaser provided
that: (i) such transfer may otherwise be effected in accordance with applicable
securities laws, and (ii) such assignee or transferee acquires at least 5,000
shares of the Registrable Securities (appropriately adjusted for
Recapitalizations).
6. Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriter or underwriters of any proposed firm underwritten offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten offering for a period of up to 90 days
beginning on the effective date of the registration statement, provided that the
Company's officers and directors and each holder of 10% or more of the Company's
issued and outstanding Common Stock also agree to such limitations. The Holders
shall upon request execute a written agreement confirming and agreeing as to the
foregoing.
7. Registration Indemnification. In the event of any Registration under
----------------------------
the Act pursuant to these provisions of Registrable Securities of any Holder,
the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which such Holder or such underwriter or controlling person
may become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated
-6-
<PAGE>
therein or necessary to make the statements therein not misleading; and will
reimburse such Holder and each such underwriter and each such controlling person
for any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; 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, or any preliminary
prospectus or final prospectus or amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by such Holder or such underwriter specifically for
use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company through an instrument duly executed by the Holder specifically for use
in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
-7-
<PAGE>
PLEASE COMPLETE THE FOLLOWING
The undersigned hereby represents and warrants to the Company that the answers
to the following questions are true and correct and that the Company may rely on
such answers in deciding whether to accept this subscription.
1. The undersigned subscriber is [_] a natural person, [_] a trust, [_] a
corporation, [_] a partnership, [_] other (please
specify)_____________________________________________________________.
2. State principal occupation:__________________________________________.
3. Please state educational background(schools, degrees, majors):
_____________________________________________________________________
_____________________________________________________________________.
4. In the last five years, the subscriber has invested in:
(check whichever statement is applicable)
[_] venture capital private placements;
[_] oil and gas or real estate private placements; or
[_] other business investments:____________________________________
_____________________________________________________________________
_____________________________________________________________________.
(briefly describe type of investments)
5. I have a net worth (with my spouse and including home, furnishings and
automobiles) of:
(check whichever statement is applicable)
[_] less than or equal to $1,000,000; or
[_] more than $1,000,000.
6. My investment in the Company [_] is [_] is not more than 20% of my net
worth (including home, furnishing and automobiles).
-8-
<PAGE>
7. I had an individual income* in each of the last two years of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
8. I reasonably expect to have an individual income* in the current year
of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
- --------------------------------------------------------------------------------
* Individual income is calculated for any year as follows: (i) individual
adjusted gross income (as reported on Subscriber's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber (as a limited partner) as
reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
9. I had joint income* with my spouse in each of the last two years of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
10. I reasonably expect to have a joint income* with my spouse and joint
income in the current year of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
-9-
<PAGE>
11. Complete if subscriber is a natural person and married:
I reasonably expect to have a joint income* with my spouse and joint
income in the current year of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
-10-
<PAGE>
PLEASE SIGN, DATE AND FURNISH THE BOXED INFORMATION
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Stock Purchase Agreement as of this 12th day of December, 1989.
<TABLE>
<CAPTION>
SUBSCRIBER'S NAME AND MAILING ADDRESS: SUBSCRIBER'S RESIDENCE ADDRESS:
<S> <C>
- ----------------------------------------- --------------------------------------------------
(Name) (Street)
--------------------------------------------------
- ----------------------------------------- (City) (State) (Zip)
(Street)
SUBSCRIBER'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER:
- -----------------------------------------
(City) (State) (Zip) --------------------------------------------------
AMOUNT OF INVESTMENT: --------------------------------------------------
SIGNATURE OF SUBSCRIBER
$_______________________ TITLE, IF SIGNING ON BEHALF OF AN ENTITY:
--------------------------------------------------
</TABLE>
-11-
<PAGE>
ACCEPTED this _________ day of December, 1989.
HYBRID FAX, Inc.
By:________________________________________
President
-12-
<PAGE>
EXHIBIT 10.15
------------------------------------------------------------------------
PLEASE COMPLETE PAGES 7, 8, AND 9 AND RETURN TWO COPIES OF THIS
AGREEMENT TO THE COMPANY TOGETHER WITH YOUR CHECK BY AUGUST 31, 1990.
------------------------------------------------------------------------
HYBRID FAX, INC.
Subscription and Stock Purchase Agreement
TO: Hybrid Fax, Inc.
978 Hamilton Court
Menlo Park CA 94025
Attn: President
Gentlemen:
The undersigned has received the Confidential Private Placement Memorandum
dated August 17, 1990 (the "Memorandum") offering a minimum of 200,000 and a
maximum of 600,000 shares of Series C Preferred Stock ("Preferred Stock") of
Hybrid Fax, Inc., a Delaware corporation ("Company"), with a minimum investment
being $20,000 (except with respect to current holders of the Company's Series A
and Series B Preferred Stock) and additional investment being available in
increments of $10,000. The undersigned also acknowledges the receipt thereof
with this Subscription and Stock Purchase Agreement. The Memorandum, its
appendices and any material delivered by the Company therewith are herein
referred to as the "Offering Documents".
The undersigned ("Purchaser") hereby subscribes for, and agrees to
purchase, one share of Preferred Stock for each $1.25 of the amount of
investment set forth in the space provided on the signature page below. The
undersigned hereby tenders this Subscription and Stock Purchase Agreement (the
"Agreement") with a check in the amount of the aggregate subscription amount
payable to the order of "Hybrid Fax, Inc."
Purchaser understands that, upon receipt, the check tendered as payment for
the subscription amount for the Preferred Stock shall not be negotiated by the
Company until subscriptions aggregating at least $200,000 in whole are received
and accepted by the Company provided that, if minimum subscriptions are not
accepted by the Company by September 15, 1990, the check will be promptly
returned to the undersigned.
This subscription shall be irrevocable and shall survive death, disability,
dissolution, liquidation or bankruptcy of Purchaser, subject, however, to all of
the terms and provisions contained in the Offering Documents and the closing
conditions set forth herein. The Company
<PAGE>
shall have the right to accept or reject this subscription, in whole or in part,
and this subscription shall be deemed to be accepted by the Company only by
execution of this Agreement.
All capitalized terms used but not defined herein shall have the same
meaning as defined in the Memorandum.
If Purchaser is a beneficial holder of Series A or Series B Preferred
Stock, Purchaser hereby consents to the creation of a third series of Preferred
Stock in accordance with the Memorandum.
Purchaser represents the following to the Company:
(a) Purchaser has full power and authority to enter into this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and binding
obligation of such Purchaser, enforceable against the purchaser in accordance
with its terms.
(b) Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Preferred Stock (or
the Common Stock issuable upon conversion) for which such Purchaser hereby
subscribes. Purchaser is able to bear the economic risk of this investment and,
consequently, without limiting the generality of the foregoing, is able to hold
the Preferred Stock (and the Common Stock issuable upon conversion) for an
indefinite period of time and has a sufficient net worth to sustain a loss of
the entire investment in the Company in the event such loss should occur.
(d) Purchaser is acquiring the Preferred Stock for his own account
for investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred Stock (or the Common Stock issuable upon
conversion).
(e) Purchaser acknowledges that there are substantial restrictions on
the transferability of the Preferred Stock (and the Common Stock issuable upon
the conversion thereof). Since the Preferred Stock (and the Common Stock
issuable upon conversion thereof) will not be, and, except as provided in this
Agreement, the Purchaser has no right to require that they be, registered under
the 1933 Act or qualified pursuant to applicable state securities law, the
Preferred Stock (and the Common Stock issuable upon conversion thereof) may not
be, and
-2-
<PAGE>
Purchaser agrees that they shall not be, sold unless such sale is exempt from
such registration under the 1933 Act and any other applicable state securities
law or regulation. Each Purchaser further acknowledges that the Company is under
no obligation to aid me in obtaining any exemption from the registration
requirements. Purchaser acknowledges that Purchaser shall be responsible for
compliance with all conditions on transfer imposed by any securities
administrator of any state and for any expenses incurred by the Company for
legal or accounting services in connection with reviewing such a proposed
transfer and/or issuing opinions in connection therewith.
Upon issuance of the Preferred Stock to Purchaser pursuant hereto, the
Company agrees that Purchaser shall have the following registration rights with
respect to such shares of Preferred Stock purchased hereunder (and the Common
Stock issuable upon conversion thereof):
1. Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Holders of 50% of the issued or issuable Registrable Securities (the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders and (ii)
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, appropriate qualification under blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six months
after the effective date of the Company's first registered public offering
of its stock;
-3-
<PAGE>
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations contained in Rule 144 promulgated by the Securities and
Exchange Commission or such similar exemption from registration
requirements of the Act;
(D) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(E) After the Company has effected one such registration pursuant to
this paragraph 1(a), and such registrations have been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best
efforts to register, qualify or comply under this Section 6.1 shall be
deferred for a period not to exceed 120 days from the date of receipt of
the written request from the Initiating Holders.
Subject to the foregoing clauses (A) through (F), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1(a)(i). In such event, the right of any Holder to registration pursuant
to this Section 1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 1, and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by a majority in interest of the
Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 1, if the managing
underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders participating and the number of shares
of
-4-
<PAGE>
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
2. Optional Registrations. If at any time or times prior to
----------------------
December 31, 1995 the Company shall determine to register any of its securities
(for itself or for any other securities holder of the Company) under the
Securities Act or any successor legislation (other than a registration relating
to stock option plans, employee benefit plans or a Rule 145 transaction), and in
connection therewith the Company may lawfully register its Common Stock, the
Company will promptly give written notice thereof to the then holders (the
"Holders") of all issued or issuable Registrable Securities (as hereinafter
defined) and will use its best efforts to include in such registration and to
effect the registration under the Securities Act of all Registrable Securities
which such Holders may request in writing delivered to the Company within 15
days after receipt by such Holder of the notice given by the Company; provided,
however, if the managing underwriter for the Company advises the Company in
writing that including all or part of the Registrable Shares in such offering
will adversely affect the marketing of the proposed offering, then, in
connection with any such underwritten offering by the Company of any of its
securities, such registration of Registrable Securities shall be limited to not
less than 10% of the total number of shares to be sold in the case of an initial
public offering of the Company's securities, and 20% of the total number of
shares to be sold in the case of a subsequent offering; further provided,
however, that such limited number of shares of Common Stock in such offering,
which shares shall be taken from those owned (or obtainable upon the exercise of
rights with respect to other securities) by a group of holders requesting
registration consisting of the Holders and other holders having similar
registration rights to those of the Holders, and such limitation shall be
imposed upon the Holders and such other holders pro rata on the basis of the
total number of (i) shares of Registrable Securities owned by the requesting
Holders and (ii) shares of Common Stock owned, or obtainable by them upon the
exercise of rights with respect to other securities, by such other requesting
holders. In the event of such a limitation, shares of persons not having similar
registration rights will not be included in such registration. The Company shall
have the right to select the managing underwriter or underwriters for any
underwritten offering made pursuant to a registration under this Section 2
hereof.
-5-
<PAGE>
3. Registrable Securities. For the purposes of these provisions, the
----------------------
term "Registrable Securities" shall mean (i) the Common Stock issued or issuable
upon conversion of any series of Preferred Stock of the Company (including the
Preferred Stock) where the holder thereof has the right under this agreement or
a substantially similar right to require registration of such stock (the
"Conversion Stock"), (ii) the Common Stock issued or issuable upon exercise of
the Company's outstanding Common Stock Purchase Warrants, of which warrants to
purchase 75,009 shares are outstanding and (iii) any Common Stock issued or
issuable with respect to the Common Stock described in clauses (i) or (ii) by
way of a stock dividend or stock split.
4. Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in
connection with (i) one registration pursuant to Section 1, and (ii) one
registration pursuant to Section 2, shall be borne by the Company, except that
the Holders shall bear underwriting commissions and discounts attributable to
their Registrable Securities being registered and the fees and expenses of
separate counsel, if any, for such Holders. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other Registration Expenses shall be borne by the Holders of such securities pro
rata. If the Company includes in such registration any securities to be offered
by it, all expenses shall be borne by the Company,
(b) A proportionate share of the expenses of the registration and
offering incurred in connection with any registration pursuant to Section 2
after the first registration thereunder, shall be borne pro rata by the Holder
or Holders requesting the registration on the basis of the ratio of the number
of their shares so registered to the total number of shares included in such
registration.
5. Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted Purchasers under Sections 1 and 2 may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Securities by a Purchaser
provided that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws, and (ii) such assignee or transferee acquires at
least 5,000 shares of the Registrable Securities (appropriately adjusted for
Recapitalizations).
6. Standoff Agreement. The Holders shall, if requested by the
------------------
managing underwriter or underwriters of any proposed firm underwritten offering
of securities by the Company, agree not to sell any of their Registrable
Securities or any other securities of the Company owned by such Holders in any
transaction other than pursuant to such underwritten offering for a period of up
to 90 days beginning on the effective date of the registration statement,
provided that the Company's officers and directors and each holder of 10% or
more of the Company's issued and outstanding Common Stock also agree to such
limitations. The Holders shall upon request execute a written agreement
confirming and agreeing as to the foregoing.
-6-
<PAGE>
7. Registration Indemnification. In the event of any Registration
----------------------------
under the Act pursuant to these provisions of Registrable Securities of any
Holder, the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which such Holder or such underwriter or controlling person
may become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or such underwriter specifically for use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company through an instrument duly executed by the Holder specifically for use
in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to
-7-
<PAGE>
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses incurred by the latter in
connection with the defense thereof.
-8-
<PAGE>
PLEASE COMPLETE THE FOLLOWING
The undersigned hereby represents and warrants to the Company that the
answers to the following questions are true and correct and that the Company may
rely on such answers in deciding whether to accept this subscription.
1. The undersigned subscriber is [ ] a natural person, [ ] a trust,
[ ] a corporation, [ ] a partnership, [ ] other (please
specify)
-------------------------------------------------------------
2. State principal occupation of person executing this Agreement:
---------------------------------------------------------------------
3. Please state educational background of person executing this Agreement
(schools, degrees, majors):
---------------------------------------------------------------------
---------------------------------------------------------------------
4. In the last five years, the subscriber has invested in:
(check whichever statement is applicable)
[ ] venture capital private placements;
[ ] oil and gas or real estate private placements; or
[ ] other business investments:
--------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(briefly describe type of investments)
5. The subscriber has a net worth (if an individual, together with spouse
and including home, furnishings and automobiles) of:
(check whichever statement is applicable)
[ ] less than or equal to $1,000,000; or
[ ] more than $1,000,000 but less than $5,000,000; or
[ ] more than $5,000,000.
6. The subscriber's investment in the Company [ ] is [ ] is not more than
20% of the undersigned's net worth (including home, furnishings and
automobiles).
7. If the subscriber is an entity, the subscriber [ ] was [ ] was not
formed specifically for the purpose of investing in the Company.
-9-
<PAGE>
8. If the subscriber is an individual, the subscriber had an individual
income* in each of the last two years of:
(check whichever statement is applicable)
[ ] less than $200,000; or
[ ] more than $200,000.
9. If the subscriber is an individual, the subscriber reasonably expects
to have an individual income* in the current year of:
(check whichever statement is applicable)
[ ] less than $200,000; or
[ ] more than $200,000.
- --------------------------------------------------------------------------------
* Individual income is calculated for any year as follows: (i) individual
adjusted gross income (as reported on Subscriber's federal income tax return),
plus (ii) any deductions for long-term capital gain under Section 1202 of the
Internal Revenue Code of 1954 (the "Code"), plus (iii) any deductions for
depletion under Sections 611 et seq. of the Code, plus (iv) any exclusion for
interest under Section 103 of the Code, plus (v) any losses of a limited
partnership allocated to Subscriber (as a limited partner) as reported on
Schedule E of Form 1040.
- --------------------------------------------------------------------------------
10. If the subscriber is an individual and married, the subscriber had
joint income* with his or her spouse in each of the last two years of:
(check whichever statement is applicable)
[ ] less than or equal to $300,000; or
[ ] more than $300,000.
11. If the subscriber is an individual and married, the subscriber
reasonably expects to have joint income* with his or her spouse and joint income
in the current year of:
(check whichever statement is applicable)
[ ] less than or equal to $300,000; or
[ ] more than $300,000.
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section 1202
of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any deductions
for depletion under Sections 611 et seq. of the Code, plus (iv) any exclusion
for interest under Section 103 of the Code, plus (v) any losses of a limited
partnership allocated to Subscriber and his or her spouse (as a limited
partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
-10-
<PAGE>
PLEASE SIGN, DATE AND FURNISH THE BOXED INFORMATION
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Stock Purchase Agreement as of this ____ day of _______, 1990.
- ----------------------------------------- ---------------------------------
SUBSCRIBER'S NAME AND MAILING ADDRESS: SUBSCRIBER'S RESIDENCE ADDRESS:
-------------------------------------- -------------------------------
(Name) (Street)
-------------------------------
-------------------------------------- (City) (State) (Zip)
(Street)
SUBSCRIBER'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER:
--------------------------------------
(City) (State) (Zip)
- ----------------------------------------- ---------------------------------
- ----------------------------- ------------------------------------------
AMOUNT
OF INVESTMENT: SIGNATURE OF SUBSCRIBER
TITLE (IF SIGNING ON BEHALF OF AN ENTITY):
$
-----------------
- -----------------------------
------------------------------------------
ACCEPTED this _________ day of September, 1989.
HYBRID FAX, Inc.
By:
-------------------------------------------
President
-11-
<PAGE>
EXHIBIT 10.16
------------------------------------------------------------------------
PLEASE COMPLETE PAGES 7, 8, AND 9 AND RETURN TWO COPIES OF THIS
AGREEMENT TO THE COMPANY TOGETHER WITH YOUR CHECK BY AUGUST 31, 1990.
------------------------------------------------------------------------
HYBRID FAX, INC.
Subscription and Stock Purchase Agreement
TO: Hybrid Fax, Inc.
978 Hamilton Court
Menlo Park CA 94025
Attn: President
Gentlemen:
The undersigned has received the Confidential Private Placement Memorandum
dated August 17, 1990 (the "Memorandum") offering a minimum of 200,000 and a
maximum of 600,000 shares of Series C Preferred Stock ("Preferred Stock") of
Hybrid Fax, Inc., a Delaware corporation ("Company"), with a minimum investment
being $20,000 (except with respect to current holders of the Company's Series A
and Series B Preferred Stock) and additional investment being available in
increments of $10,000. The undersigned also acknowledges the receipt thereof
with this Subscription and Stock Purchase Agreement. The Memorandum, its
appendices and any material delivered by the Company therewith are herein
referred to as the "Offering Documents".
The undersigned hereby subscribes for, and irrevocably agrees to purchase
(on the terms set forth herein), 200,000 shares of Preferred Stock at a purchase
price of $1.25 per share. The 200,000 shares of Preferred Stock subscribed for
hereby are to be purchased as follows:
(a) 100,000 shares of Preferred Stock are being purchased by the
undersigned as of the date of acceptance of this Subscription and Stock
Purchase Agreement (the "Agreement") by the delivery of a check in the
amount of $125,000 payable to the order of the Company; and
(b) On or before October 21, 1990, the undersigned, or an affiliate
thereof designated by the undersigned, will purchase, and the Company
agrees to issue, 100,000 shares of preferred Stock by the delivery of a
check in the amount of $1250,000 payable to the order of the Company.
The term "Purchaser" as used herein shall mean, collectively, the undersigned
and any affiliate thereof who purchases preferred Stock pursuant to clause (b)
above.
1
<PAGE>
In the event that an affiliate of the undersigned purchases shares of
preferred Stock pursuant to clause (b) above, the undersigned agrees that (i)
such affiliate will be subject to, and be entitled to all rights under, the
terms of this agreement as if it were a party hereto, (ii) on request by the
Company, the undersigned will cause such affiliate to acknowledge in writing
that it agrees to be bound by this agreement and (iii) it will furnish all
information regarding the affiliate to the Company and its counsel in order for
the Company and its counsel to be reasonably satisfied that the affiliate either
qualified as an "accredited investor" under Regulation D promulgated by the
Securities and exchange Commission and applicable state securities laws or
otherwise meets investor standards under available private offering exemptions
from state and federal securities laws.
This subscription shall be irrevocable and shall survive dissolution,
liquidation or bankruptcy of purchaser, subject, however, to all of the terms
and provisions contained in the offering Documents and the closing conditions
set forth herein. The Company shall have the right to accept or reject this
subscription, in whole or in part, and this subscription shall be deemed to be
accepted by the Company only by execution of this Agreement.
All capitalized terms used but not defined herein shall have the same
meaning as defined in the Memorandum.
If Purchaser is a beneficial holder of Series A or Series B Preferred
Stock, Purchaser hereby consents to the creation of a third series of Preferred
Stock in accordance with the Memorandum.
Purchaser represents the following to the Company:
(a) Purchaser has full power and authority to enter into this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and binding
obligation of such Purchaser, enforceable against the purchaser in accordance
with its terms.
(b) Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Preferred Stock (or
the Common Stock issuable upon conversion) for which such Purchaser hereby
subscribes. Purchaser is able to bear the economic risk of this investment and,
consequently, without limiting the generality of the foregoing, is able to hold
the Preferred Stock (and the Common Stock issuable upon conversion) for an
indefinite period of time and has a sufficient net worth to sustain a loss of
the entire investment in the Company in the event such loss should occur.
-2-
<PAGE>
(d) Purchaser is acquiring the Preferred Stock for his own account
for investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred Stock (or the Common Stock issuable upon
conversion).
(e) Purchaser acknowledges that there are substantial restrictions on
the transferability of the Preferred Stock (and the Common Stock issuable upon
the conversion thereof). Since the Preferred Stock (and the Common Stock
issuable upon conversion thereof) will not be, and, except as provided in this
Agreement, the Purchaser has no right to require that they be, registered under
the 1933 Act or qualified pursuant to applicable state securities law, the
Preferred Stock (and the Common Stock issuable upon conversion thereof) may not
be, and Purchaser agrees that they shall not be, sold unless such sale is exempt
from such registration under the 1933 Act and any other applicable state
securities law or regulation. Each Purchaser further acknowledges that the
Company is under no obligation to aid me in obtaining any exemption from the
registration requirements. Purchaser acknowledges that Purchaser shall be
responsible for compliance with all conditions on transfer imposed by any
securities administrator of any state and for any expenses incurred by the
Company for legal or accounting services in connection with reviewing such a
proposed transfer and/or issuing opinions in connection therewith.
(f) The undersigned hereby represents and warrants to the Company that
all information that the undersigned has furnished to the Company and its
counsel in order for the Company and its counsel to be reasonably satisfied that
the undersigned either qualifies as an "accredited investor" under Regulation D
promulgated by the Securities and exchange Commission and applicable state
securities laws, or otherwise meets investor standards under available private
offering exemptions from state and federal securities laws, is true and correct.
1. Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Holders of 50% of the issued or issuable Registrable Securities (the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders and (ii)
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, appropriate qualification under blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under
-3-
<PAGE>
the Securities Act and any other governmental requirements or regulations) as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a written request
received by the Company within 20 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance pursuant
to this Section 1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six months
after the effective date of the Company's first registered public offering
of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations contained in Rule 144 promulgated by the Securities and
Exchange Commission or such similar exemption from registration
requirements of the Act;
(D) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(E) After the Company has effected one such registration pursuant to
this paragraph 1(a), and such registrations have been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best
efforts to register, qualify or comply under this Section 6.1 shall be
deferred for a period not to exceed 120 days from the date of receipt of
the written request from the Initiating Holders.
-4-
<PAGE>
Subject to the foregoing clauses (A) through (F), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1(a)(i). In such event, the right of any Holder to registration pursuant
to this Section 1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 1, and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by a majority in interest of the
Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 1, if the managing
underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders participating and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
2. Optional Registrations. If at any time or times prior to
----------------------
December 31, 1995 the Company shall determine to register any of its securities
(for itself or for any other securities holder of the Company) under the
Securities Act or any successor legislation (other than a registration relating
to stock option plans, employee benefit plans or a Rule 145 transaction), and in
connection therewith the Company may lawfully register its Common Stock, the
Company will promptly give written notice thereof to the then holders (the
"Holders") of all issued or issuable Registrable Securities (as hereinafter
defined) and will use its best efforts to include in such registration and to
effect the registration under the Securities Act of all Registrable Securities
which such Holders may request in writing delivered to the Company within 15
days after receipt by such Holder of the notice given by the Company; provided,
however, if the
-5-
<PAGE>
managing underwriter for the Company advises the Company in writing that
including all or part of the Registrable Shares in such offering will adversely
affect the marketing of the proposed offering, then, in connection with any such
underwritten offering by the Company of any of its securities, such registration
of Registrable Securities shall be limited to not less than 10% of the total
number of shares to be sold in the case of an initial public offering of the
Company's securities, and 20% of the total number of shares to be sold in the
case of a subsequent offering; further provided, however, that such limited
number of shares of Common Stock in such offering, which shares shall be taken
from those owned (or obtainable upon the exercise of rights with respect to
other securities) by a group of holders requesting registration consisting of
the Holders and other holders having similar registration rights to those of the
Holders, and such limitation shall be imposed upon the Holders and such other
holders pro rata on the basis of the total number of (i) shares of Registrable
Securities owned by the requesting Holders and (ii) shares of Common Stock
owned, or obtainable by them upon the exercise of rights with respect to other
securities, by such other requesting holders. In the event of such a limitation,
shares of persons not having similar registration rights will not be included in
such registration. The Company shall have the right to select the managing
underwriter or underwriters for any underwritten offering made pursuant to a
registration under this Section 2 hereof.
3. Registrable Securities. For the purposes of these provisions, the
----------------------
term "Registrable Securities" shall mean (i) the Common Stock issued or issuable
upon conversion of any series of Preferred Stock of the Company (including the
Preferred Stock) where the holder thereof has the right under this agreement or
a substantially similar right to require registration of such stock (the
"Conversion Stock"), (ii) the Common Stock issued or issuable upon exercise of
the Company's outstanding Common Stock Purchase Warrants, of which warrants to
purchase 75,009 shares are outstanding and (iii) any Common Stock issued or
issuable with respect to the Common Stock described in clauses (i) or (ii) by
way of a stock dividend or stock split.
4. Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in
connection with (i) one registration pursuant to Section 1, and (ii) one
registration pursuant to Section 2, shall be borne by the Company, except that
the Holders shall bear underwriting commissions and discounts attributable to
their Registrable Securities being registered and the fees and expenses of
separate counsel, if any, for such Holders. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other Registration Expenses shall be borne by the Holders of such securities pro
rata. If the Company includes in such registration any securities to be offered
by it, all expenses shall be borne by the Company,
(b) A proportionate share of the expenses of the registration and
offering incurred in connection with any registration pursuant to Section 2
after the first registration thereunder, shall be borne pro rata by the Holder
or Holders requesting the registration on the
-6-
<PAGE>
basis of the ratio of the number of their shares so registered to the total
number of shares included in such registration.
5. Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted Purchasers under Sections 1 and 2 may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Securities by a Purchaser
provided that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws, and (ii) such assignee or transferee acquires at
least 5,000 shares of the Registrable Securities (appropriately adjusted for
Recapitalizations).
6. Standoff Agreement. The Holders shall, if requested by the
------------------
managing underwriter or underwriters of any proposed firm underwritten offering
of securities by the Company, agree not to sell any of their Registrable
Securities or any other securities of the Company owned by such Holders in any
transaction other than pursuant to such underwritten offering for a period of up
to 90 days beginning on the effective date of the registration statement,
provided that the Company's officers and directors and each holder of 10% or
more of the Company's issued and outstanding Common Stock also agree to such
limitations. The Holders shall upon request execute a written agreement
confirming and agreeing as to the foregoing.
7. Registration Indemnification. In the event of any Registration
----------------------------
under the Act pursuant to these provisions of Registrable Securities of any
Holder, the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which such Holder or such underwriter or controlling person
may become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or such underwriter specifically for use in the preparation thereof.
-7-
<PAGE>
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company through an instrument duly executed by the Holder specifically for use
in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
-8-
<PAGE>
PLEASE COMPLETE THE FOLLOWING
The undersigned hereby represents and warrants to the Company that the
answers to the following questions are true and correct and that the Company may
rely on such answers in deciding whether to accept this subscription.
1. The undersigned subscriber is [_] a natural person, [_] a trust, [_] a
corporation, [_] a partnership, [_] other (please specify)
________________________________.
2. State principal occupation of person executing this Agreement:
----------------------------------------------------------------------
3. Please state educational background of person executing this Agreement
(schools, degrees, majors):
----------------------------------------------------------------------
----------------------------------------------------------------------
4. In the last five years, the subscriber has invested in:
(check whichever statement is applicable)
[_] venture capital private placements;
[_] oil and gas or real estate private placements; or
[_] other business investments:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(briefly describe type of investments)
5. The subscriber has a net worth (if an individual, together with spouse
and including home, furnishings and automobiles) of:
(check whichever statement is applicable)
[_] less than or equal to $1,000,000; or
[_] more than $1,000,000 but less than $5,000,000; or
[_] more than $5,000,000.
6. The subscriber's investment in the Company [_] is [_] is not more than
20% of the undersigned's net worth (including home, furnishings and
automobiles).
7. If the subscriber is an entity, the subscriber [_] was [_] was not
formed specifically for the purpose of investing in the Company.
-9-
<PAGE>
8. If the subscriber is an individual, the subscriber had an individual
income* in each of the last two years of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
9. If the subscriber is an individual, the subscriber reasonably expects
to have an individual income* in the current year of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
10. If the subscriber is an individual and married, the subscriber had
joint income* with his or her spouse in each of the last two years of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
11. If the subscriber is an individual and married, the subscriber
reasonably expects to have joint income* with his or her spouse and joint
income in the current year of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
- -------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- -------------------------------------------------------------------------------
-10-
<PAGE>
PLEASE SIGN, DATE AND FURNISH THE BOXED INFORMATION
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Stock Purchase Agreement as of this 6th day of September, 1990.
- -----------------------------------------------------------------------------
SUBSCRIBER'S NAME AND MAILING ADDRESS: SUBSCRIBER'S RESIDENCE ADDRESS:
- ----------------------------------------- ---------------------------------
(Name) (Street)
- ----------------------------------------- ---------------------------------
(Street) (City) (State) (Zip)
SUBSCRIBER'S SOCIAL SECURITY OR
- ----------------------------------------- TAX IDENTIFICATION NUMBER:
(City) (State) (Zip)
---------------------------------
- -----------------------------------------------------------------------------
- ----------------------------
/s/Timothy Draper
AMOUNT -----------------------------------
OF INVESTMENT SIGNATURE OF SUBSCRIBER
TITLE ( IF SIGNING ON BEHALF OF AN ENTITY):
$
- -----------------
- ----------------------------
Draper Associates Polaris Fund L.P.
-----------------------------------
ACCEPTED this 6th day of September, 1990.
HYBRID FAX, INC.
By: /s/ Edward R. Prince III
----------------------------------
President
-11-
<PAGE>
EXHIBIT 10.17
HYBRID FAX, INC.
Subscription and Stock Purchase Agreement
TO: Hybrid Fax, Inc.
978 Hamilton Court
Menlo Park CA 94025
Attn: President
Gentlemen:
The undersigned has received the Confidential Private Placement Memorandum
dated August 17, 1990 (the "Memorandum") offering a minimum of 200,000 and a
maximum of 600,000 shares of Series C Preferred Stock ("Preferred Stock") of
Hybrid Fax, Inc., a Delaware corporation ("Company"), with a minimum investment
being $20,000 (except with respect to current holders of the Company's Series A
and Series B Preferred Stock) and additional investment being available in
increments of $10,000. The undersigned also acknowledges the receipt thereof
with this Subscription and Stock Purchase Agreement. The Memorandum, its
appendices and any material delivered by the Company therewith are herein
referred to as the "Offering Documents".
The undersigned ("Purchasers") hereby subscribes for, and irrevocably
agrees to purchase (subject to and on the terms set forth herein), 200,000
shares of Preferred Stock at a purchase price of $1.25 per share. The 200,000
shares of Preferred Stock subscribed for hereby are to be purchased as follows:
(a) 40,000 shares of Preferred Stock are being purchased by the
undersigned as of the date of acceptance of this Subscription and Stock
Purchase Agreement (the "Agreement") by the delivery of a check in the
amount of $50,000 payable to the order of the Company; and
(b) On the 15th day of each calender month commencing with October 1990
and ending with May 1991 the undersigned agrees to purchase, and the
Company agrees to issue, 20,000 shares of Preferred Stock (a total of
160,000 shares) by the delivery of a check on the 15th of each such month
in the amount of $25,000 payable to the order of the Company.
(c) The undersigned shall have the right to elect to withdraw its
subscription to purchase, and the undersigned shall thereafter not be
obligated to purchase, any further shares of preferred Stock not already
paid for under clause (b) of this paragraph in the even that (i) gross
revenues billed to the Company by the undersigned or its affiliated
companies under all contracts, agreements and orders for work performed
during either of the calender quarters ended December 31, 1990 and march
31, 1991 does not exceed $375,000 and (ii)
<PAGE>
within 15 days from the last day of either of such calender quarter, the
undersigned delivers the Company a written election to cease further
purchases of Preferred Stock under this Agreement.
This subscription shall be irrevocable and shall survive dissolution,
liquidation or bankruptcy of purchaser, subject, however, to all of the terms
and provisions contained in the offering Documents and the closing conditions
set forth herein. The Company shall have the right to accept or reject this
subscription, in whole or in part, and this subscription shall be deemed to be
accepted by the Company only by execution of this Agreement.
All capitalized terms used but not defined herein shall have the same
meaning as defined in the Memorandum.
If Purchaser is a beneficial holder of Series A or Series B Preferred
Stock, Purchaser hereby consents to the creation of a third series of Preferred
Stock in accordance with the Memorandum.
Purchaser represents the following to the Company:
(a) Purchaser has full power and authority to enter into this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and binding
obligation of such Purchaser, enforceable against the purchaser in accordance
with its terms.
(b) Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Preferred Stock (or
the Common Stock issuable upon conversion) for which such Purchaser hereby
subscribes. Purchaser is able to bear the economic risk of this investment and,
consequently, without limiting the generality of the foregoing, is able to hold
the Preferred Stock (and the Common Stock issuable upon conversion) for an
indefinite period of time and has a sufficient net worth to sustain a loss of
the entire investment in the Company in the event such loss should occur.
(d) Purchaser is acquiring the Preferred Stock for his own account
for investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Preferred Stock (or the Common Stock issuable upon
conversion).
-2-
<PAGE>
(e) Purchaser acknowledges that there are substantial restrictions on
the transferability of the Preferred Stock (and the Common Stock issuable upon
the conversion thereof). Since the Preferred Stock (and the Common Stock
issuable upon conversion thereof) will not be, and, except as provided in this
Agreement, the Purchaser has no right to require that they be, registered under
the 1933 Act or qualified pursuant to applicable state securities law, the
Preferred Stock (and the Common Stock issuable upon conversion thereof) may not
be, and Purchaser agrees that they shall not be, sold unless such sale is exempt
from such registration under the 1933 Act and any other applicable state
securities law or regulation. Each Purchaser further acknowledges that the
Company is under no obligation to aid me in obtaining any exemption from the
registration requirements. Purchaser acknowledges that Purchaser shall be
responsible for compliance with all conditions on transfer imposed by any
securities administrator of any state and for any expenses incurred by the
Company for legal or accounting services in connection with reviewing such a
proposed transfer and/or issuing opinions in connection therewith.
(f) The undersigned hereby represents and warrants to the Company that
the undersigned (i) is a corporation not specifically formed for the purpose of
investing in the Company, (ii) has a net worth in excess of more than $5,000,000
or (iii) is owned exclusively by persons who either (1) have a net worth
(jointly with spouse) in excess of $1,000,000, (2) had an individual income* in
each of the last two years of more than $200,000 and reasonably expects to have
an individual income* in the current year of more than $200,000 or (3) had joint
income* with his or her spouse in each of the last two years of more than
$300,000 and reasonably expects to have joint income* with his or her spouse and
joint income in the current year of more than $300,000.
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
1. Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Holders of 50% of the issued or issuable Registrable Securities (the "Initiating
Holders") a written request that the Company effect a registration under the
Securities Act of 1933, as amended (the "Securities Act") with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders and (ii)
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, appropriate qualification under blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate
-3-
<PAGE>
the sale and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within 20 days after
receipt of such written notice from the Company; provided, however, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six months
after the effective date of the Company's first registered public offering
of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that
the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations contained in Rule 144 promulgated by the Securities and
Exchange Commission or such similar exemption from registration
requirements of the Act;
(D) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(E) After the Company has effected one such registration pursuant to
this paragraph 1(a), and such registrations have been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best
efforts to register, qualify or comply under this Section 6.1 shall be
deferred for a period not to exceed 120 days from the date of receipt of
the written request from the Initiating Holders.
Subject to the foregoing clauses (A) through (F), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as
-4-
<PAGE>
part of the notice given pursuant to Section 1(a)(i). In such event, the right
of any Holder to registration pursuant to this Section 1 shall be conditioned
upon such Holder's participation in the underwriting arrangements required by
this Section 1, and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested shall be limited as provided herein. The
Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter(s) selected for such underwriting
by a majority in interest of the Initiating Holders, but subject to the
Company's reasonable approval. Notwithstanding any other provision of this
Section 1, if the managing underwriter(s) advise(s) the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders participating and
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason of
the underwriters' marketing limitation shall be included in such registration.
To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
2. Optional Registrations. If at any time or times prior to
----------------------
December 31, 1995 the Company shall determine to register any of its securities
(for itself or for any other securities holder of the Company) under the
Securities Act or any successor legislation (other than a registration relating
to stock option plans, employee benefit plans or a Rule 145 transaction), and in
connection therewith the Company may lawfully register its Common Stock, the
Company will promptly give written notice thereof to the then holders (the
"Holders") of all issued or issuable Registrable Securities (as hereinafter
defined) and will use its best efforts to include in such registration and to
effect the registration under the Securities Act of all Registrable Securities
which such Holders may request in writing delivered to the Company within 15
days after receipt by such Holder of the notice given by the Company; provided,
however, if the managing underwriter for the Company advises the Company in
writing that including all or part of the Registrable Shares in such offering
will adversely affect the marketing of the proposed offering, then, in
connection with any such underwritten offering by the Company of any of its
securities, such registration of Registrable Securities shall be limited to not
less than 10% of the total number of shares to be sold in the case of an initial
public offering of the Company's securities, and 20% of the total number of
shares to be sold in the case of a subsequent offering; further provided,
however, that such limited number of shares of Common Stock in such offering,
which shares shall be taken from those owned (or obtainable upon the exercise of
rights with respect to other securities) by a group of holders requesting
registration consisting of the Holders and other holders having similar
registration rights to those of the Holders, and such limitation shall be
imposed upon the Holders and such other
-5-
<PAGE>
holders pro rata on the basis of the total number of (i) shares of Registrable
Securities owned by the requesting Holders and (ii) shares of Common Stock
owned, or obtainable by them upon the exercise of rights with respect to other
securities, by such other requesting holders. In the event of such a limitation,
shares of persons not having similar registration rights will not be included in
such registration. The Company shall have the right to select the managing
underwriter or underwriters for any underwritten offering made pursuant to a
registration under this Section 2 hereof.
3. Registrable Securities. For the purposes of these provisions, the
----------------------
term "Registrable Securities" shall mean (i) the Common Stock issued or issuable
upon conversion of any series of Preferred Stock of the Company (including the
Preferred Stock) where the holder thereof has the right under this agreement or
a substantially similar right to require registration of such stock (the
"Conversion Stock"), (ii) the Common Stock issued or issuable upon exercise of
the Company's outstanding Common Stock Purchase Warrants, of which warrants to
purchase 75,009 shares are outstanding and (iii) any Common Stock issued or
issuable with respect to the Common Stock described in clauses (i) or (ii) by
way of a stock dividend or stock split.
4. Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in
connection with (i) one registration pursuant to Section 1, and (ii) one
registration pursuant to Section 2, shall be borne by the Company, except that
the Holders shall bear underwriting commissions and discounts attributable to
their Registrable Securities being registered and the fees and expenses of
separate counsel, if any, for such Holders. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other Registration Expenses shall be borne by the Holders of such securities pro
rata. If the Company includes in such registration any securities to be offered
by it, all expenses shall be borne by the Company,
(b) A proportionate share of the expenses of the registration and
offering incurred in connection with any registration pursuant to Section 2
after the first registration thereunder, shall be borne pro rata by the Holder
or Holders requesting the registration on the basis of the ratio of the number
of their shares so registered to the total number of shares included in such
registration.
5. Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted Purchasers under Sections 1 and 2 may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Securities by a Purchaser
provided that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws, and (ii) such assignee or transferee acquires at
least 5,000 shares of the Registrable Securities (appropriately adjusted for
Recapitalizations).
6. Standoff Agreement. The Holders shall, if requested by the
------------------
managing underwriter or underwriters of any proposed firm underwritten offering
of securities by the Company, agree not to sell any of their Registrable
Securities or any other securities of the Company owned by such Holders in any
transaction other than pursuant to such underwritten offering for a period of up
to 90 days beginning on the effective date of the registration statement,
provided that the Company's officers and directors and each holder of 10% or
more of the Company's issued and
-6-
<PAGE>
outstanding Common Stock also agree to such limitations. The Holders shall upon
request execute a written agreement confirming and agreeing as to the foregoing.
7. Registration Indemnification. In the event of any Registration
----------------------------
under the Act pursuant to these provisions of Registrable Securities of any
Holder, the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which such Holder or such underwriter or controlling person
may become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or such underwriter specifically for use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company through an instrument duly executed by the Holder specifically for use
in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
-7-
<PAGE>
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
PLEASE SIGN, DATE AND FURNISH THE BOXED INFORMATION
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Stock Purchase Agreement as of this 7th day of September, 1990.
- --------------------------------------------------
SUBSCRIBER'S NAME AND MAILING ADDRESS:
ADLAR Turnkey Manuf Corp
-----------------------------------------------
(Name)
2350 Lundy Place
-----------------------------------------------
(Street)
San Jose CA 95131
-----------------------------------------------
(City) (State) (Zip)
--------------------------------------------------
/s/A A
---------------------------------------------------
Signature of Subscriber
Title:
Chairman of the Board of Directors
----------------------------------
ACCEPTED this 7th day of September, 1990.
HYBRID FAX, INC.
By: /s/ Edward R. Prince III
------------------------------
President
-8-
<PAGE>
EXHIBIT 10.18
------------------------------------------------------------
PLEASE COMPLETE AND RETURN TWO
COPIES OF THIS AGREEMENT TOGETHER WITH YOUR SIGNED PROXY AND
YOUR CHECK TO THE COMPANY BY AUGUST 36, 1991.
------------------------------------------------------------
JETFAX, INC.
Subscription and Stock Purchase Agreement
for Shares of series D and Series E Preferred Stock Plus Warrants
Pursuant to Right of First Purchase as Holder of Series A Preferred Stock
Name of Series A Preferred Stockholder ("Purchaser"):
Maximum Number of Shares of Series D Preferred Stock
Offered to Purchase at $1.62 per share (1)(2):
Maximum Number of Shares of Series E Preferred Stock
Offered to Purchaser at $2.15 per share(1):
______________
(1) For each three shares of Series D Preferred Stock or series E Preferred
Stock purchased hereby, Purchaser will receive a warrant to purchase one share
of Series E Preferred Stock (rounded to the nearest whole share) at an initial
exercise price of $2.75 per share (subject to anti-dilution adjustments), which
warrant expires February 15, 1994.
(2) For each share of Series D Preferred Stock purchased hereby, Purchaser will
be granted an option to acquire .7535 shares of Series E Preferred Stock
(rounded to the nearest whole share) at a price of $2.15 per share provided such
option is exercised on or prior to February 15, 1992. In the event such option
is exercised in full or in part, Purchaser shall receive warrants described in
footnote (`1) hereof in the ratio of one warrant for every three shares of
Series E Preferred Stock purchased.
1. Subscription. Purchaser hereby subscribes for, and agrees to purchase
------------
the number of shares of Series D Preferred Stock ("Series D Stock") of JetFax,
Inc. (The "Company") and/or Series E Preferred Stock of the Company ("Series E
Stock") as set forth in the space provided on the signature page below for the
above-referenced purchase price; provided that such subscription cannot exceed
the maximum number of shares offered as set forth above. The Series D Stock and
Series E Stock being subscribed for hereby is herein referred to as the "Stock."
In the event this subscription is accepted by the Company, Purchaser shall also
be entitled to the warrants and options described in footnotes 91) and(2) above
on such terms and in such amounts as described herein. The undersigned hereby
tender this Subscription and Stock Purchase Agreement (the "Agreement") with a
personal or bank check in the amount of the aggregate subscription amount
payable to the order of "JetFax, Inc."
<PAGE>
The Company shall have the right to accept or reject this subscription, in
whole or in part, and this subscription shall be deemed to be accepted by the
Company only by execution of this Agreement. No subscription will be accepted
unless and until the proposed transaction with Ailicec California Corporation is
substantially consummated, which, assuming certain stockholder proposals are
adopted, is expected to occur shortly after the 1991 Annual Meeting of
Stockholders of the Company scheduled for August 9, 1991. Any check tendered as
payment for the subscription amount for the Stock shall not be negotiated by the
Company unless and until this subscription is accepted by the Company. In the
event his subscription is not accepted, the check will be promptly returned to
the undersigned.
This subscription shall be irrevocable and shall survive death, disability,
dissolution, liquidation or bankruptcy of Purchaser, subject, however, to all of
the terms, provisions and conditions set forth herein.
2. Purchaser Representations. Purchaser represents the following to the
-------------------------
Company:
(a) Purchaser has full power and authority to enter into this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and binding
obligation of such Purchaser, enforceable against the purchaser in accordance
with its terms.
(b) Purchaser recognizes that an investment in the Company is a
speculative investment involving a high degree of risk.
(c) Purchaser has adequate net worth and means of providing for
current needs and possible personal contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Stock (or the Common
Stock issuable upon conversion) for which such Purchaser hereby subscribes.
Purchaser is able to bear the economic risk of this investment and,
consequently, without limiting the generality of the foregoing, is able to hold
the Stock (and the Common Stock issuable upon conversion) for an indefinite
period of time and has a sufficient net worth to sustain a loss of the entire
investment in the Company in the event such loss should occur.
(d) Purchaser is acquiring the Stock for his own account for
investment and not for the benefit of any other person or with a view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and such Purchaser does not now have any reason to anticipate any
change in circumstances or other particular occasion or event which would cause
such Purchaser to sell the Stock (or the Common Stock issuable upon conversion).
(e) Purchaser acknowledges that there are substantial restrictions on
the transferability of the Stock (and the Common Stock issuable upon the
conversion thereof). Since the Preferred Stock (and the Common Stock issuable
upon conversion thereof) will not be, and, except as provided in this Agreement,
the Purchaser has no right to require that they be, registered under the 1933
Act or qualified pursuant to applicable state securities law, the Stock (and
the Common Stock issuable upon conversion thereof) may not be, and Purchaser
agrees that they shall not be, sold unless such sale is exempt from such
registration under the 1933 Act and any other applicable state securities law or
regulation. Each Purchaser further acknowledges that the Company is under no
obligation to aid me in obtaining any exemption from the registration
requirements. Purchaser acknowledges that Purchaser shall be responsible for
compliance with all conditions on transfer imposed by any securities
administrator of any state and for any expenses incurred by the Company for
legal or accounting services in connection with reviewing such a proposed
transfer and/or issuing opinions in connection therewith.
(f) Purchaser has received and reviewed (i) a JetFax letter to Holders
of Series A Preferred Stock dated July 15, 1991, (ii) the Notice of Meeting and
Proxy statement related to the Company's 1991 Annual Meeting ("proxy Statement)
and (iii) the Company's Annual Report for the year ended march 31, 1991, all of
which having been mailed by the Company to you as a holder of Series A preferred
Stock. Purchase is familiar with the proposed terms of the Series D Stock and
Series E Stock. Purchaser has received and reviewed all information concerning
the
-2-
<PAGE>
Company (including financial information) that Purchaser considers necessary or
desirable to make an informed business judgment concerning the risks and merits
of further investment in the Company.
3. Registration Rights and Restrictions on Transfer. Upon issuance of
------------------------------------------------
the Stock to Purchaser pursuant hereto, the Company and the Purchaser agrees
that Purchaser shall have the same registration rights, and be subject to the
same restrictions on transfer (other than any right of repurchase by the
Company), with respect to such shares of Preferred Stock purchased hereunder
(and the Common Stock issuable upon conversion thereof) as such Purchaser has,
or is subject to, with respect to shares of Series A Preferred Stock first
purchased by purchaser and currently held by such purchaser and the terms of
such registration rights and restrictions on transfer (including any agreement
to restrict transfer for a limited period of time after a public offering of any
shares of the Company, but not including any right of the Company to repurchase
such shares In the event of proposed transfer) previously granted to Purchaser
in any stock purchase agreement pursuant to which Purchaser first acquired
Series A Preferred Stock are incorporated herein by reference.
4. Purchaser Information.
---------------------
PLEASE COMPLETE THE FOLLOWING
Purchaser represents and warrants to the Company that the answers to the
following questions are true and correct and that the Company may rely on such
answers in deciding whether to accept this subscription.
1. Purchaser is [_] a natural person, [_] a trust, [_] a corporation,
[_] a partnership, [_] other (please specify)____________________.
2. State principal occupation of person executing this Agreement:
---------------------------------------------------------------------
3. Purchaser has a net worth (if an individual, together with spouse and
including home, furnishings and automobiles) of:
(check whichever statement is applicable)
[_] less than or equal to $1,000,000; or
[_] more than $1,000,000 but less than $5,000,000; or
[_] more than $5,000,000.
4. Purchaser's investment in the Company [_] is [_] is not more than 20%
of the undersigned's net worth (including home, furnishings and
automobiles).
5. If Purchaser is an individual, the Purchaser had an individual income*
in each of the last two years of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
-3-
<PAGE>
6. If Purchaser is an individual, the Purchaser reasonably expects to have
an individual income* in the current year of:
(check whichever statement is applicable)
[_] less than $200,000; or
[_] more than $200,000.
- --------------------------------------------------------------------------------
* Individual income is calculated for any year as follows: (i) individual
adjusted gross income (as reported on Subscriber's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber (as a limited partner) as
reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
7. If Purchaser is an individual and married, Purchaser had joint income*
with his or her spouse in each of the last two years of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
8. If Purchaser is an individual and married, Purchaser reasonably expects
to have joint income* with his or her spouse and joint income in the
current year of:
(check whichever statement is applicable)
[_] less than or equal to $300,000; or
[_] more than $300,000.
- --------------------------------------------------------------------------------
* Joint income is calculated for any year as follows: (i) adjusted gross income
(as reported on Subscriber's and his or her spouse's federal income tax
return), plus (ii) any deductions for long-term capital gain under Section
1202 of the Internal Revenue Code of 1954 (the "Code"), plus (iii) any
deductions for depletion under Sections 611 et seq. of the Code, plus (iv)
any exclusion for interest under Section 103 of the Code, plus (v) any losses
of a limited partnership allocated to Subscriber and his or her spouse (as a
limited partner) as reported on Schedule E of Form 1040.
- --------------------------------------------------------------------------------
-4-
<PAGE>
PLEASE SIGN, DATE AND FURNISH THE BOXED INFORMATION
IN WITNESS WHEREOF, the undersigned has executed this Subscription and
Stock Purchase Agreement as of this ____ day of July, 1991.
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------
Amount of Subscription Amount of Subscription
for Series D Shares: for Series E Shares:
$_______________ $_______________
($1.62 for each share of Series D Preferred ($2.15 for each share of Series E Preferred
Stock plus Warrants). Stock plus Warrants.)
- --------------------------------------------------------------------------------
</TABLE>
-----------------------------------
Signature of Purchaser
Title (if executing for an entity):
------------------------------------
ACCEPTED this ____day of August, 1991.
JETFAX, INC.
By:
--------------------------------
President
-5-
<PAGE>
EXHIBIT 10.19
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
JETFAX, INC.
Dated as of August 18, 1991
JetFax, Inc., a Delaware corporation (the "Company"), and Ailicec
California Corporation, a California corporation (the "Purchaser") have entered
into this Agreement for the purposes, among other things, of providing for (i)
the purchase by the Purchaser, and the issuance by the Company, on the terms and
subject to the conditions described herein, of certain shares of a new Series E
of the Company's preferred stock and (ii) the issuance of certain stock purchase
warrants by the Company to the Purchaser.
1. Creation of Series E Preferred Stock. The Company agrees to promptly
------------------------------------
take all necessary corporate action to authorize and create a new series of its
preferred stock out of its authorized but unissued preferred stock. Such stock
shall be known as Series E Preferred Stock, par value $.01 per share (the
"Preferred"). The Preferred shall have substantially the designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions set forth in the Certificate of Designation (the
"Certificate of Designation") of the Company attached hereto as Exhibit A. The
Preferred shall, upon the terms and conditions set forth in the Certificate of
Designation, be convertible into shares of Common Stock of the Company, par
value $.01 per share (the "Common Stock") at an initial conversion rate of one
share of Preferred for one share of Common Stock, subject to adjustment as
provided in the Certificate of Designation.
2. Purchase and Sale of the Shares; Conversion of $300,000 Note. Subject
------------------------------------------------------------
to the terms and conditions set forth herein, the Company will issue and sell
(including converting the Company's certain indebtedness to shares), in a number
of closings, to the Purchaser, and the Purchaser will buy (including accepting
the conversion of certain indebtedness to shares) from the Company, a total
number of 930,232 shares, for an aggregate price of $2 million.
(a) Upon the approval, execution and delivery of this Agreement and the
fulfillment (or waiver by the Purchaser, in writing and in its sole discretion)
of all the conditions precedent set forth in paragraph 4 of this Agreement, the
indebtedness (including principal and accrued and unpaid interest) evidenced by
that certain promissory note of the Company dated June 11, 1991 in the principal
amount of $300,000 (the "$300,000 Note") shall be automatically converted into
the right to receive 139,535 shares of Preferred, and such indebtedness shall no
longer be considered outstanding for any purpose (except to the extent that it
represents the right to receive such shares of Preferred) nor shall such
indebtedness continue to accrue interest. The Company shall cause such shares of
Preferred to be issued to Purchaser upon the surrender to the Company
1.
<PAGE>
of the $300,000 Note, whereupon the Company shall issue a stock certificate to
Purchaser evidencing such shares of Preferred.
(b) Upon the approval, execution and delivery of this Agreement and the
fulfillment (or waiver by the Purchaser, in writing and in its sole discretion)
of all the conditions precedent set forth in paragraph 4 of this Agreement, the
indebtedness (including principal and accrued and unpaid interest) evidenced by
that certain promissory note of the Company dated July 16, 1991 in the principal
amount of $100,000 (the "$100,000 Note") shall be automatically converted into
the right to receive 46,512 shares of Preferred, and such indebtedness shall no
longer be considered outstanding for any purpose (except to the extent that it
represents the right to receive such shares of Preferred) nor shall such
indebtedness continue to accrue interest. The Company shall cause such shares of
Preferred to be issued to Purchaser upon the surrender to the Company of the
$100,000 Note, whereupon the Company shall issue a stock certificate to
Purchaser evidencing such shares of Preferred.
(c) Subject to the other terms and conditions set forth in this Agreement
(including without limitation paragraph 4), Purchaser hereby subscribes for and
agrees to purchase, and the Company agrees to issue, at a price of $2.15 per
share, the following numbers of additional shares of Preferred on the respective
dates and for the corresponding cash purchase prices specified below:
No. of Shares of Aggregate Cash
Date Preferred to be Purchased Purchase Price
---- ------------------------- --------------
Date of the Agreement 69,767 $ 150,000
September 18, 1991 93,023 $ 200,000
October 18, 1991 116,279 $ 250,000
November 18, 1991 116,279 $ 250,000
December 18, 1991 116,279 $ 250,000
January 18, 1992 116,279 $ 250,000
February 18, 1992 116,279 $ 250,000
------- ----------
Total 744,185 $1,600,000
provided that $103,125 of the cash purchase price due and owing on October 15,
1991 shall be payable by the surrender by the Purchaser to the Company of that
certain promissory note of the Company dated May 15, 1991 in the original
principal amount of $100,000 (the "$100,000 Note"). The Purchaser shall pay the
aggregate cash purchase price on the indicated dates (or next business day if
such date is not a business day) by delivering a bank check to the order of the
Company for such amount or wire transferring immediately available funds on such
indicated dates to a bank account designated by the Company. The dates set forth
in this Section 2(b) for the purchase of shares of Preferred by the Purchaser
are herein referred to as "Purchase Dates."
2.
<PAGE>
(d) All shares of Preferred to be issued to Purchaser under this Section 2
are herein referred to as "Purchaser Shares." The Purchaser Shares shall be
evidenced by Preferred stock certificates. Such certificates shall be duly and
validly issued and registered in the name of the Purchaser, and shall be in
proper form. The Company shall deliver such certificates for the proper number
of shares (together with Warrants as required by this Agreement) on the
applicable Purchase Date. The closing of each purchase of shares (and Warrants)
under this Agreement shall occur at the offices of the Purchaser (located at
3350 Scott Boulevard, Building 46, Suite #2, Santa Clara, California) during
normal business hours, on the applicable Purchase Date (or if not a business
day, on the next following business day), or at such other place and time as may
be mutually agreeable to the parties.
(e) Upon the conversion or cancellation of the two Promissory Notes of the
Company dated June 11, 1991, and July 16, 1991 for the amounts of $100,000 and
$300,000, respectively, as hereinbefore stated in paragraph 2(a) and 2(b), the
Company shall pay to the Purchaser promptly, in cash, no later than one week
from the date of such conversion or cancellation, the entire accrued and unpaid
interest amount due and outstanding on such promissory notes.
(f) Notwithstanding any of the foregoing, the Purchaser shall have no further
obligation to purchase any Preferred shares in the event the Company fails to
meet any of the development milestones within 30 days of the applicable dates on
which such milestone should have been met as stipulated in Section 3(a) of the
Development Agreement executed by the parties on August ___, 1991. This
subparagraph (f) however shall not apply if the Company fails to meet the
development milestone set forth in section 3(a)(2) of the Development Agreement.
3. Issuance of Warrants.
--------------------
(a) Upon its purchase of at least $500,000 worth of Preferred shares under
2(b) above, the Purchaser will receive one warrant (each a "Warrant") for every
three shares of Preferred purchased. Thereafter, concurrent with each subsequent
purchase of shares under 2(b) above, the Purchaser will receive warrants on the
same pro rata basis for each $50,000 of Preferred purchased, until the Purchaser
has received a minimum aggregate of 310,077 Warrants. Each Warrant will be
exercisable for one share of Preferred at any time on or before February 15,
1994, for a purchase price of $2.75 per share, and shall otherwise be
substantially equivalent in terms of those Warrants issued to purchase Series A
Preferred Stock under that certain Warrant Agreement dated January 15, 1991.
Each Warrant shall be registered in the name of Purchaser, duly and validly
issued, and in the form of Exhibit B.
(b) The Purchaser acknowledges that the Company may offer and issue 61,728
shares of Series D Preferred Stock of the Company having substantially such
rights as set forth in that certain Certificate of Designation for Series D
Preferred Stock attached hereto as Exhibit C. Such shares may be issued at a
price of $1.62 per share to Draper Associates ("Draper") in connection with the
conversion of a $100,000 promissory note of the Company held by Draper, plus
warrants to purchase an additional 46,512 shares of Preferred at a price of
$2.15 per share exercisable on
3.
<PAGE>
or before February 15, 1992 and warrants to purchase 36,030 shares at a price
of $2.75 per share on or before February 15, 1994. Series A Holders will also be
offered a small number of Series D (not to exceed 10,000) shares and similar
warrants pursuant to their contractual rights of first purchase, as described in
2(d).
(c) Prior to March 1, 1992, the Company will not issue any shares of
Preferred to any person or entity other than the Purchaser, except that the
Company may issue up to 370,334 shares of Preferred plus warrants to purchase up
to 121,518 shares of Preferred to registered holders of Series A Preferred Stock
of the Company as of the date first written above ("Series A Holders") who wish
to participate in this transaction, pursuant to their existing rights of first
purchase under certain Preferred Stock Purchase Agreements with the Company.
However, the Company does not anticipate more than 30,000 shares of Preferred
being acquired by existing Series A Holders. The prices offered to Series A
Holders for purchase of Preferred and the terms of the warrants will be
identical to the prices and terms offered to the Purchaser in this Agreement,
although the payment schedule and terms may vary from the terms of this
Agreement as mutually agreed between the Company and the Purchaser.
4. Conditions Precedent to Purchase. The obligations of the Purchaser to
--------------------------------
make purchases of Purchaser Shares and Warrants as set forth in 2(c) and 3 above
shall be subject to the prior satisfaction of each of the conditions precedent
set forth in 4(b) below (the "Conditions Precedent"), or the waiver of the
Conditions Precedent by the Purchaser, by written notice to the Company and in
the Purchaser's sole discretion.
(a) The following provisions shall also apply with respect to the purchase of
such shares and Warrants, notwithstanding anything to the contrary in this
Agreement:
(i) Until and unless the Conditions Precedent have been and remain
satisfied as described above, the Purchaser shall have no obligations to
purchase such shares or Warrants.
(ii) Notwithstanding (i) above, the Purchaser shall have the option to
waive any and all Conditions Precedent set forth in paragraph 4(b), in its sole
discretion, and to purchase any or all shares of Preferred listed in 2(c) above
(and corresponding Warrants as described in 3 above), at any time or times on or
after the applicable Purchase Dates, respectively, at the price of $2.15 per
share. The Purchaser may exercise such option to waive by written notice to the
Company, and the closing of such purchase shall occur within ten (10) days
thereafter. The Purchaser's option rights to waive any Condition Precedent and
to purchase shares notwithstanding under this subparagraph (ii) shall expire
within 120 calendar days from the applicable Purchase Date, but in no event
shall such option rights be exercised later than March 1, 1992.
(iii) If the Conditions Precedent become and remain satisfied (or are
waived by the Purchaser as described above) at any time after one or more
applicable Purchase Dates, then on the next occurring Purchase Date (the "New
Purchase Date"), the Purchaser shall also be
4.
<PAGE>
obligated to purchase the shares (and Warrants) to have been purchased on such
prior Purchase Dates, on the same terms that would otherwise have applied and
the Company shall be obligated to sell all such shares (and Warrants) to the
Purchaser on such New Purchase Date, and the closing of such purchase and sale
shall occur on such date, provided, however, that the Company shall be subject
to no further obligation to offer or sell any remaining shares of Preferred (or
Warrants) to the Purchaser under this Agreement if all of the shares of
Preferred listed in 2(c) above have not been purchased by Purchaser on or prior
to March 1, 1992.
(iv) If the Conditions Precedent have not become or do not remain
satisfied (and have not been waived by the Purchaser as described above) on
March 1, 1992, then at any time thereafter the Purchaser may terminate all of
its obligations under this Agreement by written notice to the Company.
(v) The three Promissory Notes referred to in paragraph 2 shall remain
in effect, and all payments thereunder shall be due and payable as required by
the terms thereof, until each of them is converted in connection with the
Purchaser's purchase of Purchaser Shares pursuant to paragraph 2.
(b) The Conditions Precedent are as follows:
(i) The Company will have filed a Certificate of Designation for the
Preferred in the form attached hereto as Exhibit A with the Delaware Secretary
of State, authorizing a number of Preferred shares sufficient to issue 1,240,309
Preferred Shares to the Purchaser pursuant to the stock purchase under this
Agreement and through the Purchaser's exercise of all Warrants, plus such
additional shares (and shares issuable upon exercise or warrants) as may be
purchased by Series A Holders;
(ii) The board of directors of the Company shall have approved this
Agreement and all Associated Agreements (hereinafter defined in paragraph
4(6)(xi)), and the Purchaser shall have received adequate documentation of such
approval;
(iii) The shareholders of the Company shall have provided all necessary
consents or approvals under applicable law to permit the Company to execute,
deliver and perform fully this Agreement and all Associated Agreements, and the
Purchaser shall have received adequate documentation of such approval;
(iv) Key employees and officers of the Company including Lon Radin, Rudy
Prince and others designated by the Purchaser shall have entered into employment
agreements with the Company containing appropriate noncompetition,
confidentiality and other customary provisions, and shall have irrevocably
assigned all key inventions, software and other technology created by them to
the Company, in form and substance reasonably satisfactory to the Purchaser;
5.
<PAGE>
(v) The Purchaser shall have approved, in writing, the terms of all of
the Company's compensation arrangements with its officers, directors and other
key personnel;
(vi) All governmental and regulatory approvals in the United States
necessary to consummate the transactions between the Company and the Purchaser
shall have been obtained;
(vii) The Purchaser shall have received a legal opinion of the Company's
counsel with respect to the Company's corporate existence, authorized capital
stock, the rights of holders of the Preferred, and the enforceability of all
agreements between the Purchaser and the Company, in form and substance
satisfactory to the Purchaser and its legal counsel;
(viii) The Company shall not have taken any of the actions described in
paragraph 8 below without the approvals required by that paragraph, or such
action(s) shall have been cured or abrogated to the Purchaser's reasonable
satisfaction;
(ix) The Company shall have performed and complied in all material
respects with all of its obligations under any agreements or contracts with the
Purchaser (including without limitation this Agreement and the Associated
Agreements), or such breach(es) shall have been remedied to the Purchaser's
satisfaction;
(x) The Purchaser shall not have reasonably concluded, based on
documented evidence, that material irregularities have occurred in the
disbursement, handling or transmission of funds, or maintenance of books or
records, by the Company or any officer or director or employee thereof;
(xi) The Company and the Purchaser (or its designated affiliate) shall
have entered into a mutually acceptable Manufacturing Agreement, Product
Development Agreement and Product Marketing Agreement (collectively referred to
as the "Associated Agreements");
(xii) The Purchaser shall have entered into a mutually acceptable Tagalong
Agreement with Lon Radin and Rudy Prince. Such agreement shall entitle the
Purchaser to participate, on a pro rata basis, in any sales of securities of the
Company by Lon Radin or Rudy Prince which constitute, either individually or in
the aggregate, sales of more than five percent (5%) of the voting power of the
Company, calculated on a fully diluted basis (i.e., assuming exercise of all
options and conversion of all convertible securities); and
(xiii) All representations and warranties and other statements of the
Company herein and in any Associated Agreements shall be, on the applicable
Purchase Date and after giving effect to the transactions contemplated by this
Agreement and any such Associated Agreement, true and correct in all material
respects.
6.
<PAGE>
5. Conditions to Sale. The obligation of the Company to issue and sell
------------------
any or all of the Purchaser Shares to the Purchaser under Section 2(b) hereof
shall be subject to the fulfillment, or the waiver by the Company, prior to or
at the applicable Purchase Date, of the following conditions:
(a) All representations and warranties and other statements of the Purchaser
herein and in any Associated Agreements entered into between the Company and
Purchaser shall be, on the Purchaser Date and after giving effect to the
transactions contemplated by this Agreement and any such Associated Agreement,
true and correct in all material respects; and
(b) The Purchaser shall have performed and complied in all material respects
with all of its obligations hereunder and under any Associated Agreement entered
into between the Company and the Purchaser, required to be performed on or prior
to such Purchase Date.
6. Representations and Warranties of the Company. As of the date first
---------------------------------------------
written above and each Purchase Date, the Company hereby represents and warrants
to the Purchaser as follows:
(a) The Company has been duly incorporated and organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own its
properties and conduct its business as currently conducted. The Company has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing, under the laws of each other jurisdiction in which the Company
owns or leases properties, or conducts any business so as to require such
qualification, other than where the failure to be so qualified or in good
standing would not have a material adverse effect on the Company.
(b) All of the common stock and preferred stock of the Company outstanding as
of the date hereof has been duly and validly authorized and issued, fully paid
and non-assessable. As of the date of this Agreement, the authorized capital
stock of the Company consists of: (i) 5,000,000 shares of common stock, par
value $.01 per share, of which 835,000 shares are issued and outstanding and
(ii) 3,000,000 shares of preferred stock, par value of $.01 per share, of which
1,000,000 shares have been authorized to be issued as Series A Preferred Stock
and 750,996 shares of which are issued and outstanding, 1,000,000 shares have
been authorized to be issued as Series B Preferred Stock and 546,474 shares of
which are issued and outstanding and 600,000 shares have been authorized to be
issued as Series C Preferred Stock and 504,834 shares of which are issued and
outstanding. Upon the filing of the Certificate of Designation as contemplated
in paragraph 1 hereof, there will be 1,500,000 shares of Preferred duly and
validly authorized for issuance. As of the date of this Agreement except (1) for
up to 300,000 shares of common stock reserved or available for sale pursuant to
options granted to certain employees, former employees, officers, consultants
and directors of the Company, (2) warrants to purchase a maximum of 82,592
shares of Preferred to be issued to Draper Associates, (3) Warrants issued
pursuant to that
7.
<PAGE>
certain Warrant Agreement dated January 15, 1991 among the Company and certain
investors (the "Warrant Agreement") to purchase an aggregate of 30,001 shares of
the Company's Series A Preferred Stock (4) a subscription obligation to issue an
additional 60,000 shares of Series C Preferred Stock to Adlar Turnkey
Manufacturing Co. for a price of $1.25 per share, (5) certain contractual rights
of first purchase granted to certain holders of the Company's Series A Preferred
Stock, (which may entitle such holders to purchase up to a theoretical maximum
of 370,334 shares of Preferred, plus Warrants to purchase up to 121,518 shares
of Preferred, and a small number of shares of Series D Preferred Stock plus
Warrants in connection with the transactions contemplated by or described in
this Agreement) (6) obligations to issue Series D Preferred Stock in the amount
of 61,728 and related warrants to Draper, as described above and (7) the
conversion and other rights set forth in the certificates of designation related
to the outstanding shares of the Company's three series of its preferred stock,
as described above (a) there are no outstanding subscriptions, warrants,
options, calls, rights or commitments of any character relating to or entitling
any person to purchase or otherwise acquire from the Company any capital stock
of the Company, (b) there are no obligations or securities convertible into or
exchangeable for any shares of capital stock of the Company or any commitments
of any character relating to or entitling any person to purchase or otherwise
acquire any such obligations or securities, and (c) there are no preemptive or
similar rights to subscribe for or to purchase any capital stock of the Company;
(c) The execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated thereby
have been or, prior to the applicable Purchase Dates will be, duly authorized by
all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
(d) The execution and delivery of this Agreement and the issue and sale of
the Preferred and the grant of Warrants hereunder to the Purchaser, and the
compliance by the Company with all of the provisions of this Agreement and, when
filed by the Company with the Secretary of State of the State of Delaware, the
Certificate of Designation, and the consummation of the transactions herein and
therein contemplated will not result in a breach or violation of any of the
terms or provisions of or constitute a default under, or result in the creation
of any lien in respect to any property or assets of the Company under, the
Certificate of Incorporation or By-Laws of the Company, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company is bound, or any statute or law to
which the Company or any of its properties is subject or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its properties; and, no consent, approval, authorization,
order, registration or qualification of or with any such court or governmental
agency or body is required for the execution and delivery of, or for the
performance by, the Company of this Agreement, the issue and sale of the
Preferred constituting the Purchaser Shares and the Warrants, the placement of
the Purchaser Shares and the Warrants, or the consummation by the Company of the
other transactions
8.
<PAGE>
contemplated by this Agreement except such as may be required under state
securities or Blue Sky laws and under the Securities Act of 1933, as amended
(the Securities Act") in connection with the placement of the Purchaser Shares
and the grant of the Warrants, and in connection with subsequent resales by the
Purchaser in such placement;
(e) There are no legal or governmental proceedings pending to which the
Company is a party or of which any of its properties is the subject, or which
challenge the validity or legality of this Agreement, the Associated Agreements
or the transactions contemplated hereby or thereby; and, to the best of the
Company's knowledge, no such proceedings are overtly threatened by governmental
authorities or by any other persons; and
(f) The Company is not to its knowledge in violation of any statutes, laws,
ordinances, governmental rules or regulations or any judgment, order or decree
(federal, state, local or foreign) to which it is subject nor has it failed to
obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership or operation of its properties or the conduct of its
business (including, without limitation, matters relating to environmental laws
or regulations,) except for such violations and failures to obtain such
licenses, permits, franchises or other governmental authorizations that would
not, individually or in the aggregate, have a material adverse effect on the
business, results of operations or financial condition of the Company (whether
because such license, permit, franchise or other governmental authorization will
be obtained within a reasonable time after the date hereof or otherwise);
(g) The Company has not committed a material breach of, and is not in default
(or capable of being called in default) under, any loan agreement, promissory
note, guarantee, security agreement, including without limitation any existing
agreements between the Company and Silicon Valley Bank concerning the Company's
borrowings or credit;
(h) Upon issuance, each of the shares of Preferred and the Warrants will have
been duly authorized by all necessary corporate action on the part of the
Company; will be duly and validly issued, validly outstanding, fully paid and
nonassessable; and will not be subject to any liens or encumbrances. Such shares
will rank equally with all outstanding shares of Series A, B and D Preferred
Stock of the Company with respect to priority in payment of dividends and the
distribution of assets upon any liquidation of the Company, and no securities of
the Company will have priority over the Preferred with respect to such dividend
and liquidation matters;
(i) The Company has filed or caused to be filed all federal and state income
tax returns which are or were required to be filed, and has paid or caused to be
paid all taxes as shown on said returns. There are no disputes between the
Company and any governmental authority concerning taxes;
(j) The Company is not presently in default with respect to any judgment,
order, writ, injunction, or decree of any federal, state, local or foreign
court, department, agency or instrumentality;
9.
<PAGE>
(k) Except as disclosed in writing to the Purchaser in the Disclosure
Statement attached hereto as Exhibit D, to the Company's best knowledge, the
Company's design, assembly, manufacture, distribution, marketing and sale of
its products (collectively "Company Activities") do not infringe any rights of
any third party or parties, including without limitation patent rights,
copyrights, trade secret rights, and/or other intellectual property rights; and
no material claims have been made or are intended to be made that the Company
Activities infringe any such rights;
(1) To the Company's best knowledge, the Company has not committed a material
breach of, and is not in default (or capable of being called in default) under,
any material license or technology transfer agreement with any third party or
parties.
(m) Holders of shares of Series A Preferred Stock and Series D Preferred
Stock do not have the right, by virtue of rights of first purchase, options,
warrants or otherwise, to purchase more than 80,000 shares of Preferred.
7. Representations and Warrants of the Purchaser. As of the date first
---------------------------------------------
written above and each Purchase Date, the Purchaser represents the following to
the Company:
(a) The Purchaser has full power and authority to enter into this Agreement,
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement, and the transactions contemplated hereby
have been duly authorized by all necessary action on the part of the Purchaser,
and this Agreement is a legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms.
(b) The Purchaser and its representatives have been furnished, prior to the
date hereof, with all information that it deems necessary to make an informed
business decision regarding an investment in the Company. The Purchaser
acknowledges that the Company has made available to the Purchaser and its
representatives the opportunity to ask questions of, receive answers and to
obtain information necessary to verify the accuracy of disclosed information.
The Purchaser, together with its representatives, have such knowledge and
experience in financial and business matters necessary to be able to analyze the
merits and risks of this investment. (c) The Purchaser is a wholly-owned
subsidiary of Ailicec International Enterprises, Ltd., a Hong Kong corporation.
The Purchaser further represents that it is an accredited investor as defined in
Regulation D promulgated under the Securities Act, is experienced in investing
in securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Preferred.
(d) The Purchaser hereby confirms that the Preferred to be received by the
Purchaser and the Common Stock issuable upon conversion thereof will be acquired
for investment for Purchaser's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same
10.
<PAGE>
(e) The Purchaser has received no representations or warranties (other than
as contained in this Agreement) from the Company or its employees or agents, or
any other person, in making its investment decision, and the Purchaser is
relying on the investigations made by the Purchaser and its representatives.
(f) The Purchaser acknowledges that there will be substantial restrictions on
the transferability of the Preferred (and the Common Stock issuable upon the
conversion thereof) acquired hereunder. Since the Preferred (and the Common
Stock issuable upon conversion thereof) will not be, and (except as set forth in
this Agreement) the Purchaser has no right to require that they be, registered
under the Securities Act or qualified pursuant to applicable state securities
laws, the Preferred (and the Common Stock issuable upon conversion thereof) may
not be, and each Purchaser agrees that they shall not be, sold unless such sale
is permitted under, or exempt from such registration under, the Securities Act
and any other applicable state blue sky law or regulation. The Purchaser further
acknowledges that except as expressly provided in this Agreement, the Company is
under no obligation to aid it in obtaining any exemption from the registration
requirements. The Purchaser acknowledges that the Purchaser shall be responsible
for compliance with all conditions on transfer imposed by any securities
administrator of any state.
8. Covenants for the Benefit of the Purchaser.
------------------------------------------
(a) The Company agrees that for so long as any Preferred shares are
outstanding and held by the Purchaser; (i) a majority of the issued and
outstanding Preferred shall be entitled to elect two (2) of the members of the
Company's board of directors; (ii) the total number or members of the Company's
Board of Directors shall not exceed seven (7) without approval of a majority of
the holders of the issued and outstanding Preferred; (iii) the Company shall not
issue shares at any time to any third parties, including to any of the Company's
existing shareholders, which would cause the Purchaser to lose its majority
ownership of the issued and outstanding Preferred, or issue warrants, options or
convertible securities which, upon exercise or conversion, would cause the
Purchaser to lose such majority ownership; and (iv) the Company will not take,
and will not permit its officers, directors, employees, agents or
representatives to take, any of the following actions without the prior written
approval of a majority of the issued and outstanding Preferred:
(i) enter into any material transaction, make any significant loans or
payments to, guarantee (directly or indirectly) any obligations or indebtedness
of, or transfer any assets or property to, any officer, director, or employee of
the company or any affiliate thereof, any holder of more than five percent (5%)
of the voting power of the Company, or any Close Relative (as defined below) of
any of the foregoing;
(ii) enter or engage in any business other than the development,
manufacture and sale of facsimile machines, facsimile peripherals, and related
software and devices (including all current products of the Company);
11.
<PAGE>
(iii) engage in any merger, reorganization, or sale of all or a
substantial portion of its assets prior to March 1, 1992;
(iv) prior to March 1, 1992, issue any equity securities of the Company,
other than pursuant to this Agreement, the Draper $100,000 Note conversion,
exercise of options issued under any employee stock option plan not exceeding
300,000 shares in the aggregate, or the exercise of outstanding (as of the date
first written above) options and warrants and rights of first purchase of Series
A Holders as described elsewhere in this Agreement;
(v) redeem or repurchase any equity securities of the Company in excess
of a cumulative total of 100,000 shares of Common Stock (or equivalent preferred
shares), other than shares of the Preferred;
(vi) during any twelve (12) month period, engage in any of the following
with a value either individually or in the aggregate in excess of $250,000: (1)
capital investments, (2) purchase or disposition of assets, or (3) lending funds
of any kind, or sales on credit to any single customer beyond the normal 60 day
credit terms;
(vii) select or change independent accountants or auditors;
(viii) enter into any agreements where payment, made by the Company can be
reasonably expected to be in excess of $1,000,000 in the aggregate;
(ix) make any material amendment in or to the Certificate of
Incorporation and/or Bylaws of the Company that could (or does) materially and
adversely affects the rights of the Purchaser;
(x) declare or pay any dividends on any equity securities of the
Company; or
(xi) initiate, defend, adjust, settle or compromise any claim, action,
suit or judgment by or against the Company involving an amount in excess of
$250,000 or any claim for equitable relief of like value.
"Close Relative" means any ancestor, lineal descendant, brother or sister or
lineal descendants of either, spouse, aunt, uncle, father-in-law, mother-in-law,
son-in-law, brother-in-law, daughter-in-law or sister-in-law.
(b) The Company further agrees as follows:
(i) Promptly upon the execution of this Agreement, the Company shall
cause its Board of Directors to amend the Bylaws of the Corporation so that (A)
Section 3.4 shall reflect the voting rights of the Preferred to elect two (2)
directors, as described in paragraph 8(a)(i); and (B) Section 3.10 shall provide
that notice of special meetings of the Board of
12.
<PAGE>
Directors shall be mailed or otherwise given to each director at least ten (10)
days prior to the date of the meeting.
(ii) Upon the written request or the Purchaser, the Company shall provide
the Purchaser with reasonable assistance (A) in complying with any accounting,
tax or securities laws or regulations requiring the Purchaser (or its parent
corporation) to report on the Purchaser's investment in the Company; and (B) in
complying with any federal or state securities or "blue sky" laws applicable to
the purchase or subsequent resale (if any) of the Preferred. The Purchaser shall
reimburse the Company for any out-of-pocket costs reasonably incurred by the
Company in providing such requested assistance.
(c) As long as Purchaser holds not less than 3% of the shares of Preferred
and/or Common Stock issued upon conversion of the Preferred, as adjusted for
Recapitalizations, the Company shall permit the Purchaser, at the Purchaser's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers and other employees, all at such reasonable times as may be
requested by the Purchaser, provided, however, that the Company shall not be
obligated pursuant to this paragraph (c) to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
9. Registration Rights.
-------------------
9.1 Requested Registration.
----------------------
(a) Request for Registration. If the Company shall receive from Holders (as
------------------------
defined below) of fifty percent (50%) of the issued or issuable Registrable
Securities (as defined below) (the "Initiating Holders"), a written request that
the Company effect a registration under the Securities Act with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to exceed $3,000,000, the Company will (i) promptly give written notice of the
proposed registration to all other Holders and (ii) as soon as practicable, use
its best efforts to effect such registration (including, without limitation,
appropriate qualification under blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within Twenty (20) days after actual receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 9.1:
13.
<PAGE>
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(B) Prior to the earlier of (i) December 31, 1992, or (ii) six (6)
months after the effective date of the Company's first registered public
offering of its stock;
(C) If the Company receives an opinion of counsel, reasonably
satisfactory to a majority of the requesting Holders, to the effect that the
Holders can make open market sales of the outstanding Common Stock held by them
without registration, subject to the volume and manner of sale limitations or
such similar exemption from registration requirements of the Securities Act;
(D) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6) months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
(E) After the Company has effected one such registration pursuant to
this paragraph 9.1(a), and such registration has been declared or ordered
effective; or
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company it would be seriously detrimental to the
Company or its shareholders for a registration statement to be filed in the near
future, in which case the Company's obligation to use its best efforts to
register, qualify or comply under this paragraph 9.1(a) shall be deferred for a
period not to exceed 120 days from the date of receipt of the written request
from the Initiating Holders.
Subject to the foregoing clause (A) through (F), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this Section
------------
9.1 is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as part of the notice given pursuant to paragraph
9.1(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 9.1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this paragraph 9.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by a majority in interest of the
Initiating
14.
<PAGE>
Holders, but subject to the Company's reasonable approval. Notwithstanding any
other provision of this paragraph 9.1, if the managing underwriter(s) advise(s)
the Initiating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Company shall so advise all
Holders participating and the number of shares of Registrable Securities that
may be included in the registration and underwriting shall be allocated among
all Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriters' marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration, and such Registrable Securities shall
not be transferred in a public distribution prior to 90 days after the effective
date of such registration, or such other shorter period of time as the
underwriters may require.
9.2 Registration Form S-3.
---------------------
(a) If any Holder or Holder holding in the aggregate not less than fifteen
percent (15%) of the aggregate number of shares of the issued and outstanding
preferred and Common Stock issued upon the conversion of the preferred request
that the Company file a registration statement on Form S-3 (or any successor
form to Form S-3) for a public offering of the Registrable Securities the
reasonable anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $500,000, and the Company
is then entitled to use Form S-3 under applicable Commission rules to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request; provided,
however, that the Company shall not be required to effect more than one
registration pursuant to this paragraph 9.2 in any six month period. The
substantive provisions of paragraph 9.5 shall be applicable to each registration
initiated under this paragraph 9.2.
(b) Notwithstanding the foregoing, the Company shall not be obligated to take
any action pursuant to this paragraph 9.2 (i) in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, unless the Company is already subject to
service in such jurisdiction and except as may be required by the Securities
Act; (ii) if the Company, within ten (10) days of the receipt of the request of
the Initiating Holders, gives notice of its bona fide intention to effect the
filing of a registration statement with the Commission within ninety (90) days
of receipt of such request (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering
15.
<PAGE>
solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities); (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on the date six (6) months immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or (iv) if the Company shall furnish to such
Holder a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for registration statements to be filed in
the near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 120 days
from the receipt of the request to file such registration by such Holder.
9.3 Optional Registrations. If at any time or times after the date first
----------------------
written above, the Company shall determine to register any of its securities
(for itself or for any other securities holder of the Company) under the
Securities Act or any successor legislation (other than a registration relating
to stock option plans, employee benefit plans or a Rule 145 transaction), and in
connection therewith the Company may lawfully register its Common Stock, the
Company will promptly give written notice thereof to the then Holders of all
issued or issuable Registrable securities and will use its best efforts to
include in such registration and to effect the registration under the Securities
Act of all Registrable Securities which such Holders may request in writing
delivered to the Company within fifteen (15) days after receipt by such Holders
of the notice given by the Company; provided, however, if the managing
-------- -------
underwriter for the Company advises the Company in writing that including all or
part of the Registrable Shares in such offering will adversely affect the
marketing of the proposed offering, then, in connection with any such
underwritten offering by the Company of any of its securities, such registration
of Registrable Securities shall be limited to not less than ten percent (10%) of
the total number of shares to be sold in the case of an initial public offering
of the Company's securities, and twenty percent (20%) of the total number of
shares to be sold in the case of a subsequent offering; further provided,
------- --------
however, that such limited number of shares of Common Stock in such offering
- -------
shall be taken from those owned (or obtainable upon the exercise of rights with
respect to other securities) by a group of holders requesting registration
consisting of the Holders and other holders having similar registration rights
to those of the Holders, and such limitation shall be imposed upon the Holders
and such other holders pro rata on the basis of the total number of (i) shares
of Registrable Securities owned by the requesting Holders and (ii) shares of
Common Stock owned, or obtainable by them upon the exercise of rights with
respect to other securities, by such other requesting holders. In the event of
such a limitation, shares of persons not having similar registration rights will
not be included in such registration. The Company shall have the
right to select the managing underwriter or underwriters for any underwritten
public offering made pursuant to a registration under this paragraph 9.3.
9.4 Registrable Securities. For the purposes of paragraph 9:
----------------------
16.
<PAGE>
(a) The term "Registrable Securities" shall mean (i) the Common Stock issued
or issuable upon conversion of all outstanding shares of the Company's preferred
stock that are so convertible, including without limitation the Preferred; and
(ii) any Common Stock or other securities of the Company issued or issuable with
respect to the Common Stock described in clause (i) by way of a stock dividend
or stock split, or other distribution, with respect to or in exchange for or
replacement of such Common Stock or other securities.
(b) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement.
(c) The term "Holder" means the Purchaser, so long as the Purchaser holds any
Registrable Securities, and any person to whom the registration rights conferred
by this Agreement have been transferred in compliance with the terms hereof.
9.5 Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in connection with
(i) one registration pursuant to paragraph 9.1, (ii) any registration under
paragraph 9.2, subject to (b) below and (iii) three registrations pursuant to
paragraph 9.3, shall be borne by the Company, except that the Holders shall bear
underwriting commissions and discounts attributable to their Registrable
Securities being registered and the fees and expenses of separate counsel, if
any, for such Holders. All other selling expenses relating to securities
registered on behalf of the Holders and all other registration expenses shall be
borne by the Holders of such securities pro rata. If the Company includes in any
registration any securities to be offered by it, all expenses thereof shall be
borne solely by the Company.
(b) A proportionate share of the expenses of the registration and offering
incurred in connection with (i) a registration pursuant to paragraph 9.2 and
(ii) any registration pursuant to paragraph 9.3 after the third registration
thereunder, shall be borne pro rata by the Holder or Holders requesting the
registration on the basis of the ratio of the number of their shares so
registered to the total number of shares included in such registration;
provided, however, that with respect to registrations under paragraph 9.2, the
- -------- -------
Company shall pay fifty percent (50%) of such expenses.
9.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Purchaser under paragraphs 9.1, 9.2 and 9.3 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by a
Purchaser provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, and (ii) such assignee or transferee
acquires at least 5,000 shares of the Registrable Securities (appropriately
adjusted for recapitalizations).
17.
<PAGE>
9.7 Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriter or underwriters of any proposed firm underwritten public offering of
securities by the Company, agreed not to sell any of their Registrable
Securities or any other securities of the Company owned by such Holders in any
transaction other than pursuant to such underwritten public offering for a
period of up to 90 days beginning on the effective date of the applicable
registration statement, provided that the Company's officers and directors and
each holder of 10% or more of the Company's issued and outstanding Common Stock
also agree to such limitations. The Holders shall upon request execute a
separate written agreement confirming and agreeing as to the foregoing.
9.8 Registration Indemnification. In the event of any registration under
----------------------------
the Securities Act pursuant to paragraph 9 of Registrable Securities of any
Holder, the Company will hold harmless such Holder and each underwriter of such
securities and each other person, if any, who controls such Holder or such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities to which such Holder or such underwriter 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 any registration statement, or any
preliminary prospectus or final prospectus or amendment or supplement thereto on
the effective date thereof, 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; and will reimburse
such Holder and each such underwriter and each such controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
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, or any preliminary prospectus or
final prospectus or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Holder or such underwriter specifically for use
in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to include
in any registration statement any Registrable Securities then held by a Holder
that the Company shall have received an undertaking reasonably satisfactory to
it and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Securities Act, with respect to any statement or omission
from such registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with information furnished
to the Company through an instrument duly executed by the Holder specifically
for use in the preparation of such registration statement, preliminary
prospectus or final prospectus or such amendment or supplement thereto.
18.
<PAGE>
Promptly after receipt by an indemnified party under this paragraph 9.8 of
notice of the commencement of any action involving a claim referred to in the
preceding provisions of paragraph 9.8, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action. In case any such action
is brought against an indemnified party, the indemnifying party will be entitled
to participate in and or assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
9.9 Registration Procedures. Whenever the Company is required by this
-----------------------
Agreement to use its best efforts to effect the registration of any securities,
the Company shall:
(a) prepare and file with the Commission a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain effective as provided herein;
(b) prepare and file with the Commission all amendments and supplements to
such registration statement and any prospectus used therewith as may be
necessary to keep such registration statement effective and current and to
comply with the provisions of the Securities Act with respect-to the sale or
other disposition of such securities;
(c) furnish to each Holder of such securities such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such Holder may
reasonably request in order to facilitate the disposition of its securities; and
(d) use its best efforts to register or qualify the securities under such
other securities or "blue sky" or other applicable laws of such jurisdictions
within the United States as the Holder shall reasonably request, to enable the
Holder to consummate the public sale or other disposition in such jurisdictions
of such securities.
9.10 Rights Granted to Subsequent Investors. After the date first written
--------------------------------------
above, the Company shall not grant any registration rights to any third party or
parties without the written consent of the Purchaser, including subsequent
investors in the Company, except as follows. The Company may grant optional
registration rights with respect to Common Stock, comparable to or more limited
than those set forth in paragraph 9.3, provided that at most such rights shall
--------
be limited to sharing pro rata in the available portion of the registration in
question with all other participating holders of securities.
9.11 Rule 144 Undertakings. At any time and from time to time after the
---------------------
expiration of ninety (90) days following the earlier of the close of business on
such date as (i) a registration
19.
<PAGE>
statement filed by the Company under the Securities Act becomes effective or
(ii) the Company registers a class of securities under section 12 of the
Securities Exchange Act of 1934, as amended, the Company shall use its best
efforts to make publicly available and available to the Holders, pursuant to
Rule 144 of the Commission under the Securities Act, such information as is
necessary to enable the Holders to make sales of Registrable Securities pursuant
to that Rule and the Company shall use its best efforts to timely file with the
Commission all documents and reports required of the Company under the
Securities Exchange Act of 1934. The Company shall furnish to any Holder upon
request (after the preceding sentence shall have become applicable), a written
statement executed by the company as to compliance with the current public
information requirements of Rule 144.
10. Right of First Purchase
-----------------------
10.1 Right of First Purchase. The Company hereby grants to Purchaser the
-----------------------
right to first purchase for a number of shares of the same class of New
Securities (as defined in this paragraph 10.1) which the Company may, from time
to time, propose to sell and issue. Purchaser shall be entitled to purchase a
number of shares of the class of New Securities sufficient to maintain its Pro
Rata Ownership in the Company after taking into account the proposed issuance by
the Company "Pro Rata Ownership" at any given time means the following ratio:
(a) the sum of (1) the total number of shares of Common Stock then held by
the Purchaser, plus (2) the total number of shares of Conversion Stock (as
defined below) then held by the Purchaser, plus (3) any additional unissued
Purchaser Shares which are issuable to the Purchaser under this Agreement, if
any;
divided by
- ----------
(b) the sum of (1) the total number of shares of Common Stock then
outstanding, plus (2) the total number of shares of Conversion Stock at that
time, plus (3) any additional unissued Purchaser Shares which are issuable to
the Purchaser under this Agreement, if any.
"Conversion Stock" means all then outstanding shares of convertible preferred
stock of the Company, other securities of the Company that are convertible into
Common Stock, and options, warrants (including without limitation the Warrants)
and other instruments or rights that are exercisable for or convertible into
Common Stock. As used in this paragraph 10, the number of shares of Conversion
Stock at any given time shall be calculated as the number of shares of Common
Stock into which it is then convertible, assuming conversion of all such
securities and exercise of all such options, warrants and rights.
(c) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company including common stock and preferred stock, whether
now authorized or not, and rights, options or warrants to purchase said shares
of
20.
<PAGE>
common stock or preferred stock, and securities of any type whatsoever that
are, or may become, convertible into said shares of common stock or preferred
stock. Notwithstanding the foregoing, "New Securities" shall not include (i) the
shares of Preferred or Warrants to be issued pursuant to this Agreement, (ii)
securities offered to the public generally pursuant to a registration statement
or pursuant to Regulation A under the Securities Act, (iii) shares issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization whereby the
Company or its shareholders own not less than fifty-one percent (51%) of the
voting power of the surviving or successor corporation, (iv) shares of Common
Stock or related options exercisable for such Common Stock issued to employees,
officers and directors of, and consultants, customers, and vendors to, the
Company, pursuant to any arrangement approved by the Board of Directors of the
Company after the date first written above (provided, however, that the maximum
-------- -------
number of such shares of Common Stock shall be 200,000, (v) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company or (vi) any shares issued pursuant to the matters described in clauses
(1) through (6) of paragraph 6(b) hereof.
(d) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Company shall include with such notice a
brief summary of the then current business plan of the Company. The Purchaser
shall have fifteen (15) days from the date of receipt of any such notice to
agree to purchase up to the Purchaser's share (calculated in accordance with
this paragraph 10.1) of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. The Company shall notify
the Purchaser of any material revision to the price and terms of the issuance of
New Securities and the Purchaser shall be entitled to 15 additional days in
order to respond to the Company.
(e) In the event the Purchaser fails to exercise such right of first purchase
within said 15 day period (as extended, if applicable), the Company shall have
120 days thereafter to sell or enter into an agreement (pursuant to which the
sale of the New Securities covered thereby shall be closed, if at all, within 60
days from the date of said agreement) to sell the New Securities not elected to
be purchased by the Purchaser at a price and upon the terms no more favorable to
the purchasers of such securities than specified in the Company's notice to the
Purchaser. In the event the Company has not sold the New Securities or entered
into an agreement to sell the New Securities within said 120 day period (or sold
and issued New Securities in accordance with the foregoing within 60 days from
the date of said agreement), the Company shall not thereafter issue or sell any
of such New Securities, without again offering the securities to the Purchaser
in the manner provided above.
(f) The right of first purchase granted under this Agreement shall expire
upon the first to occur of the following: (i) the closing of the first public
offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared effective
by, the Commission under the Securities Act, resulting in proceeds to the
21.
<PAGE>
Company of at least $2,000,000, or (ii) Purchaser does not then hold at least
100,000 shares of Preferred, Common Stock and/or Conversion Stock (appropriately
adjusted for recapitalizations).
(g) The right of first purchase granted hereunder is not assignable except by
the Purchaser to any wholly-owned subsidiary that acquires at least 100,000
shares (appropriately adjusted for recapitalizations).
(h) Notwithstanding anything to the contrary contained in this paragraph 10,
in the event the New Securities proposed to be issued by the Company are to be
convertible into shares of Common Stock, the right of first purchase granted
pursuant to this paragraph 10 shall, at the Company's option, apply to the
purchase of a pro rata number of shares of Common Stock into which the pro rata
number of shares of New Securities that the Purchaser otherwise would have been
entitled to purchase would be convertible. Substitution of Common Stock in lieu
of an offer of New Securities shall be indicated in the Company's notice to the
Purchaser pursuant to paragraph 10(b) hereof. Failure of the Purchaser to effect
its right of first purchase of such Common Stock shall entitle the Company to
issue such New Securities on any such terms as the Company shall approve,
provided that such securities shall at most be convertible into the maximum
number of shares of Common Stock set forth in the Company's notice to Purchaser.
11. Suspension or Termination of Certain Provisions. If Purchaser breaches
-----------------------------------------------
its obligation to purchase shares of Preferred under paragraph 2(c) hereof, and
such breach is not cured within thirty (30) days of the applicable Purchase Date
(or New Purchase Date, in the event the provisions of paragraph 4(a) (iii)
apply), the provisions of Sections 8, 9 and 10 hereof, and all rights, benefits
and covenants granted to or in favor of Purchaser thereunder, shall cease to
have any force or effect and the obligation of the Company to sell any remaining
shares of Preferred to Purchaser under Section 2(c) shall terminate; such
provisions and all such rights, benefits and covenants, and the obligation of
the Company to sell remaining shares of Preferred to Purchaser under Section
2(c) shall however be fully reinstated (effective as of the dated of such cure)
if Purchaser cures all breaches of Section 2(c) by the purchase of the
appropriate number of shares of Preferred within ninety (90) days from the
expiration of the above referenced thirty (30) day period. Notwithstanding the
foregoing, the Purchaser shall not be treated as having breached its obligation
to purchase shares of Preferred if the Company had failed to reach any of the
development milestones under Section 3(a) of the Development Agreement between
the parties and the provisions of Section 8 (with the exception of Section
8(a)(ii)), 9, and 10 hereof and all rights, benefits and convents granted to or
in favor of Purchaser shall continue in full force and effect.
12. Restrictions on Transfer; Other Agreements.
------------------------------------------
12.1 Restrictive Legend. (a) The Purchaser Shares and shares issued
------------------
pursuant to the exercise of the Warrants and any Conversion Stock issued in
connection therewith, shall (unless their disposition is otherwise permitted by
the provisions of this paragraph 11) be subject to stop
22.
<PAGE>
transfer instructions and shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"This security has not been registered under the Securities Act of 1933, as
amended, and may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until registered under such Act, or unless such
offer, sale, transfer, pledge or hypothecation is exempt from registration
or is otherwise in compliance with such Act. The transferability of this
security is also subject to restrictions contained in a Stock Purchase
Agreement, a copy of which the Company will furnish to the holder of this
security upon request."
(b) The Company hereby agrees that it will, upon the Purchaser's request,
eliminate the foregoing legend and stop transfer instructions if, in the written
opinion of counsel (which counsel and opinion (in form, scope and substance)
shall be reasonably satisfactory to the Company), the Purchaser is entitled,
without limitation as to manner or sale to sell the Purchaser Shares without
registration under the Securities Act by reason of Rule 144 thereunder (or any
successor or equivalent provision).
12.2 Restrictions on Transfer. The Purchaser, by acquiring any of the
------------------------
Purchaser Shares and shares issued pursuant to the exercise of the Warrants,
hereby covenants and agrees that, except as provided in this Agreement, it will
not directly or indirectly offer for sale or sell (within the meaning of the
Securities Act) any of the Purchaser Shares or shares issued pursuant to the
exercise of the Warrants or any Conversion Stock issued in connection therewith.
(a) The Purchaser may offer or sell the Purchaser Shares or shares issued
pursuant to the exercise of the Warrants or any Conversion Stock issued in
connection therewith pursuant to:
(i) an effective registration statement under the Securities Act
("Registration Statement") filed by the Company under paragraph 9 hereof,
or
(ii) an exemption from registration under the Securities Act, provided
that prior to any such proposed transfer of the Purchaser Shares, the
Purchaser shall give written notice to the Company of the Purchaser's
intention to effect such transfer, which notice shall be accompanied by
such evidence as may be reasonably satisfactory to the Company that the
proposed transfer of the Purchaser Shares or other shares subject to
these restrictions may be effected without registration under the
Securities Act, whereupon the Purchaser shall be entitled to transfer the
Purchaser Shares or other shares subject to these restrictions in
accordance with the terms of the notice delivered by the Purchaser to the
Company, or
(iii) the provisions of Rule 144 (or any successor provision) under the
Securities Act, if applicable.
23.
<PAGE>
(b) Any offer or sale of the Purchaser Shares or shares issued pursuant to
the exercise of the Warrants or any Conversion Stock issued in connection
therewith shall be made in accordance with Federal and state securities laws
(including the prospectus delivery requirements of the Securities Act), if
applicable.
(c) Each of the Purchaser Shares or shares issued pursuant to the exercise of
the Warrants or any Conversion Stock issued in connection therewith transferred
as above provided shall bear the appropriate restrictive legend set forth in
paragraph 11.1 above except as provided in paragraph 9 or if, in the opinion of
the legal counsel referred to above (which counsel and opinion (in form, scope
and substance) shall be reasonably satisfactory to the Company), such legend is
not required in order to establish compliance with any provisions of the
Securities Act.
13. Miscellaneous.
-------------
13.1 Notices; Payments. Except as otherwise provided in this Agreement, all
-----------------
notices, requests, claims, demands, waivers and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand, if delivered personally or by courier, or ten (10) business
days after being deposited in the mail (registered or certified mail postage
prepaid, return receipt requested) properly addressed as set forth below.
13.2 Headings; Schedules and Exhibits. The headings herein are for
--------------------------------
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The
schedules and exhibits attached hereto, and the certificates and other documents
delivered as specified herein, are expressly made a part of this Agreement.
13.3 Effect of Agreement.
-------------------
(a) This Agreement, including the representations and warranties contained
herein and the annexes, schedules, exhibits, certificates, opinions and other
documents referred to herein or delivered pursuant hereto contain the entire
agreement between the Purchaser and the Company with respect to the subject
matter contained herein and supersede all prior agreements and understandings,
oral and written, with respect thereto. No representations and warranties other
than those contained herein or in any such annex, schedule, exhibit,
certificate, opinion or other document shall be deemed to have been made by the
Purchaser or the Company with respect to this Agreement. All of the
representations and warranties contained herein shall survive the execution and
performance of this Agreement.
(b) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns but, except
as otherwise expressly provided herein, neither this Agreement nor any of the
rights, interests or obligations hereunder shall be
24.
<PAGE>
assigned by either of the parties hereto without the prior written consent of
the other party. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
(c) No right, power or remedy granted under this Agreement is intended to be
exclusive, but each shall be cumulative and in addition to any other rights,
powers or remedies referred to in this Agreement or otherwise available at law
or in equity; and the exercise or beginning of exercise by any party hereto of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by such party of any or all such other rights,
powers or remedies. No waiver by any party hereto, and no failure or delay on
the part of such party in any one or more instances to insist upon strict
performance or observance of one or more covenants or conditions hereof, shall
in any way be, or be construed to be, a waiver thereof or prevent such party's
rights to require at a later time the performance or observance of such
covenants or conditions, or otherwise prejudice such party's rights, powers or
remedies.
13.4 Company Information. For so long as the Purchaser shall own Preferred,
-------------------
the Company shall furnish to the Purchaser (i) for the first three quarters of
each fiscal year reports of its business and operations (including unaudited
quarterly financial statements) and (ii) for each fiscal year, an annual report
of its business and operations (including financial statements which shall be
audited by a certified public accounting firm of established reputation).
13.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
-------------
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES THEREOF.
13.6 Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument. Execution and
delivery of this Agreement by exchange of facsimile copies bearing the facsimile
signature of a party hereto shall constitute a valid and binding execution and
delivery of this Agreement by such party. Such facsimile copies shall constitute
enforceable original documents.
13.7 Lost, Etc., Certificates Evidencing Preferred Certificates; Exchange
--------------------------------------------------------------------
of Certificates. Upon receipt of evidence satisfactory to the Company of the
- ---------------
loss, theft, destruction or mutilation of any certificate evidencing any shares
of Preferred or Warrants held by the Purchaser, and in case of loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the Company,
or, in the case of such mutilation, upon surrender and cancellation of such
certificate, the Company will make and deliver in lieu of such certificate one
or more new certificates of the same series and in such denomination or
denominations as the Purchaser may request for the same aggregate number of
shares of Preferred or Warrants evidenced by the certificate so lost, stolen,
destroyed or mutilated, less the number of shares of Preferred, if any,
originally evidenced by such
25.
<PAGE>
certificate that have theretofore been redeemed, and registered in such name or
names as the Purchaser may request.
Upon surrender by the Purchaser or its nominee of any certificate evidencing
any shares of Preferred for exchange at the office of the Company, the Company
at its expense (exclusive of applicable transfer taxes if any) will issue in
exchange therefor one or more new certificates of the same series and in such
denomination or denominations as such Purchaser may request for the same
aggregate number of shares of Preferred originally evidenced by the certificate
so surrendered, less the number of shares of Preferred, if any, evidenced by
such surrendered certificate that have theretofore been redeemed, and registered
in such name or names as such Purchaser or the Partnership may request.
13.8 Amendments; Waiver. This Agreement may be amended only by a writing
------------------
executed by or on behalf of both the Company and the Purchaser.
13.9 Severability. In the event that any term of provision of this
------------
Agreement shall, for any reason, be held invalid, illegal, or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other term of provision hereof, and this Agreement shall be interpreted and
construed as if such term or provision, to the extent the same shall be held to
be invalid, illegal, or unenforceable, had never been included herein.
13.10 Further Assurances. The parties shall each perform such acts, execute
------------------
and deliver such instruments and documents, and do all such other things as may
be reasonably necessary to accomplish the transactions contemplated by this
Agreement.
13.11 Costs. Except as expressly provided herein to the contrary, each party
-----
to this Agreement shall be responsible for its expenses incurred in connection
with the negotiation and performance of this Agreement. Further, each party
shall pay its own costs with respect to the hiring of auditors and attorneys
except as otherwise provided herein.
13.12 Resolution of Disputes.
----------------------
(a) General. In the event of any controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the scope of this paragraph
12.12, either party may require by written notice to the other that such
controversy or claim by submitted to arbitration as provided herein.
(b) The parties hereby irrevocably agree to settle any controversy or claim
described in paragraph 12.12 (a) by written notice by either party to the other
pursuant to paragraph 12.12(a). The arbitration proceeding shall be conducted in
accordance with the Commercial Arbitration Rules then obtaining of the American
Arbitration Association. The place of the proceeding shall be San Francisco,
California. The decision of the arbitrators shall be final and binding upon both
26.
<PAGE>
parties and their respective successors and assigns. Judgment upon the
award rendered may be entered in any court of competent jurisdiction.
(c) If either party commences any action or arbitration or judicial
proceedings against the other party to enforce any provision of this Agreement
or an award as described above, or to compel the other party to submit to
arbitration, the prevailing party in such action or proceedings shall be
entitled to recover from the other party the reasonable attorneys' fees and
other costs and expenses incurred by that prevailing party in connection with
such action or proceeding and in connection with the enforcement of any judgment
or order thereby obtained.
13.13 Indemnification. Each party shall indemnify, protect, defend, and hold
---------------
harmless the other party and such party's representatives, officers, employees,
and successors from and against any and all losses, claims, damages, expenses
and liabilities (including, without limitation, all out-of-pocket expenses,
expenses incurred with respect to any assessment or judgment, and fees and
disbursements of counsel and accountants) incurred or sustained by the other
party and/or such party's representatives, officers, employees, and/or
successors as a result of any event, occurrence, claims circumstance or other
matter arising from any material breach by the first party of any covenant of
this Agreement, or any failure or untruth of any representation or warranty made
by the first party herein. Each party's obligations under this paragraph 12.13
shall survive the execution and performance of this Agreement.
13.14 Force Majeure. Neither party shall be responsible for any failure to
-------------
perform its obligations hereunder due to any cause or event beyond such party's
reasonable control, including without limitation acts of God, war, civil
commotion, riots, embargoes, domestic or foreign governmental laws or acts,
regulations or orders, fires, floods, earthquakes, accidents, machinery
malfunctions, quarantines, strikes, lockouts or other labor difficulties. The
affected party shall give the other party prompt notice of such cause or event
no later than seven (7) days after such cause or event. The notice shall
describe the nature of the cause or event, including an estimation of its
expected duration and probable impact on the ultimate performance of the
affected party's obligations hereunder. Each party shall exercise all reasonable
efforts to mitigate or limit damages to the other party resulting from the
nonperformance.
EXECUTED on this 18th day of August 1991, but effective as of the date first
above written by the Company and the Purchaser.
JETFAX, INC.
By _____________________________
Title __________________________
By _____________________________
27.
<PAGE>
Title __________________________
AILICEC CALIFORNIA CORPORATION
By _____________________________
Title __________________________
By _____________________________
Title __________________________
28.
<PAGE>
EXHIBIT 10.20
JetFax, Inc.
----------------------
SERIES F PREFERRED STOCK
PURCHASE AGREEMENT
------------------------
March 5, 1996
<PAGE>
SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule I - Purchasers
Schedule II - Additional Purchasers
Schedule 4.4 - Options and Other Rights
Schedule 4.5 - Conflicts
Schedule 4.7 - Liabilities
Schedule 4.8 - Adverse Changes
Schedule 4.10 - Contracts
Schedule 4.11 - Related Person Indebtedness
Schedule 4.12 - Litigation
Schedule 4.13 - Consents
Schedule 4.14 - Encumbrances
Schedule 4.15 - Technology
Schedule 4.17 - Plans
Schedule 4.22 - Related Party Transactions
Schedule 5.7 - Risk Factors
Schedule 12.7 - Agent's Fees
Exhibit A - Certificate of Designation
Exhibit B - Financial Statements
Exhibit C - Form of Opinion
</TABLE>
<PAGE>
[Execution Copy]
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS AGREEMENT (this "Agreement") is made as of March 5, 1996, by and among
JETFAX, INC., a Delaware corporation (the "Company"), and each of the parties
listed on the Schedule of Purchasers attached hereto as Schedule I (the
---------------------- ----------
"Schedule of Purchasers"). The persons listed on the Schedule of Purchasers are
- ----------------------- ----------------------
sometimes hereinafter referred to collectively as the "Purchasers" and
individually as a "Purchaser."
WHEREAS, the Company is a corporation engaged in the development,
marketing, sale and license of fax products and technologies; and
WHEREAS, the Company desires to issue and sell, and the Purchasers desire
to purchase, certain securities of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein contained, the Company and each Purchaser hereby agree as
follows:
SECTION 1
---------
Definitions
-----------
1.1 For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(b) "Certificate of Designation" shall have the meaning specified in
Section 2.1 hereof.
(c) "Closing" and "Closing Date" shall have the meanings specified in
Section 3 hereof.
(d) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
<PAGE>
(e) "Common Stock" shall have the meaning specified in Section 4.4(a)
hereof.
(f) "Note" and "Notes" shall mean the 10% convertible Notes issued by
the Company to certain of the Purchasers pursuant to the Note Purchase
Agreement.
(g) "Note Purchase Agreement" shall mean the Note Purchase Agreement
dated as of August 3, 1994, as amended, by and among the Company and certain of
the Purchasers.
(h) "Preferred Stock" shall have the meaning specified in Section
4.4(a) hereof.
(i) "Series A Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(j) "Series B Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(k) "Series C Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(l) "Series D Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(m) "Series E Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(n) "Series F Preferred" shall have the meaning specified in Section
2.1 hereof.
(o) "Series P Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(p) "Shares" shall have the meaning specified in Section 2.1 hereof.
(q) "Tax" or "Taxes" shall mean taxes and similar governmental
impositions payable to any federal, state, local or foreign taxing authority,
including (i) income, minimum, franchise, property, withholding, employment,
social security, excise, stamp, occupation, windfall profits, transfer and gains
taxes, (ii) customs duties, imposts, charges, levies, or other similar
-2-
<PAGE>
assessments of any kind, and (iii) interest, penalties, and additions to tax
imposed with respect thereto.
(r) "Technology" shall have the meaning specified in Section 4.15
hereof.
1.2 Wherever used in this Agreement (a) the words "include" or "including"
shall be construed as incorporating, also, "but not limited to" or "without
limitation", (b) the word "day" means a calendar day unless otherwise specified,
(c) the word "party" means each and every person whose signature is set forth at
the end of this Agreement, (d) the word "law" (or "laws") means any statute,
ordinance, resolution, regulation, code, rule, order, decree, judgment,
injunction, mandate or other legally binding requirements of a government
entity, (e) the word "notice" shall mean notice in writing (whether or not
specifically stated) and shall include notices, consents, approvals and any
other written communication contemplated under this Agreement and (f) the words
"business day" shall mean any day other than Saturday, Sunday or a day on which
commercial banks located in San Francisco, California are required or authorized
by law to close.
1.3 Certain other words and phrases are defined or described elsewhere in
this Agreement and/or the Exhibits and Schedules hereto. Unless the context
otherwise requires, words in the singular number include the plural and vice
versa. Use of the masculine, feminine or neuter shall include each such other
gender. All Schedules and Exhibits hereto are hereby incorporated herein and
made a part hereof. Unless specified to the contrary, references to Articles,
Sections, Schedules and/or Exhibits mean the particular Article, Section,
Schedule or Exhibit in or to this Agreement. References to this Agreement shall
include this Agreement as varied or modified from time to time by the parties.
SECTION 2
---------
Authorization, Purchase and Sale of the Shares
----------------------------------------------
2.1 Authorization of the Shares. The Company has authorized the issuance
---------------------------
and sale of up to 3,500,000 shares of its Series F Preferred Stock, $.01 par
value per share ("Series F Preferred"), having the rights, restrictions,
privileges and preferences as set forth in the Certificate of Designations,
Preferences and Rights of Series F Preferred Stock of the Company as filed on or
before the date hereof and attached hereto as Exhibit A (the "Certificate of
---------
-3-
<PAGE>
Designation"). For purposes of this Agreement, the term "Shares" shall mean the
shares of Series F Preferred authorized for issuance and sale as provided in
this Section 2.1.
2.2 Sale and Purchase of the Shares. At the initial Closing, and subject
-------------------------------
to the terms and conditions hereof, the Company will issue and sell to the
Purchasers and each Purchaser will purchase from the Company the number of
shares of Series F Preferred set forth opposite its name on Schedule I, at a
----------
purchase price of $2.75 per share.
SECTION 3
---------
Closing, Payment and Delivery
-----------------------------
The purchase and sale of the Shares being purchased by the Purchasers
hereunder shall take place at 10:00 a.m. at the offices of General Counsel
Associates, 1891 Landings Drive, Mountain View, California 94043 on March 5,
1996, and at such other time, date and place as is consistent with the terms of
this Agreement (which time, date and place, and any future such time, date and
place, are referred to in this Agreement as a "Closing" and a "Closing Date").
At the initial Closing the Company shall deliver to each of the Purchasers a
certificate representing the number of Shares set forth opposite the Purchaser's
name on Schedule I against delivery to the Company by the Purchaser of the
----------
amount of the purchase price of such Shares in the form of Note(s) in the
aggregate principal amount, plus accrued interest, as set forth opposite each
such Purchaser's respective name on the Schedule of Purchasers and the amount in
immediately available funds as set forth opposite each such Purchaser's
respective name on the Schedule of Purchasers.
In addition, on or prior to March 31, 1996, at a purchase price of $2.75
per share, and subject to the satisfaction of the Company's counsel as to
securities laws issues, the Company (a) shall sell to each of the persons listed
on Schedule II hereto who elects to so purchase, the number of Shares set forth
-----------
opposite such person's name on Schedule II against delivery to the Company by
-----------
such person of the amount of the purchase price of such Shares in the form of
Note(s) in the aggregate principal amount, plus accrued interest, as set forth
opposite such person's name on Schedule II and the amount in immediately
-----------
available funds as set forth opposite such person's name on the Schedule II (or
-----------
any combination thereof) and (b) may sell additional Shares to such persons as
designated by the Company. Any subsequent sales of Shares pursuant to the
-4-
<PAGE>
foregoing provision shall be made pursuant to the provisions of this Agreement.
As a condition of such purchase, all purchasers of such Shares shall execute a
counterpart of this Agreement and shall, for all purposes, be considered
Purchasers hereunder. Notwithstanding anything in this Agreement to the
contrary, if less than 3,500,000 Shares are sold by March 31, 1996, the term
Shares shall only refer to such lesser number.
SECTION 4
---------
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants as of the date hereof to each
Purchaser as follows:
4.1 Organization and Standing. The Company is duly incorporated, validly
-------------------------
existing and in good standing under the laws of the State of Delaware. The
Company has full corporate power and authority to own its properties and assets
and carry on its business as it was heretofore and is currently being conducted
by the Company. The Company is duly licensed or qualified to transact business
as a foreign corporation, and is in good standing, in all jurisdictions in which
the nature of the business transacted by it or the character of the properties
owned or leased by it requires such licensing or qualification, except where the
failure to be so qualified will not have a material adverse effect on the
business, properties or condition, financial or otherwise ( the "Condition"), of
the Company.
4.2 Corporate Power and Authority. The Company has full corporate power
-----------------------------
and authority to enter into this Agreement and to sell the Shares and to carry
out and perform its obligations under the terms of this Agreement.
4.3 Subsidiaries. The Company does not directly or indirectly own any
------------
equity interest in any other corporation, partnership, limited liability
company, joint venture or other business association or entity; provided,
--------
however, the Company from time to time maintains money market accounts or
- -------
similar investment vehicles.
4.4 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 13,500,000
shares of Common Stock, $.01 par value per share
-5-
<PAGE>
("Common Stock"), and 9,500,000 shares of Preferred Stock, $.01 par value per
share ("Preferred Stock"). Of the Preferred Stock, 1,000,000 shares have been
designated as Series A Preferred Stock, $.01 par value per share ("Series A
Preferred"), 1,000,000 shares have been designated as Series B Preferred Stock,
$.01 par value per share ("Series B Preferred"), 600,000 shares have been
designated as Series C Preferred Stock, $.01 par value per share ("Series C
Preferred"), 100,000 shares have been designated as Series D Preferred Stock,
$.01 par value per share ("Series D Preferred"), 2,500,000 shares have been
designated as Series E Preferred Stock, $.01 par value per share ("Series E
Preferred"), 500,000 shares have been designated as Series P Preferred Stock,
$.01 par value per share ("Series P Preferred") and 3,500,000 shares have been
designated as Series F Preferred. Immediately prior to the initial Closing,
954,474 shares of the Common Stock, 750,996 shares of Series A Preferred,
533,974 shares of the Series B Preferred, 564,834 shares of the Series C
Preferred, 67,890 shares of the Series D Preferred, 930,594 shares of the Series
E Preferred, 90,000 shares of the Series P Preferred and none of the Series F
Preferred will be issued and outstanding, and all such issued and outstanding
shares will have been duly authorized and validly issued, will be fully paid and
nonassessable, and will have been offered, issued, sold and delivered by the
Company in compliance with applicable federal and state securities law.
(b) Except as specified in Schedule 4.4, in this Agreement or in the
------------
Certificate of Designation, there are no authorized or outstanding preemptive,
conversion or other rights, options, warrants, securities, commitments or
agreements granted or issued by or binding upon the Company for the issuance,
purchase or acquisition of any shares of its capital stock or any securities
convertible into or exchangeable for shares of its capital stock or obligating
the Company to grant, extend or enter into any such commitment or agreement.
4.5 Authorization; No Conflicts. All corporate action on the part of the
---------------------------
Company necessary for the authorization, execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated herein has been taken. This Agreement is the valid and binding
obligation of the Company, enforceable in accordance with its terms. Except as
specified in Schedule 4.5, the execution, delivery and performance by the
------------
Company of this Agreement will not, assuming the truth and accuracy of each of
the Purchasers' representations and warranties
-6-
<PAGE>
set forth in Section 5 hereof, result in any violation of and will not conflict
with, or result in a breach of any of the terms of or loss of benefit under, or
permit the acceleration of any obligation under, or constitute a default under,
any provision of federal or state law to which the Company is subject, the
Company's Certificate of Incorporation, the Company's By-Laws or any agreement
or instrument to which the Company is a party or by which it or any of its
properties is bound or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term, except where such violation, conflict, breach,
default, loss or acceleration would not have a material adverse effect,
individually or in the aggregate, on the Condition of the Company. Except as
specified in Schedule 4.5, no shareholder of the Company has any preemptive
------------
rights or rights of first refusal by reason of the issuance of the Shares which
rights have not been duly waived. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, will be free of restrictions on transfer other than restrictions
on transfer under this Agreement and under applicable federal and state
securities laws, and will be free of any liens or encumbrances other than as set
forth in this Agreement. The shares of Common Stock issuable upon conversion of
the Shares have been duly and validly reserved and are not subject to any
preemptive rights or rights of first refusal and, upon issuance in accordance
with the Certificate of Designation, will be validly issued, fully paid and
nonassessable.
4.6 Financial Information. The unaudited financial statements of the
---------------------
Company as of December 31, 1995, and the audited financial statements of the
Company as of March 31, 1995, attached hereto as Exhibit B (a) are in accordance
---------
with the books and records of the Company, (b) present fairly the financial
position and results of operations and (as to the audited financial statements
only) changes in financial position of the Company at the dates and for the
periods to which they relate and (c) were prepared in accordance with generally
accepted accounting principles in all material respects applied on a consistent
basis (other than, with respect to the unaudited statements, as to footnote
presentation and year-end adjustments).
4.7 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
4.7, the Company has no liabilities (fixed, accrued, contingent or otherwise,
- ---
including any Tax liabilities due) ("Liabilities") which are not fully reflected
or provided for on
-7-
<PAGE>
the most recent financial statements referred to in Section 4.6, except
Liabilities incurred in the ordinary course of business since the date of such
financial statements or which individually or in the aggregate are not
materially adverse to the Condition of the Company. The Company is not aware of
any reasonable basis for the assertion against the Company of any other
Liability other than Liabilities that are not individually or in the aggregate
material to the Condition of the Company.
4.8 Absence of Certain Changes. Except to the extent described in this
--------------------------
Agreement, in Schedule 4.8 or in the other Schedules to this Agreement, since
------------
the date of the most recent financial statements referred to in Section 4.6
there has not been any event or condition of any character which has materially
and adversely affected the Condition of the Company, including the following:
(a) the creation, incurrence, assumption or guarantee of any
indebtedness, or the subjection of any of the Company's assets to any lien
except for liabilities, indebtedness or liens that, individually or in the
aggregate, are not materially adverse to the Condition of the Company;
(b) any resignation or termination of employment of any key officer
or any knowledge by the Company of any impending resignation or termination of
employment by any such key officer;
(c) except in the ordinary course of business, any material increase
in the compensation payable or to become payable by the Company to any of its
officers or directors, or any material increase of any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made by the Company for
or with any officer or director;
(d) any damage, destruction or loss of any of the properties or assets
of the Company (whether or not covered by insurance) materially adversely
affecting the Condition of the Company;
(e) any declaration, setting aside or payment of any dividend or other
distribution in respect of any of the Company's capital stock or any redemption,
purchase or other acquisition of any such stock by the Company;
-8-
<PAGE>
(f) any material change in any method of accounting or accounting
practice of the Company;
(g) any notes or accounts receivable or portions thereof written off
by the Company as uncollectible (except for write-offs in the ordinary course of
business and consistent with past practice);
(h) any issuance or sale of any stock, bonds or other corporate
securities of which the Company is the issuer;
(i) any sale, assignment, transfer or encumbrance of any of the assets
(real, personal or mixed) of the Company, except in the ordinary course of
business and consistent with past practice; or
(j) any collective bargaining agreements entered into by the Company.
4.9 Taxes. The Company has filed or will file within the time prescribed
-----
by law (including extensions of time approved by the appropriate taxing
authority) all Tax returns and reports required to be filed with the United
States Internal Revenue Service, with the State of Delaware, with the State of
California and with all other jurisdictions where such filing is required by
law, except where the failure to so file would not have a material adverse
effect on the Condition of the Company. The Company has paid or, as and to the
extent required by generally accepted accounting principles, made adequate
provision in the most recent financial statements referred to in Section 4.6 for
the payment of, all Taxes, interest, penalties, assessments or deficiencies
shown to be due or claimed to be due on or in respect of such Tax returns and
reports. The Company's Tax returns have not, to the best of the Company's
knowledge and belief, been audited by the United States Internal Revenue Service
nor by any state taxing authority. There is no claim or assessment pending or,
to the knowledge of the Company, threatened against the Company for any alleged
deficiency in Taxes, except where such claim would not be materially adverse to
the Condition of the Company.
4.10 Contracts. Except as set forth in Schedule 4.10, the Company has no
--------- -------------
current contracts, agreements or the like of any material nature. Except as
set forth in Schedule 4.10, the Company has complied with all the provisions of
-------------
all said contracts and agreements except where such failure has not had a
material adverse
-9-
<PAGE>
effect, individually or in the aggregate, on the Company. Except as set forth in
Schedule 4.10, the Company is not in violation or default under any such
- -------------
contract or agreement except where such violation or default has not had a
material adverse effect, individually or in the aggregate, on the Company.
Except as set forth in Schedule 4.10, to the best of the Company's knowledge,
-------------
none of the other parties to any such contract is in violation or default under
any such contract in any material respect that would have a material adverse
effect on the Condition of the Company. The Company has not received any notice
of cancellation or any written communication threatening cancellation of any
material contract by any party thereto.
4.11 Shareholders, Directors and Officers; Indebtedness. Set forth on
--------------------------------------------------
Schedule 4.11 is a correct and complete list or description of all indebtedness
- -------------
of the Company to its officers, directors or shareholders or any of their
respective relatives and of all indebtedness of such persons to the Company.
4.12 Litigation. Except as set forth in Schedule 4.12, there is neither
---------- -------------
pending nor, to the Company's knowledge, threatened any action, suit,
proceeding, arbitration or claim, whether or not purportedly on behalf of the
Company, to which the Company is or may be named as a party or its property or
assets is or may be subject and in which an unfavorable outcome, ruling or
finding in any such matter or for all such matters taken as a whole might have a
material adverse effect on the Condition of the Company. Except as set forth in
Schedule 4.12, there are no unsatisfied judgements or outstanding orders,
- -------------
injunctions, decrees, stipulations or awards of any court, tribunal or
arbitrator against the Company or any of its properties or assets that,
individually or in the aggregate, are material and adverse to the Condition of
the Company.
4.13 Consents. Except as set forth on Schedule 4.13, all consents,
-------- -------------
approvals, orders or authorizations of, or registrations, qualifications,
designations, declarations or filings with, any federal or state governmental
authority (including under the "blue sky laws" of an such state governmental
authority), any party to a contract to which the Company is bound or any other
third party, on the part of the Company, required in connection with the
execution and delivery of this Agreement or the consummation of the transactions
under the terms of this Agreement, shall have been made or obtained prior to,
and be effective as of, any Closing, other than any notice filings required to
be made after such
-10-
<PAGE>
Closing pursuant to Regulation D under the Act and any applicable "blue sky
laws."
4.14 Title to Properties; Liens and Encumbrances. The Company has a valid
-------------------------------------------
and indefeasible ownership interest in all of its property and assets (real or
personal, tangible or intangible) material to its business, free from all
mortgages, pledges, liens, security interests, encumbrances or charges, except
as listed on Schedule 4.14 hereto. The Company is not in violation of any law,
-------------
regulation or ordinance relating to its property or assets which violation would
have a material adverse effect on the business of the Company. All personal
property and assets, and all buildings, structures and fixtures used by it in
the conduct of its business, are in good operating condition and repair, except
where such failure or failures, individually or in the aggregate, would not have
a material adverse effect on the Condition of the Company.
4.15 Technology.
----------
(a) Set forth on Schedule 4.15 are all patents, patent rights,
-------------
trademarks, trademark rights, copyrights, proprietary rights, licenses and
processes, and all registrations and applications for registration with respect
to any of the foregoing, owned or used by the Company and material to its
business (the "Technology"). Other than as set forth on Schedules 4.12 and
------------------
4.15, the Company is not aware of and has not received any notice of
- ----
infringement upon or conflict with the asserted rights of others with respect to
any of the Technology or the Proprietary Technology (as defined below) except
where such would not have a material adverse effect, individually or in the
aggregate, on the Condition of the Company. To the Company's knowledge, all
Technology and all Proprietary Technology owned or used by the Company are owned
or used by it free of any adverse claims, rights or encumbrances as to the
Company's rights thereto except where such claims, rights or encumbrances would
not have a material adverse effect, individually or in the aggregate, on the
Condition of the Company, and the Company has used reasonable efforts to protect
its rights to continued secrecy thereof.
(b) Except as set forth on Schedule 4.15, the Company owns or
-------------
possesses the right to use the full range of trade secrets, technical knowledge
and experience, confidential information and other proprietary knowledge,
technical, engineering and operating data relating to the products, designs,
schematics, plans, operating principles, formulas, computer software programs,
-11-
<PAGE>
electronically recordable data or concepts, marketing data, inventions,
improvements, research and development records and reports, experimental and
engineering reports, product specifications, manufacturing specifications, raw
materials specifications, drawings, photographs, models, compilations of
information, records, books and papers, quality control reports and
specifications, manufacturing and production techniques and methods and any
other information possessed by the Company concerning the design, formulation,
manufacturing, quality control, testing, storage, development, improvement,
installation, and operation of the Company's products and services and material
to the Condition of the Company (collectively, "Proprietary Technology").
(c) Each engineer and officer of the Company has executed a
proprietary information and inventions agreement to protect the Company's rights
to the Technology.
4.16 Compliance. The Company is not in violation of any term of any law,
----------
judgment, decree, order, rule or regulation to which the Company is subject and
a violation of which, individually or in the aggregate, would have a material
adverse effect on the Condition of the Company. The Company has obtained and
maintains in full force and effect all permits, licenses, consents, approvals,
registrations, authorizations and qualifications under all applicable laws, and
with all applicable governmental authorities, required for the conduct by it of
its business and the ownership or possession by it of its properties and assets,
except to the extent the failure to so obtain and maintain would not have a
material adverse effect, individually or in the aggregate, on the Condition of
the Company. All required reports and filings with governmental authorities have
been properly made as and when required, except where the failure to report or
file would not, individually or in the aggregate, have a material adverse effect
on the Condition of the Company.
4.17 ERISA.
-----
(a) The Company has not incurred any liability to the Pension Benefit
Guaranty Corporation (the "PBGC") except for required premium payments, which
payments have been paid when due. To the best of the Company's knowledge, no
prohibited transactions or events have occurred which might give rise to any
liability of the Company under Section 406 of the Employee Retirement Income
Security Act of 1974, as amended, and the regulations thereunder
-12-
<PAGE>
("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) No employee benefit plan within the meaning of Section 3(3) of
ERISA which covers, or during the period of five years ending on the date
hereof, has covered, employees of the Company (an "ERISA Plan") is a defined
benefit plan, multi-employer plan or plan subject to the minimum funding
standards of Section 412 of the Code (that is, a pension plan within the meaning
of the Code).
(c) No proceeding has been initiated by any person (including the
PBGC) to terminate any ERISA Plan.
(d) With respect to each ERISA Plan, (i) all payments and
contributions due from the Company to date have been made and all amounts
properly accrued to date as liabilities of the Company that have not been paid
have been properly reflected in the books of the Company, except for payments
and contributions that are not, individually or in the aggregate, material and
adverse to the Condition of the Company; (ii) to the best of the Company's
knowledge, the Company has complied with, and each ERISA Plan materially
conforms in form and operation to, all applicable laws and regulations
applicable to the ERISA Plans, including, without limitation, ERISA and the Code
except where the failure to so comply would not, individually or in the
aggregate, have a material and adverse effect on the Condition of the Company;
and (iii) except as set forth on Schedule 4.17 hereto, each ERISA Plan that is
-------------
an employee pension benefit plan intended to qualify under Section 401 of the
Code (that is, an ERISA Plan that is not a welfare plan) has received a
favorable determination letter from the Internal Revenue Service with respect to
such qualification, its related trust has been determined to be exempt from
taxation under Section 501(a) of the Code and nothing has occurred since the
date of such letter that has adversely affected or is likely to adversely affect
such qualification or exemption.
(e) Each ERISA Plan maintained by the Company or for the benefit of
the employees is listed in Schedule 4.17 hereto.
-------------
4.18 Employees; Labor Relations. To the best knowledge of the Company, no
--------------------------
labor union or any representative thereof has made any attempt to organize or
represent employees of the Company. There are no unfair labor practice charges,
pending trials with respect to unfair labor practice charges, pending material
grievance
-13-
<PAGE>
proceedings or adverse decisions of a Trial Examiner of the National Labor
Relations Board against the Company. To the best knowledge of the Company,
relations with employees of the Company are satisfactory.
4.19 Insurance. The Company maintains in full force and effect insurance
---------
which is customary in its industry and which the Company believes is
commercially reasonable given the risks involved in the business conducted by
the Company.
4.20 Environmental and Safety Laws. The Company is not aware of and has
-----------------------------
not received notice of, and is not aware of any basis for, any violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, which violations, individually or in the
aggregate, would have a material adverse effect on the Company's business.
4.21 Manufacturing and Marketing Rights. Except as set forth in Schedule
---------------------------------- --------
4.10, the Company has not granted rights to manufacture, produce or assemble its
- ----
products or use any of its Technology to any other person, except for grants
that are not material and adverse to the Condition of the Company, and is not
bound by any agreement that affects, in any material and adverse way, the
Company's right to develop, manufacture or assemble its products.
4.22 Related Party Transactions. Except as set forth on Schedule 4.22, to
-------------------------- -------------
the best of the Company's knowledge no officer or director of the Company or
member of the immediate family of any of the foregoing:
(a) owns or has owned, directly or indirectly, any interest in (except
for less than one percent stock holdings for investment purposes in securities
of publicly traded companies), or is an officer, director, employee or
consultant of, any Person which is or was engaged in business as, a competitor,
lessor, lessee, supplier or customer of the Company;
(b) owns, directly or indirectly, as a whole or in part, any tangible
or intangible property that the Company uses in the conduct of its business; or
(c) has any cause of action or other claim whatsoever against, or owes
any amount to, the Company, except for immaterial claims in the ordinary course
of business such as for accrued
-14-
<PAGE>
vacation pay, accrued benefits under employee benefit plans, and medical, dental
and other similar health benefit plans existing on the date hereof.
4.23 Returns and Complaints. The Company has received no customer
----------------------
complaints concerning alleged defects in its products (or design thereof) that,
to the Company's knowledge, would have a material adverse effect on the
Condition of the Company.
SECTION 5
---------
Representations and Warranties of Purchasers
--------------------------------------------
Each Purchaser hereby represents and warrants as of the date hereof to the
Company as follows:
5.1 Experience. It acknowledges that investment in the Shares is highly
----------
speculative and involves a substantial and high degree of risk of loss of its
entire investment. It is familiar with the terms, risks and merits of an
investment in the Company through the purchase of the Shares. It (either alone
or together with its purchaser representative, if any) has such knowledge and
experience in financing and business matters that it is capable of evaluating
and understanding the merits and risks of this investment and can bear the
economic risk of this transaction. It has adequate means of providing for
current and anticipated financial needs and contingencies, is able to bear the
economic risk for an indefinite period of time and has no need for liquidity of
the investment in the Shares and could afford complete loss of such investment.
It has a preexisting personal or business relationship with the Company or one
of its officers, directors or controlling persons and/or by reason of its
business or financial experience it has the capacity to protect its own
interests in connection with the transactions contemplated by this Agreement.
5.2 Investment. It is acquiring the Shares for investment for its own
----------
account, not as a nominee or agent and not with a view to the resale, transfer
or other disposition thereof and any sale or disposition of its Shares will be
made only if such Shares are registered under the Act or the sale or disposition
is made in compliance with an exemption under the Act or the rules thereunder
and any applicable state securities laws. It understands that the Shares and
the shares of Common Stock issuable upon conversion of the Shares have not been
registered under the Act by reason of specified exemptions from the registration
provisions of the Act.
-15-
<PAGE>
5.3 Restrictions on Resale.
----------------------
(a) It acknowledges that the Shares must be held indefinitely unless
they are subsequently registered under the Act or an exemption from such
registration is available. It has been advised or is aware of the provisions of
Rules 144 and 144A promulgated under the Act, which permit the resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions and that such Rules may not be available for resale of the Shares.
(b) It acknowledges that all certificates representing the Shares
shall have endorsed thereon the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR
SUCH STATE LAWS, OR AN OPINION OF COUNSEL IS FURNISHED TO THE COMPANY
(WHICH OPINION AND COUNSEL RENDERING SAME SHALL BE REASONABLY SATISFACTORY
TO THE COMPANY) TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
Such legend shall be removed by the Company upon delivery to it of an opinion of
counsel to the Company (which opinion and counsel rendering same shall be
reasonably satisfactory to the Company) that a registration statement under the
Act is at the time effective with respect to the transfer of the legended
security or that such security may be transferred without such registration
statement being in effect and without the requirements of a legend on the
certificate in the hands of the transferee.
5.4 Access to Data. It has had an opportunity to discuss the Company's
--------------
business, management and financial affairs with its management and has had the
opportunity to review the Company's facilities. It acknowledges that any
projections or forecasts provided to it by or on behalf of the Company are
necessarily speculative and may prove to be incorrect and it is not subscribing
for the Shares in reliance thereon. It is not subscribing for the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or any
-16-
<PAGE>
solicitation of a subscription by a person not previously known to it in
connection with investments in securities generally.
5.5 Authorization. It has full power and authority to enter into and to
-------------
perform this Agreement in accordance with its terms. All action (corporate or
otherwise) on the part of each Purchaser necessary for the authorization,
execution, delivery and performance by each Purchaser of this Agreement and the
consummation of the transactions contemplated herein has been taken. This
Agreement is a valid and binding obligation of each Purchaser, enforceable in
accordance with its terms.
5.6 Accreditation. It has been advised or is aware of the provisions of
-------------
Regulation D promulgated under the Act relating to the accreditation of
investors, and it is an "Accredited Investor" as defined in Regulation D.
5.7 Risk Factors. It acknowledges that it has received and read the risk
------------
factors set forth on Schedule 5.7 hereto.
------------
5.8 Notes. It is the holder of the Note(s) being surrendered by it to the
-----
Company pursuant to this Agreement, free and clear of any liens, pledges or
encumbrances.
5.9 Excluded Purchasers. In addition, Talkot Partners II, LLC hereby
-------------------
represents and warrants to the Company that it qualifies as "excluded from the
count of purchasers" for purposes of Section 25102(f) of the California
Corporations Code pursuant to Rule 260.102.13 of Title 10 of the California Code
of Regulations.
SECTION 6
---------
Purchaser Conditions to Closing
-------------------------------
Each Purchaser's obligation to purchase the Shares at any Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of each of the following conditions:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 4 hereof shall be true and correct in
all respects when made and shall be true and correct in all respects on and as
of the Closing Date with the same force and effect as if made on and as of the
Closing Date except as affected by the consummation of the transactions
contemplated by this Agreement.
-17-
<PAGE>
6.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all respects.
6.3 Opinion of Company's Counsel. The Purchasers shall have received from
----------------------------
General Counsel Associates, counsel to the Company, an opinion addressed to the
Purchasers, dated as of the initial Closing Date, and in substantially the form
attached hereto as Exhibit C.
---------
6.4 Legal Investment. At the time of each Closing, the purchase of the
----------------
Shares to be purchased by the Purchasers hereunder shall be legally permitted by
all laws and regulations to which the Purchasers and the Company are subject.
6.5 Certificates.
------------
(a) The Company shall have delivered to the Purchasers a certificate
or certificates of an officer of the Company, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Sections 6.1 and
6.2 hereof.
(b) The Company shall have delivered to the Purchasers a certificate
of good standing as to the Company issued by the Secretary of State of the State
of Delaware.
6.6 Proceedings and Documents; Consents and Waivers; Amendment. All
----------------------------------------------------------
corporate and other proceedings in connection with the transactions contemplated
hereby and all documents and instruments incident to such transactions shall be
satisfactory in form and substance to the Purchasers and their counsel. Prior
to the Closing, the Company shall have obtained all consents or waivers, if any,
other than as specified in Schedule 4.5, necessary to execute and deliver this
------------
Agreement and issue the Shares, and to carry out the transactions contemplated
hereby and thereby, and all such consents and waivers shall be in full force and
effect.
6.7 Certificate of Designation. The Certificate of Designation set forth
--------------------------
in Exhibit A shall have been duly filed with the Secretary of State of the State
---------
of Delaware as provided by Delaware law and not rescinded or amended.
SECTION 7
---------
-18-
<PAGE>
Company Conditions to Closing
-----------------------------
The Company's obligation to sell the Shares to be purchased at any Closing
is subject to the fulfillment on or prior to the Closing Date of each of the
following conditions:
7.1 Representations and Warranties. The representations and warranties
------------------------------
made by each of the Purchasers in Section 5 hereof shall be true and correct
when made and shall be true and correct on the Closing Date.
7.2 Legal Investment. At the time of the Closing, the purchase of the
----------------
Shares to be purchased by the Purchasers hereunder shall be legally permitted by
all laws and regulations to which the Purchasers and the Company are subject.
7.3 Certificates. The Purchasers shall have executed and delivered
------------
certificates, in form and substance satisfactory to the Company and its counsel,
attesting to the status of each Purchaser as an "Accredited Investor" as defined
in Regulation D promulgated under the Act.
SECTION 8
---------
Information Rights
------------------
8.1 Financial Information. The Company hereby covenants and agrees, so
---------------------
long as any Purchaser holds at least the number of shares of Series F Preferred
issued to it hereunder, the Company shall furnish the following reports to all
such Purchasers:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 120 days thereafter, a consolidated balance
sheet of the Company and its subsidiaries (if any) as at the end of such fiscal
year and a consolidated statement of income of the Company and its subsidiaries
(if any) for such year, all in reasonable detail and all prepared in accordance
with generally accepted accounting principles and practices and audited by
nationally recognized independent certified public accountants. If any such
audited financial statements are not prepared on a consistent basis, a note to
that effect will be included therein.
-19-
<PAGE>
(b) As soon as practicable after the end of each calendar quarter, and
in any event within 60 days thereafter (except the last quarter of the Company's
fiscal year), an unaudited consolidated balance sheet of the Company and its
subsidiaries (if any) as at the end of such quarter and an unaudited
consolidated statement of income of the Company and its subsidiaries (if any)
for such quarter, all prepared in accordance with generally accepted accounting
principles in all material respects (other than as to footnote presentation and
year-end adjustments) consistently applied, all in reasonable detail and
accompanied by a certificate signed by the chief financial officer of the
Company that such statements present fairly the financial condition of the
Company and its subsidiaries (if any) as of the end of such quarter and the
results of their operations for such quarter.
8.2 Additional Information. The Company hereby covenants and agrees as
----------------------
follows:
(a) The Company shall furnish to all Purchasers who hold at least
10,000 shares of Series F Preferred, as soon as available, but in any event not
later than 30 days prior to the commencement of each fiscal year after the date
hereof, a business report of the Company and projected budgets for such fiscal
year as approved by the Company's Board of Directors.
(b) The Company shall, upon prior written notice and subject to the
reasonable discretion of the Company and subject to appropriate measures
regarding confidentiality, permit any Purchaser who holds at least 10,000 shares
of Series F Preferred to visit and inspect the properties and assets of the
Company, including its books of account and records.
8.3 Confidentiality. Each Purchaser agrees to hold all information
---------------
received pursuant to this Section 8 in confidence, not to use such information
for any purpose other than monitoring and/or evaluating its investment in the
Company and not to disclose any of such information to any third party. The
foregoing obligation of confidentiality shall not apply to any information or
materials relating to the Company or its business or operations that has entered
the public domain through no fault of the Purchaser, that an authorized
executive officer of the Company has authorized for public dissemination, that
the Purchaser knew or possessed prior to its being disclosed or delivered by the
Company
-20-
<PAGE>
or that the Purchaser obtained from sources having no duty of confidentiality to
the Company.
8.4 Assignment of Information Rights. The rights granted pursuant to
--------------------------------
Sections 8.1 and 8.2 may be assigned by any Purchaser (or by any subsequent
transferee of such rights) in connection with any transfer or assignment of
Shares to a transferee that is a partner of any Purchaser that is a general or
limited partnership (or former partner, provided such partner was a partner of
the Purchaser as of, or after, the date of this Agreement) or that is a member
of any Purchaser that is a limited liability company (or former member, provided
such member was a member of the Purchaser as of, or after, the date of this
Agreement); provided, however, that (a) such transfer of Shares may otherwise be
-------- -------
effected in accordance with applicable securities laws, (b) such transferee
acquires at least 10,000 Shares and (c) each transferee agrees in writing to
take and hold such Shares and information subject to the provisions and upon the
conditions specified in this Section 8.
8.5 Termination. The provisions of Sections 8.1 and 8.2 shall terminate
-----------
upon the closing of an underwritten public offering by the Company under the Act
of any of its equity securities for its own account pursuant to an offering
resulting in aggregate gross proceeds to the Company of not less than $8,000,000
including underwriting discounts and commissions and in which the public
offering price (as adjusted for any stock splits, stock dividends,
distributions, recapitalizations and similar events) is not less than $5.00 per
share.
SECTION 9
---------
Registration Rights
-------------------
9.1 Requested Registration.
----------------------
(a) Request for Registration. If the Company shall receive from
------------------------
Holders (as defined below) of fifty percent (50%) of the issued or issuable
Registrable Securities (as defined below) (the "Initiating Holders"), a written
request that the Company effect a registration under the Act with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to
-21-
<PAGE>
exceed $3,000,000, the Company will promptly give written notice of the proposed
registration to all other Holders and as soon as practicable, use its best
efforts to effect such registration (including, without limitation, appropriate
qualification under blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after actual receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to take any
-------- -------
action to effect any such registration, qualification or compliance pursuant to
this Section 9.1:
(i) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act;
(ii) Prior to the earlier of (i) September 1, 1997, or (ii) six (6)
months after the effective date of the Company's first registered public
offering of its stock;
(iii) If the Company receives an opinion of counsel to the effect
that the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations or such similar exemption from registration requirements of the Act;
(iv) During the period starting with the date sixty (60) days prior
to the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective);
(v) After the Company has effected one such registration pursuant
to this Section 9.1(a), and such registration has been declared or ordered
effective; or
-22-
<PAGE>
(vi) If the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, in which case the Company's obligation to use its best efforts to
register, qualify or comply under this Section 9.1(a) shall be deferred for a
period not to exceed 120 days from the date of receipt of the written request
from the Initiating Holders.
Subject to the foregoing clauses (i) through (vi), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 9.1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 9.1(a). In such event, the right of any Holder to registration pursuant
to this Section 9.1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 9.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by the Company, but such selection
subject to the reasonable approval of a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 9.1, if the
managing underwriter(s) advise(s) the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders participating and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason
of the underwriters' marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may
-23-
<PAGE>
round the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder disapproves of the terms of the under writing, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
9.2 Registration on Form S-3.
------------------------
(a) If any Holder or Holders holding in the aggregate not less than
twenty-five percent (25%) of the issued or issuable Registrable Securities
request that the Company file a registration statement on Form S-3 (or any
successor form to Form S-3) for a public offering of the Registrable Securities
the reasonable anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $500,000, and the Company
is then entitled to use Form S-3 under applicable Commission rules to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request; provided,
--------
however, that the Company shall not be required to effect more than one
- -------
registration pursuant to this Section 9.2 in any six month period. The
substantive provisions of Section 9.5 shall be applicable to each registration
initiated under this Section 9.2.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 9.2 (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act; (ii) if the Company, within ten (10) days of the receipt of the request
of the Initiating Holders, gives notice of its bona fide intention to effect the
filing of a registration statement with the Commission within ninety (90) days
of receipt of such request (other than with respect to a registration statement
relating to Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of
-24-
<PAGE>
Registrable Securities); (iii) during the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following, the effective date of any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective; or (iv) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in the near future,
then the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed 120 days from the receipt
of the request to file such registration by such Holder.
9.3 Optional Registrations. If at any time or times after the date first
----------------------
written above, the Company shall determine to register any of its securities
(for itself or for any other securities holder of the Company) under the Act or
any successor legislation (other than a registration relating to stock option
plans, employee benefit plans or a Rule 145 transaction), and in connection
therewith the Company may lawfully register its Common Stock, the Company will
promptly give written notice thereof to the then Holders of all issued or
issuable Registrable Securities and will use its best efforts to include in such
registration and to effect the registration under the Act of all Registrable
Securities which such Holders may request in writing delivered to the Company
within fifteen (15) days after receipt by such Holders of the notice given by
the Company; provided, however, if the managing underwriter for the Company
-------- -------
advises the Company in writing that including all or part of the Registrable
Shares in such offering will adversely affect the marketing of the proposed
offering, then, in connection with any such underwritten offering by the Company
of any of its securities, such registration of Registrable Securities shall be
limited to not less than five percent (5%) of the total number of shares to be
sold in the case of an initial public offering of the Company's securities, and
ten percent (10%) of the total number of shares to be sold in the case of a
subsequent offering; further provided, however, that such limited number of
------- -------- -------
shares of Common Stock in such offering shall be taken from those owned (or
obtainable upon the exercise of rights with respect to other securities) by a
group of holders requesting registration
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<PAGE>
consisting of the Holders and other holders having similar registration rights
to those of the Holders, and such limitation shall be imposed upon the Holders
and such other holders pro rata on the basis of the total number of (i) shares
of Registrable Securities owned by the requesting Holders and (ii) shares of
Common Stock owned, or obtainable by them upon the exercise of rights with
respect to other securities, by such other requesting holders. In the event of
such a limitation, shares of persons not having similar registration rights will
not be included in such registration. Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 9.3 in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act. The Company shall have the right to select the managing
underwriter or underwriters for any underwritten public offering made pursuant
to a registration under this Section 9.3. Subject to the foregoing, if such
proposed registration is in connection with an underwritten offering of Common
Stock, upon request of any Holder, the Company shall use its reasonable efforts
to cause the managing underwriter therefor to include in such underwritten
offering the Registrable Securities as to which the Holder requests such
inclusion, on terms and conditions comparable to those of the securities offered
on behalf of the Company.
9.4 Definitions. For the purposes of Section 9:
-----------
(a) The term "Registrable Securities" shall mean (i) the Common Stock
issued or issuable upon conversion of all outstanding shares of the Company's
Preferred Stock that are so convertible, including without limitation the Series
F Preferred; and (ii) any Common Stock or other securities of the Company issued
or issuable with respect to the Common Stock described in clause (i) by way of a
stock dividend or stock split, or other distribution, with respect to or in
exchange for or replacement of such Common Stock or other securities.
(b) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement.
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<PAGE>
(c) The term "Holder" means any person owning or having immediately
exercisable right to acquire Registrable Securities, including any of the
Purchasers, so long as such Purchaser holds any Registrable Securities.
9.5 Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in
connection with (i) one registration pursuant to Section 9.1, (ii) any
registration under Section 9.2, subject to (b) below and (iii) three
registrations pursuant to Section 9.3, shall be borne by the Company, except
that the Holders shall bear underwriting commissions and discounts attributable
to their Registrable Securities being registered and the fees and expenses of
separate counsel, if any, for such Holders. All other selling expenses relating
to securities registered on behalf of the Holders and all other registration
expenses shall be borne by the Holders of such securities pro rata. If the
Company includes in any registration any securities to be offered by it, all
expenses thereof shall be borne solely by the Company.
(b) A proportionate share of the expenses of the registration and
offering incurred in connection with (i) any registration pursuant to Section
9.2 after the second registration thereunder and (ii) any registration pursuant
to Section 9.3 after the third registration thereunder, shall be borne pro rata
by the Holder or Holders requesting the registration on the basis of the ratio
of the number of their shares so registered to the total number of shares
included in such registration.
9.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted the Purchaser under sections 9.1, 9.2 and 9.3 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by the
Purchaser; provided that if such transfer or assignment is to a partner of any
--------
Purchaser that is a general or limited partnership (or former partner, provided
such partner was a partner of the Purchaser as of, or after, the date of this
Agreement) or is to a member of any Purchaser that is a limited liability
company (or former member, provided such member was a member of the Purchaser as
of, or after, the date of this Agreement) such transferee or assignee need not
be acceptable to the Company; and provided, further, that (a) such transfer may
-------- -------
otherwise be effected in accordance with applicable securities laws, (b) such
assignee or transferee acquires at least
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<PAGE>
5,000 shares of the Registrable Securities (appropriately adjusted for
recapitalizations or stock splits) and (c) each assignee or transferee agrees in
writing to take and hold such securities subject to the provisions and upon the
conditions specified in this Section 9.
9.7 Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriter or underwriters of any proposed firm underwritten public offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten public offering for a period of up to
180 days beginning on the effective date of the applicable registration
statement, provided that the Company's officers and directors and each holder of
10% or more of the Company's issued and outstanding Common Stock also agree to
such limitations. The Holders shall upon request execute a separate written
agreement confirming and agreeing as to the foregoing.
9.8 Registration Indemnification. In the event of any registration under
----------------------------
the Act pursuant to Section 9 of Registrable Securities of any Holder, the
Company will hold harmless such Holder and each underwriter of such securities
and each other person, if any, who controls such Holder or such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Holder or such underwriter or controlling person may
become subject under the 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 registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; 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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and
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<PAGE>
in conformity with written information furnished to the Company through an
instrument duly executed by such Holder or such underwriter specifically for use
in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking reasonably
satisfactory to it and its counsel from each Holder, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Act, with respect to any
statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company through an instrument duly
executed by the Holder specifically for use in the preparation of such
registration statement, preliminary prospectus or final prospectus or such
amendment or supplement thereto.
Promptly after receipt by an indemnified party under this Section 9.8
of notice of the commencement of any action involving a claim referred to in the
preceding provisions of Section 9.8, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and or assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
9.9 Registration Procedures. Whenever the Company is required by this
-----------------------
Agreement to use its best efforts to effect the registration of any securities,
the Company shall:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective as provided herein;
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<PAGE>
(b) prepare and file with the Commission all amendments and
supplements to such registration statement and any prospectus used therewith as
may be necessary to keep such registration statement effective and current and
to comply with the provisions of the Act with respect to the sale or other
disposition of such securities;
(c) furnish to each Holder of such securities such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents, as such Holder may reasonably
request in order to facilitate the disposition of its securities; and
(d) use its best efforts to register or qualify the securities under
such other securities or "blue sky" or other applicable laws of such
jurisdictions within the United States as the Holder shall reasonably request,
to enable the Holder to consummate the public sale or other disposition in such
juris dictions of such securities.
9.10 Rule 144 Undertakings. At any time and from time to time after the
---------------------
expiration of ninety (90) days following the earlier of the close of business on
such date as (i) a registration statement filed by the Company under the Act
becomes effective or (ii) the Company registers a class of securities under
section 12 of the Securities Exchange Act of 1934, as amended, the Company shall
use its best efforts to make publicly available and available to the Holders,
pursuant to Rule 144 of the Commission under the Act, such information as is
necessary to enable the Holders to make sales of Registrable Securities pursuant
to that Rule and the Company shall use its best efforts to timely file with the
Commission all documents and reports required of the Company under the
Securities Exchange Act of 1934. The Company shall furnish to any Holder upon
request (after the preceding sentence shall have become applicable), a written
statement executed by the Company as to compliance with the current public
information requirements of Rule 144.
9.11 Cooperation. In connection with any registration of Registrable
-----------
Securities pursuant to this Section 9, the Company agrees to:
(a) enter into such customary agreements (including, in the event of
any underwritten public offering, an underwriting agreement containing such
terms and provisions, as are customarily
-30-
<PAGE>
contained in underwriting agreements for comparable offerings and, if no
underwriting agreement is entered into, an indemnification agreement on such
terms as is customary in transactions of such nature) and take all such other
actions as the Holders or the underwriters, if any, participating in such
offering and sale may reasonably request in order to expedite or facilitate such
offering and sale;
(b) furnish, at the request of the Holders or any underwriters
participating in such offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with respect to the Common Stock registered
and/or the date of the closing for the sale of the Common Stock from the
independent certified public accountants of the Company and addressed to the
Holders and any underwriters participating in such offering and sale, which
letter or letters shall be in form and substance as is customarily given by
independent certified public accountants, and (ii) an opinion, dated the date of
the closing for the sale of the Common Stock, of the counsel representing the
Company with respect to such offering and sale addressed to the Holders and any
such underwriters, which opinion shall be in form and substance as is customary
in transactions of a similar nature for similar entities;
(c) make available for inspection by the Holders and the underwriters,
if any, participating in such offering and sale (which inspecting underwriters
shall, if reasonably possible, be limited to any manager or managers for such
participating underwriters), one counsel for the Holders and any such
underwriters, taken together, and one accountant or accounting firm retained by
the Holders and any such underwriters, taken together, all financial and other
records, corporate documents and properties of the Company, and supply such
additional information, as they shall reasonably request; provided that any such
party shall keep the contents thereof confidential in the manner prescribed by a
confidentiality agreement containing customary terms to be executed by the
persons who are provided such access.
9.12 Action to Suspend Effectiveness; Supplement to Registration
-----------------------------------------------------------
Statement. In connection with any registration of Registrable Securities
- ----------
pursuant to this Section 9:
(a) The Company will notify the Holders and their counsel promptly of
(i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Common Stock requested to be registered or
the institution or threatening
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<PAGE>
of any proceeding for such purpose (a "STOP ORDER") or (ii) the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Common Stock requested to be registered for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose. Immediately
upon receipt of any such notice, the Holders shall cease to offer or sell any
Common Stock pursuant to the registration statement in the jurisdiction to which
such Stop Order or suspension relates. The Company will use all reasonable
efforts to prevent the issuance of any such Stop Order or the suspension of any
such qualification and, if any such Stop Order is issued or any such
qualification is suspended, to obtain as soon as possible the withdrawal or
revocation thereof, and will notify the Holders and their counsel at the
earliest practicable date of the date on which the Holders may offer and sell
Common Stock pursuant to the registration statement.
(b) For as long as sales of Registrable Securities are permitted
pursuant to a registration statement filed pursuant to this Section 9, the
Company will notify the Holders and their counsel promptly of the occurrence of
any event or the existence of any state of facts that, in the judgment of the
Company, should be set forth in such registration statement. Immediately upon
receipt of such notice, the Holders shall cease to offer or sell any Common
Stock pursuant to such registration statement, cease to deliver or use such
registration statement and, if so requested by the Company, return to the
Company, at its expense, all copies (other than permanent file copies) of such
registration statement. The Company will, as promptly as practicable, take such
action as may be necessary to amend or supplement such registration statement in
order to set forth or reflect such event or state of facts. The Company will
furnish copies of such proposed amendment or supplement to the Holders and their
counsel.
SECTION 10
----------
First Purchase Rights
---------------------
10.1 Right of First Purchase. The Company hereby grants to the Purchasers
-----------------------
the right of first purchase for a number of shares of the same class of New
Securities (as defined below) which the Company may, from time to time, propose
to sell and issue. Each Purchaser shall be entitled to purchase a number of
shares of the class of New Securities sufficient to maintain its Pro Rata
Ownership in the Company after taking into account the proposed
-32-
<PAGE>
issuance by the Company. "Pro Rata Ownership" at any given time means the
following ratio:
(a) the sum of (i) the total number of shares of Common Stock then
held by the Purchaser, plus (ii) the total number of shares of Conversion Stock
(as defined below) then held by the Purchaser;
divided by
- ----------
(b) the sum of (i) the total number of shares of Common Stock then
outstanding, plus (ii) the total number of shares of Conversion Stock at that
time.
"Conversion Stock" shall mean all then outstanding shares of convertible
preferred stock of the Company, other securities of the Company that are
convertible into Common Stock, and options, warrants and other instruments or
rights that are exercisable for or convertible into Common Stock. As used in
this Section 10, the number of shares of Conversion Stock at any given time
shall be calculated as the number of shares of Common Stock into which it is
then convertible, assuming conversion of all such securities and exercise of all
such options, warrants and rights.
(c) Except as set forth below, "New Securities" shall mean any shares
of capital stock of the Company including common stock and preferred stock,
whether now authorized or not, and rights, options or warrants to purchase said
shares of common stock or preferred stock, and securities of any type whatsoever
that are, or may become, convertible into said shares of common stock or
preferred stock. Notwithstanding the foregoing, "New Securities" shall not
include (i) the shares of Series F Preferred to be issued pursuant to this
Agreement, (ii) securities offered to the public generally pursuant to a
registration statement or pursuant to Regulation A under the Act, (iii) shares
issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization
whereby the Company or its shareholders own not less than a majority of the
voting power of the surviving or successor corporation, (iv) shares of Common
Stock or options, warrants or rights issued to employees, officers or directors
of, or consultants, customers or vendors to, the Company, pursuant to any stock
option or similar plan approved by the Board of Directors of the Company and
securities issued upon the exercise of any such options, warrants or rights, (v)
stock issued in connection with
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<PAGE>
any stock split, stock dividend or recapitalization by the Company, (vi) any
securities issued upon conversion of any preferred stock of the Company, (vii)
previously issued options, warrants or rights to purchase the Company's capital
stock and securities issued upon the exercise of any such options, warrants or
rights or (viii) any borrowings, direct or indirect, from financial institutions
or other persons by the Company, whether or not presently authorized, including
any type of loan or payment evidenced by any type of debt instrument, provided
such borrowings do not have any equity features, including warrants, options or
other rights to purchase capital stock, and are not convertible into capital
stock of the Company.
10.2 Mechanics.
---------
(a) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Purchasers written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. Each Purchaser shall have thirty (30) days
from the date of receipt of any such notice to agree to purchase up to such
Purchaser's share (calculated in accordance with Section 10.1) of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. Each Purchaser shall have a right of overallotment such that
if any Purchaser fails to exercise its right hereunder to purchase its pro rata
portion of New Securities, the Company shall so notify the other Purchasers, and
the other Purchasers may purchase the nonpurchasing Purchaser's portion on a pro
rata basis, within seven (7) days from the date of receipt of such notice. The
Company shall notify the Purchaser of any material revision to the price and
terms of the issuance of New Securities and the Purchaser shall be entitled to
fifteen (15) additional days in order to respond to the Company.
(b) In the event any Purchaser fails to exercise such right of first
purchase within said 30 day period (as extended, if applicable), the Company
shall have 120 days thereafter to sell or enter into an agreement (pursuant to
which the sale of the New Securities covered thereby shall be closed, if at all,
within 60 days from the date of said agreement) to sell the New Securities not
elected to be purchased by the Purchaser at a price and upon terms no more
favorable to the purchasers of such securities than specified in the Company's
notice to the Purchaser. In the event
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<PAGE>
the Company has not sold the New Securities or entered into an agreement to sell
the New Securities within said 120 day period (or sold and issued New Securities
in accordance with the foregoing within 60 days from the date of said
agreement), the Company shall not thereafter issue or sell any of such New
Securities, without again offering the securities to the Purchasers in the
manner provided above.
(c) The right of first purchase granted under this Agreement shall
terminate upon the closing of the first public offering of the Common Stock of
the Company to the general public which is effected pursuant to a registration
statement filed with, and declared effective by, the Commission under the Act,
resulting in proceeds to the Company of at least $8,000,000, including
underwriting discounts and commissions and in which the public offering price
(as adjusted for any stock splits, stock dividends, distributions,
recapitalizations and similar events) is not less that $5.00 per share.
(d) The right of first purchase granted hereunder is not assignable
except in connection with a transfer of Shares to a transferee that is a partner
of any Purchaser that is a general or limited partnership (or former partner,
provided such partner was a partner of the Purchaser as of, or after, the date
of this Agreement) or that is a member of any Purchaser that is a limited
liability company (or former member, provided such member was a member of the
Purchaser as of, or after, the date of this Agreement); provided, however, that
-------- -------
(a) such transfer of Shares may otherwise be effected in accordance with
applicable securities laws, (b) such transferee acquires at least 10,000 Shares
and (c) each transferee agrees in writing to take and hold such Shares subject
to the provisions and upon the conditions specified in this Section 10.
SECTION 11
----------
Restrictions on Transferability; Compliance with Act
----------------------------------------------------
11.1 Restrictions on Transferability. The Shares, and the shares of Common
-------------------------------
Stock issued on conversion thereof (the "Conversion Shares"), shall not be
transferable except upon the conditions specified in this Section 11, which
conditions are intended to insure compliance with the provisions of the Act.
Each Purchaser will cause any proposed transferee of the Shares and the
Conversion Shares held by such Purchaser to agree to take and hold
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<PAGE>
such securities subject to the provisions and upon the conditions specified in
this Section 11.
11.2 Restrictive Legend. Each certificate representing (i) the Share, (ii)
------------------
the Conversion Shares and (iii) any other securities issued in respect of the
Shares or Conversion Shares upon any stock split, stock combination, stock
dividend, recapitalization, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 11.3 below) be stamped or
otherwise imprinted with a legend in substantially the form set forth in Section
5.3 (in addition to any legend required under applicable state securities laws).
11.3 Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing securities of the Company required to bear the legend set forth in
Section 5.3 (or any similar legend) agrees to comply in all respects with the
provisions of this Section 11.3. Prior to any proposed transfer of any such
securities (unless there is in effect a registration statement under the Act
covering the proposed transfer), the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and (except in transactions in compliance with Rule 144)
shall be accompanied by either (i) a written opinion of legal counsel who shall
be reasonably satisfactory to the Company addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the securities may be effected without
registration under the Act, or (ii) a "no action" letter from the Commission to
the effect that the transfer of such securities without registration will not
result in a recommendation by the staff of the Commission that action be taken
with respect thereto, whereupon the holder of such securities shall be entitled
to transfer such securities in accordance with the terms of the notice delivered
by the holder to the Company, provided, however, that no opinion of counsel or
-------- -------
"no action" letter shall be required for any transfer resulting solely from a
distribution of securities from a partnership to its partners or from a limited
liability company to its members. Each certificate evidencing the securities
transferred pursuant to the above shall bear the legend set forth in Section
5.3, except that such certificate shall not bear such restrictive legend if, in
the opinion of counsel for the Company, such legend is not required in order to
establish compliance with any provision of the Act.
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<PAGE>
SECTION 12
----------
Miscellaneous
-------------
12.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California without giving effect to principles of
conflicts of law thereunder.
12.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
12.3 Entire Agreement; Amendment; Waiver.
-----------------------------------
(a) This Agreement (including the Schedules and Exhibits hereto) and
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
(b) This Agreement may be amended or modified upon the written
consent of the Company and holders in interest of not less than a majority of
the aggregate of the Series F Preferred then outstanding.
(c) Any provision of this Agreement may be waived with respect to
rights of any Purchaser by a written instrument executed by holders in interest
of not less than a majority of the aggregate of the Series F Preferred then
outstanding.
(d) Any amendment or waiver made in accordance with this Section 12.3
shall be binding upon each holder of any Shares then outstanding, each future
holder of such Shares and the Company.
12.4 Notices. All notices and other communications required or permitted
-------
under this Agreement shall be in writing and shall be deemed effectively given
upon personal delivery, upon delivery by a nationally recognized overnight
courier service or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the Company at its
address set forth on the signature page of this Agreement and to a Purchaser at
its address on Schedule I or the signature pages of this Agreement, or at such
----------
other address as any party may designate by ten days prior written notice given
pursuant to the terms of this section.
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<PAGE>
12.5 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any Shares upon any breach or default
of the Company under this Agreement shall impair any such right, power or remedy
of such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or in any similar breach or default
occurring thereafter; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
12.6 Separability. In the event any provision of this Agreement shall be
------------
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
12.7 Agent's Fees.
------------
(a) The Company (i) represents and warrants that, other than as set
forth on Schedule 12.7, it has retained no finder or broker in connection with
-------------
the transactions contemplated by this Agreement and (ii) hereby agrees to
indemnify and to hold each Purchaser harmless from any liability for commissions
or compensation in the nature of an agent's fee to any broker or other person or
firm (and the reasonable costs and expenses of defending against such liability
or asserted liability) arising from any act by the Company or any of its
employees or representatives, including any claim by any alleged agent, broker
or finder set forth on Schedule 12.7.
-------------
(b) Each Purchaser (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company and the
other Purchasers harmless from any liability for any commissions or compensation
in the nature of an agent's fee to any broker or other person or firm
-38-
<PAGE>
(and the reasonable costs and expenses of defending against such liability or
asserted liability) for which each Purchaser, or any of its employees or
representatives, are responsible.
12.8 Availability of Common Stock for Conversion. The Company shall, from
-------------------------------------------
time to time, in accordance with the laws of the State of Delaware take such
actions as are within its control as are necessary to increase the authorized
amount of Common Stock if at any time the number of shares of Common Stock
remaining unissued and available for issuance shall be insufficient to permit
conversion of all the then outstanding convertible preferred stock of the
Company.
12.9 Mergers, etc.; Redemptions of Stock.
-----------------------------------
(a) Without the consent of the holders of at least a majority of the
shares of Series F Preferred then outstanding, the Company will not effect a
merger or consolidation (other than whereby the Company or its shareholders own
not less than a majority of the voting power of the surviving or successor
corporation) or sell or otherwise transfer all or substantially all of the
Company's assets (other than pursuant to a pledge of assets by the Company as
collateral pursuant to any agreement with any bank, lender or group of lenders,
equipment lessor or similar lending institution or individuals in connection
with such entities or individuals providing credit facilities or equipment
financings to the Company pursuant to any approval of the Board of Directors of
the Company); provided, however, that notwithstanding the foregoing, no consent
of the holders of shares of Series F Preferred shall be required under this
Section 12.9(a) for any of the foregoing actions if as a result of such action
each of the holders of the Series F Preferred receives proceeds (consisting of
cash and/or property; for purposes of this Section 12.9(a) the value of any
property shall be as determined in good faith by the Board of Directors of the
Company) per share equal to at least $5.00 (as equitably adjusted to reflect any
stock splits, combinations, stock dividends, reclassifications and similar
events).
(b) Without the consent of the holders of at least a majority of the
shares of Series F Preferred then outstanding, the Company shall not purchase,
redeem or otherwise acquire any share of its Common Stock or any class of
Preferred Stock whose preference or priority as to dividends or assets is
inferior to the Series F Preferred; provided, however, that notwithstanding the
-39-
<PAGE>
foregoing, (i) the Company, pursuant to any repurchase rights or any rights of
first refusal, may (without the consent called for in this Section 12.9(b))
purchase shares of capital stock of the Company from consultants, employees or
directors upon termination of their employment or engagement, as the case may
be, or upon any proposed sale or other transfer by any such consultant, employee
or director of any shares of the Company's capital stock) and (ii) the Company
may (without the consent called for in this Section 12.9(b)) purchase shares of
capital stock of the Company and options therefor in connection with the
recision and repurchase offer referred to on Schedule 4.8.
------------
(c) The provisions of this Section 12.9 shall terminate upon the
closing of an underwritten public offering by the Company under the Act of any
of its equity securities for its own account pursuant to an offering resulting
in aggregate gross proceeds to the Company of not less than $8,000,000 including
underwriting discounts and commissions and in which the public offering price
(as adjusted for any stock splits, stock dividends, distributions,
recapitalizations and similar events) is not less than $5.00 per share.
12.10 California Commissioner of Corporations. THE SALE OF THE
---------------------------------------
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR
SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
12.11 Expenses. The Company shall bear its own expenses and legal fees
--------
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby. The Company shall pay the reasonable legal fees and
disbursements of Shartsis, Friese & Ginsburg, counsel to the Purchasers, with
respect to this Agreement and the transactions contemplated hereby.
12.12 Waiver. Pursuant to Section 12.5 of the Note Purchase Agreement, the
------
Purchasers, constituting a Majority of the Investors (as defined in the Note
Purchase Agreement) hereby waive, with respect to the rights of all Investors
(as defined in the Note Purchase Agreement), any rights to notice set forth in
Section 9.2
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<PAGE>
of the Note Purchase Agreement, to the extent such rights relate to the issuance
and sale of the Shares and the Common Stock issuable upon conversion thereof as
contemplated by this Agreement.
12.13 Limit on Sale of Shares. The Company agrees that, in the event that
-----------------------
as of the date that is sixty-one (61) days from the date of this Agreement the
Company has sold fewer than a total of 3,500,000 shares of Series F Preferred,
the Company will not thereafter sell more shares of Series F Preferred without
the consent of the holders of at least a majority of the shares of Series F
Preferred then outstanding; provided, however, that notwithstanding the
foregoing the Company may at any time sell up to a total of 3,000,000 shares of
Series F Preferred without the consent otherwise required by this Section 12.13.
12.14 Board of Directors. The Company and the Purchasers acknowledge and
------------------
agree that so long as PolyVentures II Limited Partnership, or affiliates thereof
("PolyVentures"), hold 363,636 or more shares of the issued and outstanding
Series F Preferred, PolyVentures shall have, in accordance with the laws of the
State of Delaware, the right to elect as a member of the Board of Directors of
the Company one (1) individual designated by PolyVentures. The right set forth
in this Section 12.14 is in addition to, and not in lieu of, any right of the
holders of Series F Preferred generally to elect a member or members of the
Board of Directors of the Company as set forth in the Certificate of
Designation. The provisions of this Section 12.14 shall terminate upon the
closing of an underwritten public offering by the Company under the Act of any
of its equity securities for its own account pursuant to an offering resulting
in aggregate gross proceeds to the Company of not less than $8,000,000 including
underwriting discounts and commissions and in which the public offering price
(as adjusted for any stock splits, stock dividends, distributions,
recapitalizations and similar events) is not less than $5.00 per share.
12.15 Interpretation. All parties have been assisted by counsel in the
--------------
preparation and negotiation of this Agreement and the transactions contemplated
hereby, and this Agreement shall be construed according to its fair language.
The rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
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<PAGE>
12.16 Titles. The titles of the sections of this Agreement are for
------
convenience of reference only and are not to be considered in construing this
Agreement.
12.17 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one Agreement.
[balance of this page intentionally left blank]
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<PAGE>
[Series F Preferred Stock Purchase Agreement]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
JETFAX, INC.
By: /s/ Rudy Prince
------------------------
Rudy Prince
President
Address:
1376 Willow Road
Menlo Park, CA 94025
[PURCHASER]
[Note: a separate signature page for
each Purchaser]
By: _______________________
Name:
Title:
Address:
[____________________________]
[____________________________]
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<PAGE>
The Series F Preferred Stock Purchase Agreement was signed by the following
individuals/entities:
Abdulwahab Al-Qatami
Kenneth Alpart
Antaeus Enterprises, Inc.
Douglas Y. Bech
Beinecke Trust
Craig Bere
Cook Investors Ltd Partnership
John & Patricia Cook
Draper Associates
Polly C. Draper
David A. Evans
Kevin Flaherty
Jeffrey S. Gilmore
Gorman, Dorothy
Granite Capital LP
Guex-Crosier, Jean
Haar, Lawrence
Helzel, Lawrence B. & Rebekah Living Trust
Herrell, James
Janet Orttung-Morrow Family Trust
Kirshman, David
Lambert Family Trust
Lego, Paul G.
Martin, Dalton W. & Virginia G. Martin Living Trust
Marwit Capital
Newman Family Trust
Pennell, Katherine
Poly Ventures, L.P.
Printz-Kopelson, Mindy
Prism Partners I
Rebecca S. Draper Living Trust
Rose, Lawrence
Rosenthal, John P.
Rosman, Martin
Saratoga Springs Co. Ltd.
Silverberg, Irwin W.
Strome Family Trust
Susskind, Jeffrey & Janice Trustees
Szanto, Victor
Talkot Partners
Timothy Draper Living Trust
Traslader SA
Waresh, Michael
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<PAGE>
EXHIBIT 10.21
PURCHASE AND DEBT RESTRUCTURING AGREEMENT
-----------------------------------------
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
----------------------------
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
<PAGE>
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
--------
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
--------
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
--------------
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
------------------------
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
2
<PAGE>
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)).
3
<PAGE>
5. Conditions of Ailicec. The obligations of Ailicec in this
---------------------
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
-----------------------
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
-----------------------------------
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
--------------------------------
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
------------------------------
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"
4
<PAGE>
(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
5
<PAGE>
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
6
<PAGE>
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.
7
<PAGE>
(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
-------------
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
-------
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
Unit B2-C2, 1/F
Kaiser Estate, Phase I
41 Man Yue Street
Hung Hom
Kowloon, Hong Kong
Telephone: 011-852-774-8888
Facsimile: 011-852-764-3773
Attention: Chung Chiu
with copies to:
Fenwick & West
Two Palo Alto Square
Palo Alto, CA 94306
Telephone: (415) 494-0600
Facsimile: (415) 494-1417
Attention: Robert B. Dellenbach, Esq.
8
<PAGE>
(b) if to JetFax, to
JetFax, Inc.
1376 Willow Road
Menlo Park, CA 94025-1430
Telephone: (415) 324-0600
Facsimile: (415) 326-1975
Attention: Rudy Prince
with copies to:
General Counsel Associates
1891 Landings Drive
Mountain View, CA 94043
Telephone: (415) 428-3900
Facsimile: (415) 428-3901
Attention: Clifford S. Robbins, Esq.
Endeavor Capital Management
Two Tudor City Place
Suite 2GN
New York, NY 10017
Attention: Anthony F. Buffa
Telephone: (212) 490-6975
Facsimile: (212) 490-8549
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: Eric M. Sippel, Esq.
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
12. Amendments. The terms of this Agreement may not be amended or
----------
modified except by a writing signed by JetFax and Ailicec.
13. Counterparts. This Agreement may be executed in any number of
------------
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
----------------
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
9
<PAGE>
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
---------------
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/Rudy Prince
----------------------
Rudy Prince, President
AILICEC INTERNATIONAL
ENTERPRISES LIMITED
By
----------------------
Name:
-----------------
Title:
----------------
10
<PAGE>
EXHIBIT A
PROMISSORY NOTE
---------------
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
-------
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
----------
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.
<PAGE>
3. Incorporation of Security Agreement and Intercreditor Agreement.
---------------------------------------------------------------
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
-------
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.
<PAGE>
5. Governing Law. This Note shall be governed by, construed and
-------------
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/Edward R. Prince III
-----------------------
Name: Edward R. Prince, III
Title: President
<PAGE>
EXHIBIT 10.22
NOTE PURCHASE AGREEMENT
Dated as of August 3, 1994
among
Jetfax, Inc.
and
the Investors Listed
on Schedule A
<PAGE>
JETFAX, INC.
1376 WILLOW ROAD
MENLO PARK, CALIFORNIA 94025-1430
10% Senior Secured Convertible Notes due July 31, 1995
August 3, 1994
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A,
AS AMENDED PURSUANT TO SECTION 2
Ladies and Gentlemen:
Jetfax, Inc., a Delaware corporation (the "COMPANY"), agrees with you as
follows:
1. AUTHORIZATION OF NOTES. The Company will authorize the issuance and
sale of up to $1,500,000 aggregate principal amount of its 10% Senior Secured
Convertible Notes due July 31, 1995 (the "NOTES", such term to include any such
notes issued in substitution therefor pursuant to section 12) to be
substantially in the form of the Notes set out in Exhibit A, with such changes
---------
therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in section 13; references
to a "Schedule" or an "Exhibit" are unless otherwise specified, to a Schedule or
an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES. The Company will issue and sell to you
and, subject to the terms and conditions of this Agreement, you will purchase
from the Company, at one or more of the Closings provided for in section 3 as
specified in Schedule A, Notes in the principal amount specified opposite your
name in Schedule A for purchase by you at such Closing or Closings at the
----------
purchase price of 100% of the principal amount thereof. The Company may sell
Notes to other purchasers which are from time to time added to Schedule A at one
----------
or more Closings. All such sales shall be subject to the prior approval of the
Company, shall be made pursuant to the terms of this Agreement and shall occur
at the respective Closing or Closings specified on Schedule A. As a condition
----------
to such purchase all such other purchasers shall execute this Agreement and
shall for all purposes be deemed to be a party hereto.
3. CLOSINGS. The sales of the Notes to be purchased by you shall take
place at the offices of Shartsis, Friese & Ginsburg, One Maritime Plaza, 18th
Floor, San Francisco, California 94111, at 10:00 a.m., San Francisco time, or
at such other time and place as you and the Company shall agree, (a) at a
closing on August 3, 1994, or on such other business day thereafter as may be
agreed upon by the Company and such of you as are to purchase Notes at such
closing (the "FIRST CLOSING") and (b) at closings that may take place on such
other business days thereafter as may be agreed upon by the Company and such of
you as are to purchase Notes at each such
<PAGE>
closing (a "SUBSEQUENT CLOSING"; the First Closing and the Subsequent Closings
are called individually a "CLOSING" and collectively the "CLOSINGS"). At each
Closing at which you are to purchase Notes, the Company will deliver to you such
Notes in the form of a single Note (or such greater number of Notes in
denominations of at least $50,000 as you may request) dated the date of such
Closing and registered in your name (or in the name of your nominee acting on
your behalf), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor. If at any Closing
at which you are to purchase Notes the Company shall fail to tender such Notes
to you as provided above in this section 3, or any of the conditions specified
in section 4 shall not have been fulfilled to your satisfaction, you shall, at
your election, be relieved of all further obligations under this Agreement,
without thereby waiving any other rights you may have by reason of such failure
or such nonfulfillment.
4. YOUR CONDITIONS TO CLOSINGS. Your obligation to purchase and pay for
the Notes to be sold to you at any Closing is subject to the fulfillment to your
satisfaction, prior to or at such Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be correct when made
and at the time of such Closing, except as affected by the consummation of such
transactions.
4.2 PERFORMANCE; NO DEFAULT. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it prior to or at such Closing and at the
time of such Closing no Event of Default shall have occurred and be continuing.
4.3 OPINIONS OF COUNSEL. You shall have received from General
Counsel Associates, counsel for the Company, a favorable opinion substantially
in the form set forth in Exhibit B, addressed to you and dated the date of the
---------
First Closing.
4.4. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
you and your special counsel, and you and your special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as you or they may reasonably request.
4.5 SALE OF OTHER NOTES. Contemporaneously with such Closing the
Company shall sell to each of you all of the Notes to be purchased at such
Closing as specified in Schedule A, and, in the case of the Subsequent Closings,
----------
the Company shall also have sold to you the Notes, if any, to have been
purchased by each of you at each prior Closing as specified in Schedule A.
----------
4.6 AILICEC. The Company and Ailicec International Enterprises
Limited, a Hong Kong corporation ("AILICEC"), shall have entered into the
Purchase and Debt Restructuring
2
<PAGE>
Agreement, dated as of August 3, 1994, relating to the shipment of units of the
8000-D model of plain paper facsimile machine, the repayment of $667,700 to
Ailicec and the restructuring of all other amounts owed by the Company to
Ailicec (the "Ailicec Agreement").
4.7 INTERCREDITOR AGREEMENT. The Company, Ailicec and each of you
shall have entered into an Intercreditor Agreement in the form set forth in
Exhibit C (the "INTERCREDITOR AGREEMENT").
- ---------
4.8 SECURITY AGREEMENT. The Company, Endeavor and each of you shall
have entered into a Security Agreement in the form set forth in Exhibit D (the
---------
"SECURITY AGREEMENT"). In connection therewith, the Company shall have delivered
to you such financing statements as are necessary for you to perfect your
security interest as set forth in the Security Agreement.
4.9 WARRANTS. The Company shall have issued and delivered to you a
Warrant in the form set forth in Exhibit E (collectively, the "WARRANTS") for
---------
an amount of shares of Common Stock of the Company equal to (a) if such Closing
occurs on or before November 18, 1994, 40% of the principal amount of Notes
purchased by you divided by $2.15, or (b) if such Closing occurs after November
18, 1994, 20% of the principal amount of Notes purchased by you divided by
$2.15.
5. THE COMPANY'S CONDITIONS TO CLOSINGS. The Company's obligation to
deliver the Notes and the Warrants at each Closing is subject to the fulfillment
to its satisfaction, prior to or at such Closing, of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. Your representations and
warranties contained in this Agreement shall be correct when made and at the
time of such Closing.
5.2 SECURITY AND INTERCREDITOR AGREEMENTS. You shall have entered
into the Security Agreement and Intercreditor Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants as of the date hereof and as of the date of each Closing
that:
6.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own and
operate its properties and assets, to carry on its business as now and
heretofore conducted, to issue and sell the Notes and to execute, deliver and
carry out the terms of the Related Documents. The Company is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the ownership of its properties or the nature of its
business make such qualification necessary and where a failure to be so
qualified would have a material adverse effect on the business, operations,
prospects or condition, financial or otherwise, of the Company (the
"CONDITION").
3
<PAGE>
6.2 CAPITALIZATION.
(a) Schedule 6.2 lists each class of capital stock of the Company
------------
and the number of shares outstanding and authorized for each class as of the
date of this Agreement. All such shares were validly issued, are fully paid and
nonassessable and have been issued in accordance with the registration or
qualification provisions of the 1933 Act and any relevant state securities laws
or pursuant to valid exemptions therefrom.
(b) Except as set forth in Schedule 6.2 and pursuant to the
------------
transactions contemplated by this Agreement, there are not on the date hereof
authorized, outstanding or contemplated any subscriptions, options, conversion
rights, warrants or other agreements, securities or commitments obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of capital stock of the Company, or any securities convertible into or
exchangeable for shares of capital stock of the Company or obligating the
Company to grant, extend or enter into any such agreement or commitment.
6.3 SUBSIDIARIES. The Company does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity.
6.4 EXECUTION AND BINDING EFFECT. The execution and delivery of the
Related Documents and the consummation of the transactions contemplated hereby
or thereby have been duly authorized by all necessary corporate action on the
part of the Company. The Related Documents (except for the Related Documents
that will be issued in the Subsequent Closings (the "SUBSEQUENT DOCUMENTS") have
been duly executed and delivered by the Company and the Related Documents (other
than such Subsequent Documents) constitute and the Subsequent Documents, upon
due execution and delivery by the Company will constitute, legal, valid and
binding agreements of the Company enforceable against the Company in accordance
with their respective terms. The Notes will be free of restrictions on transfer
other than under applicable federal and state securities laws and as provided
herein.
6.5 AUTHORIZATION AND FILINGS. Except as set forth in Schedule 6.5,
------------
no authorization, consent, approval, license, exemption or other action by, and
no registration, qualification, designation, declaration or filing with, any
Authority or any other Person is required to be made or obtained by the Company
in order to execute or deliver the Related Documents or to consummate the
transactions contemplated hereby or thereby other than the filing of financing
statements to perfect the security interests granted under the Security
Agreement.
6.6 ABSENCE OF CONFLICTS. Except as set forth in Schedule 6.6,
------------
neither the execution and delivery of the Related Documents nor the consummation
of the transactions contemplated hereby or thereby nor the performance of or
compliance with the terms and conditions in the Related Documents will (a)
violate any Law; (b) conflict with or result in a breach or violation of or a
default or loss of benefit under or permit the acceleration of any obligation
under any provision of the Certificate of Incorporation or Bylaws of the
Company, or
4
<PAGE>
any agreement or instrument to which the Company is a party or by which the
Company or any of its properties is bound, or (c) except as provided in the
Security Agreement, result in the creation or imposition of any Lien on any
property or asset of the Company, in each case or in the aggregate which would
have a material adverse effect on the Condition of the Company.
6.7 SECURITY INTEREST. Upon the payment for the Notes, the filing of
the UCC-1 financing statements referred to in the Security Agreement, the
appropriate filings with the U.S. Patent and Trademark Office and the U.S.
Copyright Office and the appropriate notice to Silicon Valley Bank, except to
the extent permitted by the Security Agreement and this Agreement, the Security
Agreement creates a valid first priority security interest and lien upon the
collateral covered thereby, enforceable against the Company and all third
parties and securing the payment of all obligations purported to be secured
thereby; provided that you will not have a perfected security interest in any
collateral which is not subject to the California Uniform Commercial Code
pursuant to Section 9104 or that cannot be perfected by the filing of a UCC-1
financing statement that is specified in California Uniform Commercial Code
Section 9302 (other than accounts at Silicon Valley Bank and collateral covered
by your filings with the U.S. Patent and Trademark Office and the U.S. Copyright
Office as to which you will have a perfected security interest after taking
appropriate action) (the "Nonperfected Collateral"), except to the extent that
after the date hereof appropriate actions are taken that will perfect such
security interests; provided, further, that such Nonperfected Collateral does
not, individually or in the aggregate, constitute a material portion of the
assets of the Company. Subject to the preceding sentence, such security
interests will be perfected security interests subject to no prior security
interests, claims, liens, or encumbrances.
6.8 FINANCIAL STATEMENTS. The Company has furnished to you true and
complete copies of the unaudited consolidated financial statements of the
Company as at and for the year ended March 31, 1994 and the audited consolidated
financial statements of the Company as at and for the years ended March 31,
1993, and March 31, 1992, (collectively, the "ANNUAL FINANCIAL STATEMENTS").
The Annual Financial Statements, including the related schedules and notes
thereto, are in accordance with the books and records of the Company and were
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto or reports thereon and except that the Annual
Financial Statement for the year ended March 31, 1994, does not include notes
thereto and may not have been prepared in accordance with GAAP in immaterial
respects) and present fairly the financial position and the results of
operations and changes in financial position of the Company as at the dates
thereof and for the periods then ended. The Company has furnished to you
unaudited financial statements of the Company as at and for the period ended
June 30, 1994 (the "UNAUDITED FINANCIAL STATEMENTS"). The Unaudited Financial
Statements are in accordance with the books and records of the Company and were
prepared in accordance with GAAP in all material respects applied on a
consistent basis (other than for the omission of notes thereto) and present
fairly the financial position of and the results of operations and changes in
financial position of the Company as at and for the period ended June 30, 1994.
5
<PAGE>
6.9 LIABILITIES. Except as provided for in the Annual Financial
Statements or the Unaudited Financial Statements, or as set forth in the
Schedules hereto, at the last day of the respective periods covered by the
Annual Financial Statements and the Unaudited Financial Statements, there were
no liabilities or obligations, whether accrued, absolute, contingent or
otherwise, and whether due or to become due and whether or not required to be
recorded or reflected on such financial statements ("LIABILITIES") other than
Liabilities that are not individually or in the aggregate material to the
Condition of the Company. The Company is not aware of any reasonable basis for
the assertion against the Company of any other debt, duty, liability, obligation
or loss contingency other than Liabilities that are not individually or in the
aggregate material to the Condition of the Company.
6.10 NO ADVERSE CHANGE. Except as otherwise permitted by this
Agreement or as disclosed on any schedule hereto, since the date of the
Unaudited Financial Statements, the Company has operated its business diligently
and only in the ordinary course of business, and has not:
(a) incurred any liabilities, other than in the ordinary course of
business consistent with past practice;
(b) suffered any material adverse change in the Condition of the
Company other than the occurrence of operating losses or the occurrence of any
event that is not inconsistent with past operating history of the Company;
(c) sold, encumbered, assigned or transferred any assets or
properties of the Company, other than in the ordinary course of business
consistent with past practice;
(d) as of the date of this Agreement, created, incurred, assumed or
guaranteed any Indebtedness or subjected any of its assets to any Lien except
for Indebtedness or Liens that are not, individually or in the aggregate,
material to the Condition of the Company;
(e) changed or amended its Certificate of Incorporation or Bylaws in
any respect material to the holders of the Notes;
(f) declared, set aside or paid any dividends or made any other
distributions in cash or property on the Company's capital stock other than as
permitted by the Ailicec Agreement;
(g) directly or indirectly redeemed, purchased or otherwise acquired
any shares of capital stock of the Company except for the repurchase of shares
from employees in an amount not to exceed, in the aggregate, $25,000 and for the
redemption of Performance Preferred Stock issued to Ailicec that is permitted by
the Ailicec Agreement;
(h) suffered any resignation or termination of employment of any key
officers
6
<PAGE>
and, the Company, to the best of its knowledge, does not know of any impending
resignation or termination of employment of any such key officers;
(i) except in the ordinary course of the Company's business,
materially increased the compensation payable or to become payable by the
Company to any of its officers or directors or materially increased any bonus,
insurance, pension or other employee benefit plan, payment or arrangement made
by the Company for or with any such officers or directors;
(j) entered into any agreement or commitment to do any of the things
described in this section 6.10.
6.11 TAXES.
(a) The Company has filed on a timely basis, within the original
filing period or any applicable extension period, all returns and reports of all
Taxes, including, without limitation, federal income tax returns, withholding
tax returns and declarations of estimated Tax and Tax reports, that are required
to be filed with respect to the Company or its income, properties or operations,
except where the failure to so file would not have a material adverse effect on
the Condition of the Company. All information set forth in all returns and
reports of all Taxes, including, without limitation, federal income tax returns,
reports, notices, accounts and information is true, complete and accurate in all
material respects. All Taxes required to be paid by the Company that are or were
due and payable prior to the date hereof (without regard to whether such Taxes
have been assessed) have been paid, except where the failure to so pay would not
have a material adverse effect, individually or in the aggregate, on the
Condition of the Company.
(b) The Company has made adequate provisions in accordance with GAAP
in the Unaudited Financial Statements for the payment of all Taxes for which the
Company may be liable that were not yet due and payable as of the date of the
Unaudited Financial Statements regardless of whether the liability for such
Taxes is disputed.
(c) There is no claim or assessment pending or, to the knowledge of
the Company, threatened against the Company for any alleged deficiency in Taxes
and the Company does not know of any pending audit or investigation with respect
to any Tax liability (direct or indirect) of the Company for any period for an
amount, individually or in the aggregate, in excess of $25,000. There are no
agreements in effect to extend the period of limitations for the assessment or
collection of any Tax for which the Company may be liable, and no requests for
such agreements are pending.
(d) The Company has in all material respects satisfied for all
periods through the date hereof all federal, state, foreign and local
withholding Tax requirements (including, without limitation, income, social
security and employment Tax withholding for all types of compensation).
7
<PAGE>
6.12 TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES. The Company has
good and marketable title to or, in the case of leases and licenses, valid and
subsisting leasehold interests or licenses in, all of its properties and assets
of whatever kind (whether real or personal, tangible or intangible) free and
clear of any Liens, except as set forth in Schedule 6.12, for Permitted Liens or
as provided in the Security Agreement. All facilities, equipment and other
material items of tangible property and assets owned by the Company are in good
operating condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable Laws relating to their construction, use and operation, except where
such failure, individually or in the aggregate, would not have a material
adverse effect on the Condition of the Company. No Person other than the Company
owns any equipment or other tangible assets or property situated on the premises
of the Company or necessary to the operation of the business of the Company,
except for leased items, as to which leases, the Company is not in default
thereof.
6.13 PATENTS, TRADEMARKS AND COPYRIGHTS.
(a) A list and brief description of all licenses, trademarks,
service marks, trade names, logos, brands, copyrights, patents, franchises, and
permits that are material to the Company's business, all applications for
registration and registrations of such trademarks, service marks, copyrights,
patents, franchises, and permits that are material to the Company's business,
and all licenses, contracts, rights, and arrangements with respect to the
foregoing that are material to the Company's business are set forth in Schedule
--------
6.13 (the "INTELLECTUAL PROPERTY RIGHTS").
- ----
(b) Except as set forth in Schedule 6.13, the Company is the sole
-------------
owner of the entire, unencumbered right, title and interest to all such
Intellectual Property Rights free and clear of all Liens other than Permitted
Liens, and all such Intellectual Property Rights are valid and enforceable.
(c) The Company owns or possesses the right to use its Proprietary
Technology, and all rights with respect to the foregoing, necessary for the
conduct of its business as now and contemplated to be conducted, without any
material conflict or infringement of the rights of others. The Company has
maintained the confidentiality of the Proprietary Technology. Each engineer and
officer of the Company (other than Eli Morowitz, the Chief Financial Officer)
has executed a proprietary information and inventions agreement to protect the
Company's rights to all Proprietary Technology.
6.14 CONTRACTS. Except as set forth Schedule 6.14, (a) the Material
-------------
Contracts are valid and in full force and effect as to the Company and, to the
best of the Company's knowledge, the other parties thereto; (b) the Company is
not in violation of or default under its Certificate of Incorporation, Bylaws or
any Material Contract, and no condition or event exists that after notice or
lapse of time or both, would result in a breach or violation of, or a default or
loss of benefit by the Company thereunder; (c) to the best of the Company's
knowledge, none of the other parties to any Material Contract are in violation
of or default under any Material
8
<PAGE>
Contract in any material respect which would cause a material adverse effect on
the condition; and (d) the Company has not received any notice of cancellation
or any written communication threatening cancellation of any Material Contract
by any party thereto. Schedule 6.13 lists all Material Contracts.
-------------
6.15 MANUFACTURING AND MARKETING RIGHTS. Except for Material
Contracts listed on Schedule 6.13, the Company has not granted rights to
-------------
manufacture, produce or assemble its products or use any of its Proprietary
Technology to any other person except for grants that are not material to the
Condition of the Company, and is not bound by any agreement that affects the
Company's exclusive right to develop, manufacture or assemble its products or
any other products that utilize the Proprietary Technology.
6.16 PERMITS; COMPLIANCE WITH LAWS. The Company has obtained and
maintains in full force and effect all permits, licenses, consents, approvals,
registrations, memberships, authorizations and qualifications under all
applicable Laws, and with all applicable Authorities, required for the conduct
by it of its business and the ownership or possession by it of its properties
and assets, except to the extent the failure to so obtain and maintain would not
have a material adverse effect, individually or in the aggregate, on the
Condition of the Company. The Company is in compliance in all respects with all
Laws applicable to it or to the conduct by it of its business or to its
ownership and possession of its properties and assets, except where the failure
to so comply, does not, individually or in the aggregate, have a material
adverse effect on the Condition of the Company. All required reports and filings
with Authorities have been properly made as and when required, except where the
failure to report or file would not, individually or in the aggregate, have a
material adverse effect on the Condition of the Company.
6.17 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning alleged defects in its products (or the design thereof)
that would materially adversely affect the Condition of the Company.
6.18 EMPLOYEES. The Company is not bound by or subject to (and none
of its asset or properties is bound by or subject to) any written or oral,
express or implied, contract, commitment or arrangement with any labor union,
and no labor union has requested or, to the knowledge of the Company, has sought
to represent any employees, representatives or agents of the Company. No strike
or labor dispute involving the Company has ever occurred or been threatened.
6.19 ERISA; EMPLOYEE BENEFITS.
(a) The Company has not incurred any liability to the Pension
Benefit Guaranty Corporation (the "PBGC") except for required premium
payments, which payments have been paid when due. To the best of the Company's
knowledge, no prohibited transactions or events have occurred which might give
rise to any liability of the Company under Section 406 of ERISA or Section
4975 of the Code.
9
<PAGE>
(b) No ERISA Plan is a defined benefit plan, multi-employer plan or
plan subject to the minimum funding standards of Section 412 of the Code (that
is, a pension plan within the meaning of the Code).
(c) No proceeding has been initiated by any Person (including the
PBGC) to terminate any ERISA Plan.
(d) With respect to each ERISA Plan, (i) all payments and
contributions due from the Company to date have been made and all amounts
properly accrued to date as liabilities of the Company that have not been paid
have been properly reflected in the books of the Company, except for payments
and contributions that are not, individually or in the aggregate, material to
the Condition of the Company; (ii) to the best of the Company's knowledge, the
Company has complied with, and each ERISA Plan conforms in form and operation
to, all applicable laws and regulations applicable to the ERISA Plans,
including, without limitation, ERISA and the Code except where the failure to
so comply would not, individually or in the aggregate, have a material adverse
effect on the Condition of the Company; and (iii) each ERISA Plan that is an
employee pension benefit plan intended to qualify under Section 401 of the
Code (that is, an ERISA Plan that is not a welfare plan) has received a
favorable determination letter from the Internal Revenue Service with respect
to such qualification, its related trust has been determined to be exempt from
taxation under Section 501(a) of the Code, and nothing has occurred since the
date of such letter that has adversely affected or is likely to adversely
affect such qualification or exemption.
(e) Each ERISA Plan maintained by the Company or for the benefit of
the employees is listed in Schedule 6.19.
-------------
6.20 ENVIRONMENTAL MATTERS.
The Company is not aware of and has not received notice of any past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans that might interfere with or prevent compliance or
continued compliance in all material respects with any Environmental Law, or
might give rise to any common law or legal liability, or otherwise form the
basis of any claim, prosecution, action, demand, suit, arbitration, proceeding,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling or the emission, discharge,
release or threatened release into the environment, of any pollutant,
contaminant, chemical or industrial, toxic or hazardous substance or waste, the
result of which would have a material adverse effect on the Condition of the
Company.
6.21 LITIGATION. Except as set forth in Schedule 6.21, there are no
-------------
claims, prosecutions, actions, demands, suits, arbitrations, proceedings,
hearings, studies, investigations or reviews pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, any ERISA
Plan or any of their respective properties or assets at law, in equity or
otherwise, in, before or by any Authority, which, if resolved against the
Company, individually
10
<PAGE>
or in the aggregate, would have a material adverse effect on the Condition of
the Company or the transactions contemplated in the Related Documents. The
Company does not know of any reasonably likely basis for any such claims,
prosecutions, actions, demands, suits, arbitrations, proceedings, hearings,
studies, investigations or reviews, which in the Company's judgement, is
reasonably likely to have a material adverse effect on the Condition of the
Company or the transactions contemplated in the Related Documents. Except as
set forth in Schedule 6.21, there are no unsatisfied judgments or outstanding
-------------
orders, injunctions, decrees, stipulations or awards of any Authority against
the Company or against any of its properties or assets that, individually or
in the aggregate, exceed $25,000 or are otherwise material to the Condition of
the Company.
6.22 INSURANCE. The assets, properties and operations of the
Company are insured under various policies of general liability and other
forms of insurance to the extent reasonably considered appropriate by the
Company. All such policies are in full force and effect in accordance with
their terms, no notice of cancellation has been received, and there is no
existing default or event which, after notice or lapse of time or both, would
constitute a violation or default thereunder. Such policies or amounts
reasonably believed by the Company to be adequate in relation to the business
and assets of the Company and all premiums to date have been paid in full.
6.23 NO MARGIN REGULATION VIOLATION. None of the transactions
contemplated by the Related Documents will violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934 or any regulations issued
pursuant thereto, including, without limitation, Regulation G, Regulation T,
Regulation X and Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System.
6.24 BROKERS AND FINDERS. The Company has not employed any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by the Related Documents that would be entitled to a broker's,
finder's or similar fee or commission in connection therewith, except for
Endeavor Capital Management.
6.25 RELATED PARTY TRANSACTIONS. Except as set forth on Schedule
--------
6.25, to the best of the Company's knowledge no officer or director of the
- ----
Company or member of the immediate family of any of the foregoing:
(a) owns or has owned, directly or indirectly, any interest in
(except for less than one percent stock holdings for investment purposes in
securities of publicly traded companies), or is an officer, director, employee
or consultant of, any Person which is or was engaged in business as, a
competitor, lessor, lessee, supplier or customer of the Company;
(b) owns, directly or indirectly, as a whole or in part, any
tangible or intangible property that the Company uses or contemplates using in
the conduct of its business; or
(c) has any cause of action or other claim whatsoever against, or
owes any
11
<PAGE>
amount to, the Company, except for immaterial claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and medical, dental and other similar health benefit plans
existing on the date hereof.
6.26 RESERVATION OF SHARES. The Common Stock issuable on conversion
of the Warrants has been duly and validly reserved for issuance and (assuming
compliance by the holders thereof with the terms of the Warrant and payment by
the holders thereof of the exercise price of that Warrant) on issuance in
accordance with the terms of the Warrant will be duly and validly issued,
fully paid and nonassessable and will be free of restrictions on transfer
other than restrictions on transfer under applicable Federal and state
securities laws and as provided herein.
7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. This Agreement is
made with you in reliance upon your representations to the Company, which by
your acceptance hereof you confirm, represent and warrant, that:
7.1 INVESTMENT INTENT. You are acquiring the Notes, the Warrants and
the Common Stock issuable upon exercise of the Warrants (collectively,
"SECURITIES") pursuant to this Agreement with your own funds for your own
account and not as a nominee or agent. No one else has any interest,
beneficial or otherwise, in any of the Securities to be purchased by you.
Except as provided herein, you are not obligated to transfer any Securities to
anyone else nor do you have any agreements or understandings to do so. You are
purchasing the Securities for investment for an indefinite period and not with
a view to the sale or distribution of any Securities, by public or private
sale or other disposition, and you have no intention of selling, granting any
participation in or otherwise distributing or disposing of any Securities. You
do not intend to subdivide your purchase of Securities with anyone.
Notwithstanding the foregoing, the disposition of your property shall be at
all times within your own control, and that your right to sell or otherwise
dispose of all or any part of the Securities purchased by you pursuant to an
effective registration statement under the 1933 Act or under an exemption
available from such registration available under the 1933 Act shall not be
prejudiced; provided that you comply with section 12.14.
7.2 NO PUBLIC OFFERING. You are able to bear the economic risk of
your investment in the Securities. You are aware that you must be prepared to
hold the Securities for an indefinite period and that the Securities have not
been registered under the 1933 Act or registered or qualified under any state
securities law, on the ground, among others, that no distribution or public
offering of Securities is to be effected and Securities are being issued by
the Company without any public offering within the meaning of Section 4(2) of
the 1933 Act. You have had an opportunity to discuss the Company's business,
management and financial affairs with its management. You are not subscribing
for the Securities as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or any solicitation of a
subscription by a person not previously known to you in connection with
investments in securities generally.
12
<PAGE>
7.3 CERTIFICATES TO BE LEGENDED. You understand that each Note and
Warrant will bear a legend on the face thereof (or on the reverse thereof with
a reference to such legend on the face thereof) required by the Securities and
Exchange Commission or a state securities commission.
7.4 NOTES AND WARRANTS WILL BE "RESTRICTED SECURITIES". You
understand that the Notes and Warrants will be "restricted securities" as that
term is defined in Rule 144 under the 1933 Act and, accordingly, that the
Notes and Warrants must be held indefinitely unless they are subsequently
registered under the 1933 Act or an exemption from such registration is
available. You understand and agree that the Company is not under any
obligation to register Notes or Warrants under the 1933 Act or to comply with
Regulation A or any other exemption and that Rule 144 is not currently
available for sales of Notes and Warrants.
7.5 ACCREDITED INVESTOR. You have been advised or are aware of the
provisions of Regulation D under the 1933 Act relating to the accreditation of
investors, and you are an "accredited investor" as defined in Regulation D
under the 1933 Act.
7.6 SOPHISTICATION OF THE PURCHASER. You have such knowledge and
experience in financial and business matters that you are capable of
evaluating the merits and risks of your investment contemplated by this
Agreement and have the capacity to protect your own interests. You acknowledge
that investment in the Securities is highly speculative and involves a
substantial and high degree of risk of loss of your entire investment. You
have adequate means of providing for current and anticipated financial needs
and contingencies, are able to bear the economic risk for an indefinite period
of time and have no need for liquidity of the investment in the Securities and
could afford complete loss of such investment.
7.7 BROKERS' FEES. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or
on behalf of you, except for Endeavor Capital Management.
8. COVENANTS. The Company hereby covenants that so long as any Notes
are outstanding:
8.1 NOTICE. The Company shall promptly give written notice to you of:
(a) any litigation or administrative or regulatory proceeding affecting
the Company where the amount claimed against the Company is $50,000 or more, or
where the granting of the relief requested might have a material adverse effect
on the Condition of the Company;
(b) any Event of Default or any event which, upon giving of notice or
lapse of time or both, would constitute an Event of Default;
13
<PAGE>
(c) any change in the location of any place of business of the Company
or of the establishment of any new, or the discontinuation of any existing,
place of business; and
(d) any event that would cause Schedule 6.2 to be inaccurate in any
------------
material respect at any time after the date of this Agreement; and
(e) entering into or committing to enter into any transaction that is
material to the Condition of the Company, other than in the ordinary course of
its business.
8.2 FINANCIAL STATEMENTS. The Company shall deliver to you in form and
detail satisfactory to you the following financial information:
(a) INTERIM FINANCIAL STATEMENTS. As soon as available but no later
than 30 days after the end of the first three fiscal quarters of each fiscal
year of the Company, the Company shall deliver to you an unaudited balance
sheet of the Company as of the end of such period and statements of income and
cash flows for such period, and for that portion of the Company's financial
reporting year ending with such period, prepared and attested by a responsible
financial officer of the Company as being prepared in accordance with GAAP in
all material respects (except for the omission of notes thereto) and as being
complete and correct and fairly presenting the Company's financial condition
and the results of the Company's operations. If any such interim financial
statements are not prepared on a consistent basis, a note to that effect will
be included therein.
(b) ANNUAL AUDITED FINANCIAL STATEMENTS. As soon as available but no
later than 120 days after the end of each financial reporting year, the Company
shall deliver to you the Company's balance sheet as of the end of such year and
statements of income and cash flows for such year, with notes to each, all in
reasonable detail and prepared in accordance with GAAP, setting forth in
comparative form corresponding figures for the preceding fiscal year, certified
by a nationally recognized independent certified public accountant whose report
in connection therewith shall not have been a qualified report, or contain a
disclaimer because of a restricted or a limited examination by such accountant
of any material portion of the Company's records. If any such annual audited
financial statements are not prepared on a consistent basis, a note to that
effect will be included therein.
8.3 ACCESS. The Company shall permit Endeavor Capital or such other
persons as a Majority of the Investors may designate to visit and inspect any of
the properties of the Company, to examine its books and records and take copies
and excerpts therefrom and to discuss its affairs with its officers, employees
and independent accountants during normal working hours on Business Days
following reasonable notice. Any such person provided access shall be required
to sign a confidentiality agreement containing such terms as are reasonable and
customary.
8.4 PAYMENT OF TAXES. The Company shall pay or otherwise discharge all
Taxes, assessments and other governmental charges or levies imposed upon it or
any of its
14
<PAGE>
properties or income on or prior to the date on which penalties attach thereto.
8.5 FINANCIAL ACCOUNTING PRACTICES. The Company shall make and keep
books, records and accounts, and maintain a system of internal accounting
controls in accordance with GAAP.
8.6 CONTRACTS. The Company shall comply with all agreements or
instruments to which it is a party or by which it or any of its properties (now
owned or hereafter acquired) may be subject or bound; provided that the Company
shall not be deemed to be in violation of this section 8.6 as a result of any
failure to comply which would not have a material adverse effect on the
Condition of the Company or on the ability of the Company to perform its
obligations under the Related Documents.
8.7 EXISTENCE. The Company shall maintain and preserve its existence,
present form of business, and all rights (including, without limitation,
Intellectual Property Rights), privileges and franchises necessary or
desirable in the normal course of its business, and keep all of its property
in good working order and condition, ordinary wear and tear excepted, except
where the same would not have a material adverse effect on the Condition of
the Company.
8.8 COMPLIANCE WITH LAWS. The Company shall comply in all material
respects with all Laws to which it or its properties or assets is or may
become subject.
8.9 INDEBTEDNESS. The Company shall not incur any Indebtedness, except
for the following:
(a) the acquisition of supplies or inventory on normal trade credit
in the ordinary course of the Company's business;
(b) Indebtedness with respect to letters of credit issued in favor of
Ailicec or Xerox Corporation;
(c) the Notes;
(d) short-term commercial borrowing, including factoring arrangements,
in an amount not to exceed the lesser of (i) $500,000, (ii) 1.2 times the
principal amount and accrued interest outstanding under the Notes and (iii)
0.5 times the amount of collectible accounts receivable of the Company (as
determined in accordance with GAAP);
(e) Indebtedness incurred on commercially reasonable terms to purchase
or lease equipment at its fair market value in the ordinary course of the
Company's business; and
(f) extensions, renewals and replacements of any of the foregoing
Indebtedness or Indebtedness reflected on the Unaudited Financial Statements;
provided, however, (i) any such
- -------- -------
15
<PAGE>
extension, renewal or replacement obligation shall be on terms at least as
favorable to the Company as the obligation being extended, renewed or
replaced, and (ii) the amount so extended, renewed or replaced shall be in an
amount not greater than the amount of the obligation extended, renewed or
replaced.
8.10 LIENS. The Company shall not create, incur, assume or permit to
exist any Lien, on any of its property, except Permitted Liens.
8.11 LOANS. The Company shall not lend any money, make any advances or
extend any credit to any Person or assume, guarantee, endorse or otherwise
become liable with respect to the obligations of any Person other than in the
ordinary course of its business.
8.12 SIGNIFICANT TRANSACTIONS. The Company shall not change its name,
liquidate or dissolve, or enter into any consolidation, merger or partnership;
acquire all or substantially all of the business or assets of any Person
(whether through stock or asset purchase or otherwise); prepay any
Indebtedness that exceeds $25,000, other than to Ailicec or to holders of the
Notes, or reorganize, reclassify or recapitalize its capital stock; transfer,
lease or otherwise dispose of all or any substantial part of its assets or the
Proprietary Technology.
8.13 TRANSACTIONS WITH AFFILIATES. Except for normal employment
relationships, transactions with Ailicec and transactions specified on Schedule
--------
6.25, the Company shall not enter into or carry out any transaction with
- ----
(including, without limitation, purchasing property or services from, selling
property or services to or providing any guarantees or loans to) any Affiliate,
unless such transaction is on fair and reasonable terms no less favorable to the
Company than it would obtain in a comparable arm's length transaction with a
Person that is not an Affiliate.
8.14 WARRANTS. If all amounts owed by the Company to you or your
assigns under any Note issued to you are not repaid within six months after
the date such Note is issued, the Company shall issue and deliver a Warrant to
you, or your permitted assigns, as the case may be, on the last day of each
month thereafter, for as long as any amount under each Note remains
outstanding, for an amount of shares of Common Stock of the Company equal to
2% of the principal amount of that Note outstanding at that time divided by
$2.15.
8.15 REGISTRATION RIGHTS.
(a) Form S-3.
--------
(i) If any Holder or Holders holding Warrants or Registrable
Securities that in the aggregate is not less than 25% of the Registrable
Securities request that the Company file a registration statement on Form
S-3 (or any successor form to Form S-3) for a public offering of the
Registrable Securities the reasonably anticipated aggregate price to the
public of which, net of underwriting discounts and commissions, would
exceed
16
<PAGE>
$500,000, and the Company is then entitled to use Form S-3 under
applicable Commission rules to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and
to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request; provided,
however, that the Company shall not be required to effect more than one
registration pursuant to this section 8.15(a) in any 6 month period. The
substantive provisions of section 8.15(c) shall be applicable to each
registration initiated under this section 8.15(a).
(ii) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this section 8.15(a): (i) in any
particular jurisdiction in which the Company would be required to execute
a general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to
service in such jurisdiction and except as may be required by the 1933
Act; (ii) if the Company, within 10 days of the receipt of the request of
the initiating Holders, gives notice of its bona fide intention to effect
the filing of a registration statement with the Commission within 90 days
of receipt of such request (other than with respect to a registration
statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration that is not appropriate for the
registration of Registrable Securities); (iii) during the period starting
with the date 60 days prior to the Company's estimated date of filing of,
and ending on the date 6 months immediately following, the effective date
of any registration statement pertaining to securities of the Company
(other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or (iv) if the Company shall
furnish to such Holder a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors
it would be seriously detrimental to the Company or its shareholders for
registration statements to be filed in the near future, then the
Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed 120 days from the
receipt of the request to file such registration by such Holder.
(b) Optional Registrations. If at any time or times after the Closing,
----------------------
the Company shall determine to register any of its securities (for itself or for
any other securities holder of the Company) under the 1933 Act or any successor
legislation (other than a registration relating to stock option plans, employee
benefit plans or a Rule 145 transaction), and in connection therewith the
Company may lawfully register its Common Stock, the Company will promptly give
written notice thereof to the then Holders of all issued or issuable Registrable
Securities. The Company shall use its best efforts (i) to include in such
registration all Registrable Securities that such Holders may request in a
writing delivered to the Company within 15 days after receipt by such Holder of
the notice given by the Company, (ii) to effect such registration under the 1933
Act and (iii) to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may request; provided, however, if the
-------- -------
managing
17
<PAGE>
underwriter for the Company advises the Company in writing that including all
or part of the Registrable Securities in such offering will adversely affect
the marketing of the proposed offering, then, in connection with any such
underwritten offering by the Company of any of its securities, such
registration of Registrable Securities shall be limited to not less than 5% of
the total number of shares to be sold in the case of an initial public
offering of the Company's securities, and 10% of the total number of shares to
be sold in the case of a subsequent offering; further provided, however, that
such limitation shall be imposed upon the Holders and other holders of Common
Stock having similar registration rights to those of the Holders pro rata on
the basis of the total number of (i) shares of Registrable Securities owned by
the requesting Holders and (ii) shares of Common Stock owned, or obtainable by
them upon the exercise of rights with respect to other securities, by such
other requesting holders. In the event of such limitation, shares of persons
not having similar registration rights will not be included in such
registration. Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this section 8.15(b) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service
in such jurisdiction and except as may be required by the 1933 Act. The
Company shall have the right to select the managing underwriter or
underwriters for any underwritten offering made pursuant to a registration
under this section 8.15. Subject to the foregoing, if such proposed
registration is in connection with an underwritten offering of Common Stock,
upon request of any Holder, the Company shall use its reasonable efforts to
cause the managing underwriter therefor to include in such offering the
Registrable Securities as to which the Holder requests such inclusion, on
terms and conditions comparable to those of the securities offered on behalf
of the Company.
(c) Expenses of Registration. All expenses of the registration and
------------------------
offering incurred in connection with any registration pursuant to this section
8.15 shall be borne by the Company, except that the Holders shall bear
underwriting commissions and discounts attributable to their Registrable
Securities being registered and the fees and expenses of separate counsel, if
any, for such Holders; and provided, however, a proportionate share of the
expenses of the registration and offering incurred in connection with any
registration pursuant to this section 8.15 after the third such registration
shall be borne pro rate by the Holder or Holders requesting the registration on
the basis of the ratio of the number of their shares so registered to the total
number of the shares included in such registration.
(d) Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Holders under this section 8.15 may be assigned to a
transferee or assignee in connection with any transfer or assignment of Warrants
or Registrable Securities by any Holder provided that: (i) such transfer may
otherwise be effected in accordance with applicable securities laws, and (ii)
such assignee or transferee acquires at least 5,000 shares of the Registrable
Securities or Warrants representing at least 5,000 shares of the Registrable
Securities (in each case appropriately adjusted for recapitalizations or stock
splits).
(e) Standoff Agreement. The Holders shall, if requested by the managing
------------------
18
<PAGE>
underwriter or underwriters of any proposed firm underwritten offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten offering for a period of up to 180 days
beginning on the effective date of the registration statement, provided that the
Company's officers and directors and each holder of 10% or more of the Company's
issued and outstanding Common Stock also agree to such limitations. The Holders
shall, upon request, execute a written agreement confirming and agreeing to the
foregoing.
(f) Registration Indemnification. In the event of any registration
----------------------------
under the 1933 Act of Registrable Securities of any Holder pursuant to this
section 8.15, the Company will hold harmless such Holder and each underwriter
of such securities and each other person, if any, who controls such Holder or
such underwriter within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities to which such Holder or such underwriter or
controlling person may become subject under the 1933 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 registration statement, or any
preliminary prospectus or final prospectus or amendment or supplement thereto
on the effective date thereof, 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; and will
reimburse such Holder and each such underwriter and each such controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; 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, or any
preliminary prospectus or final prospectus or amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Holder or such underwriter
specifically for use in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking satisfactory to it
and its counsel from each Holder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in the preceding paragraph) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the 1933 Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Company through an instrument duly executed by the Holder specifically for use
in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto.
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Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of these provisions, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and 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 for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
(g) Rule 144 Undertakings. At any time and from time to time after the
---------------------
expiration of 90 days following the earlier of the close of business on such
date as (i) a registration statement filed by the Company under the 1933 Act
becomes effective or (ii) the Company registers a class of securities under
section 12 of the Securities Exchange Act of 1934, as amended, the Company shall
use its best efforts to make publicly available and available to the Holders,
pursuant to Rule 144 of the Commission under the 1933 Act, such information as
is necessary to enable the Holders to make sales of Registrable Securities
pursuant to that Rule and the Company shall use its best efforts to timely file
with the Commission all documents and reports required of the Company under the
Securities Exchange Act of 1934. The Company shall furnish to any Holder upon
request (after the preceding sentence shall have become applicable), a written
statement executed by the Company as to compliance with the current public
information requirements of Rule 144.
(h) Information, Documents, Etc. The Company agrees that it will
----------------------------
furnish to the Holders the number of prospectuses, offering circulars or other
documents, or any amendments or supplements thereto, incident to any
registration, qualification or compliance referred to in this section 8.15 as
the Holders from time to time may reasonably request.
(i) Cooperation. In connection with any registration of Common Stock
-----------
pursuant to this section 8.15, the Company agrees to:
(i) enter into such customary agreements (including, in the event of
any underwritten public offering, an underwriting agreement containing such
terms and provisions, as are customarily contained in underwriting
agreements for comparable offerings and, if no underwriting agreement is
entered into, an indemnification agreement on such terms as is customary in
transactions of such nature) and take all such other actions as the Holders
or the underwriters, if any, participating in such offering and sale may
reasonably request in order to expedite or facilitate such offering and
sale;
(ii) furnish, at the request of the Holders or any underwriters
participating in such offering and sale, (i) a comfort letter or letters,
dated the date of the final prospectus with respect to the Common Stock
registered and/or the date of the
20
<PAGE>
closing for the sale of the Common Stock from the independent certified
public accountants of the Company and addressed to the Holders and any
underwriters participating in such offering and sale, which letter or
letters shall be in form and substance as is customarily given by
independent certified public accountants, and (ii) an opinion, dated the
date of the closing for the sale of the Common Stock, of the counsel
representing the Company with respect to such offering and sale addressed
to the Holders and any such underwriters, which opinion shall be in form
and substance as is customary in transactions of a similar nature for
similar entities;
(iii) make available for inspection by the Holders and the
underwriters, if any, participating in such offering and sale (which
inspecting underwriters shall, if reasonably possible, be limited to any
manager or managers for such participating underwriters), one counsel for
the Holders and any such underwriters, taken together, and one accountant
or accounting firm retained by the Holders and any such underwriters, taken
together, all financial and other records, corporate documents and
properties of the Company, and supply such additional information, as they
shall reasonably request; provided that any such party shall keep the
--------
contents thereof confidential in the manner prescribed by a confidentiality
agreement containing customary terms to be executed by the persons who are
provided such access.
(j) Action to Suspend Effectiveness; Supplement to Registration
-----------------------------------------------------------
Statement. In connection with any registration of Common Stock pursuant to
- ---------
this Section 8.15:
(i) The Company will notify the Holders and their counsel promptly
of (i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Common Stock requested to be
registered or the institution or threatening of any proceeding for such
purpose (a "STOP ORDER") or (ii) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Common Stock requested to be registered for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose.
Immediately upon receipt of any such notice, the Holders shall cease to
offer or sell any Common Stock pursuant to the registration statement in
the jurisdiction to which such Stop Order or suspension relates. The
Company will use all reasonable efforts to prevent the issuance of any
such Stop Order or the suspension of any such qualification and, if any
such Stop Order is issued or any such qualification is suspended, to
obtain as soon as possible the withdrawal or revocation thereof, and will
notify the Holders and their counsel at the earliest practicable date of
the date on which the Holders may offer and sell Common Stock pursuant to
the registration statement.
(ii) For as long as sales of Registrable Securities are permitted
pursuant to a registration statement filed pursuant to this section 8.15,
the Company will notify the Holders and their counsel promptly of the
occurrence of any event or the existence of any state of facts that, in
the judgment of the Company, should be set forth in such registration
statement. Immediately upon receipt of such notice, the Holders shall
cease to offer or sell
21
<PAGE>
any Common Stock pursuant to such registration statement, cease to
deliver or use such registration statement and, if so requested by the
Company, return to the Company, at its expense, all copies (other than
permanent file copies) of such registration statement. The Company will,
as promptly as practicable, take such action as may be necessary to amend
or supplement such registration statement in order to set forth or
reflect such event or state of facts. The Company will furnish copies of
such proposed amendment or supplement to the Holders and their counsel.
9. TERMS OF NOTES.
9.1 PREPAYMENT. The Company shall have the right, at any time and
from time to time to prepay all or any portion of the amount due under the
Notes without premium or penalty, so long as any amount prepaid is applied
first to reduce accrued interest. The aggregate principal amount of each
partial prepayment of Notes shall be allocated among the holders of Notes then
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts of Notes outstanding, with adjustments, to the extent
practicable, to compensate for any prior prepayments not made in exactly such
proportion.
9.2 CONVERSION.
(a) The Company intends to issue shares of its Series F Preferred
Stock (the "SERIES F PREFERRED STOCK" prior to the maturity of the Notes (the
"EQUITY CLOSING"). The Company will notify you in writing at least 30 days
prior to the issuance and sale of such Series F Preferred Stock of the price
per share of Series F Preferred Stock (the "PURCHASE PRICE") and the proposed
closing date therefor.
(b) You may elect to convert all or part of the unpaid principal
balance and accrued interest under the Notes held by you into that number of
whole, fully paid and nonassessable shares of Series F Preferred Stock that
equals the sum of such unpaid principal balance or accrued interest to be
converted divided by the Purchase Price. You may make such election by
notifying the Company in writing of the amount of unpaid principal balance or
accrued interest that you would like to convert and the number of shares of
Series F Preferred Stock to be issued to you within 15 days after your receipt
of notice of the proposed issuance of the Series F Preferred Stock pursuant to
section 9.2(a). In connection with such election or decision to make such
election, upon your request, the Company shall deliver drafts of all
agreements and documents to be delivered by or to the holders of the Series F
Preferred Stock in connection with the Equity Closing as they become available
(the "EQUITY DOCUMENTS").
(c) Before you shall be entitled to convert any Notes into Series F
Preferred Stock, you must surrender such Notes, duly endorsed for cancellation,
to the Company and agree to become a party to and bound by the Equity Documents.
The Company, shall, as soon as practical thereafter, issue and deliver to you,
or your nominee or nominees (acting on your behalf), a certificate for the
number of full shares of Series F Preferred Stock to which you shall
22
<PAGE>
be entitled and, in the case of a partial conversion, a new Note representing
the remaining unpaid principal balance thereunder.
(d) The conversion shall be deemed to have been made as of the Equity
Closing Date, and the Person or Persons entitled to receive the Series F
Preferred Stock issuable on such conversion shall be treated for all purposes as
the recordholder or holders of such Series F Preferred Stock on such date and
shall become a party to and be bound by all Equity Documents.
(e) No fractional share shall be issued on conversion of the Notes,
but in lieu thereof, upon conversion of the remaining unpaid principal balance
and accrued interest under the Notes held by you, the Company shall pay to you
an amount in cash equal to such fraction multiplied by the Purchase Price. On
conversion of any Note the Company shall pay any and all applicable issuance
taxes that may be payable in respect of any issuance or delivery of shares of
Series F Preferred Stock on such conversion. The Company shall not, however,
be required to pay, and you shall pay, any tax that may be payable in respect
of any transfer involved in the issuance and delivery of shares of Series F
Preferred Stock in a name other than your name (if such transfer is permitted
as provided herein), and no such issuance or delivery shall be made unless and
until the Person requesting such issuance has paid to the Company the amount
of any such tax, or it is established to the satisfaction of the Company that
such tax has been paid.
10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "EVENT OF DEFAULT":
(a) the Company defaults in the payment of any principal or
interest due under any Note when the same shall have become due and such
default shall continue unremedied for more than 5 days in the case of
principal due or 15 days in the case of interest due;
(b) the Company fails to observe or perform any covenant,
condition or agreement in any of the Related Documents other than as set forth
in section 10.1(a), which is not remedied within 30 days after you notify the
Company that such failure has occurred; provided that such 30 day period shall
be reduced by the number of days in excess of 10 days that any senior officer
of the Company knew of such failure, but shall in no event be reduced to less
than 20 days;
(c) any representation or warranty made by the Company in this
Agreement shall prove to have been false, incorrect, incomplete or misleading
in any material respect when made or deemed made, such representation or
warranty continues to be material and the Company shall fail to correct the
fact or circumstance which made such representation or warranty false,
incorrect, incomplete or misleading within 30 days after you notify the
Company of such misrepresentation; provided that such 30 day period shall be
reduced by the number of days in excess of 10 days that any senior officer
knew the information that caused such representation or
23
<PAGE>
warranty to be false, incorrect, incomplete or misleading in such material
respect, but shall in no event be reduced to less than 20 days;
(d) The Company shall not have suffered cumulative pre-tax
losses (after deduction of interest but excluding any extraordinary charges)
since July 1, 1994, greater than $600,000 at any time prior to December 31,
1994, which amount shall be increased by $50,000 for each month thereafter
until June 30, 1995.
(e) the occurrence of any event specified in paragraphs (b),
(c), (e), (f), (g), (h) (only with respect to Rudy Prince) and (j) (with
respect to the foregoing paragraphs (b) (c), (e), (f), (g) and (h)) of section
6.10 that is not remedied within 30 days after you notify the Company of such
occurrence; provided that such 30 day period shall be reduced by the number of
days in excess of 10 days that any senior officer of the Company knew of such
occurrence, but shall in no event be reduced to less than 20 days.
(f) entry of a decree or order by a court of competent
jurisdiction for relief in respect of the Company in any involuntary case
under applicable bankruptcy, insolvency or other similar Laws now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any substantial part of its
assets, or ordering the winding up or liquidation of its affairs, if such
decree or order shall remain unstayed and in effect for a period of 60 days;
(g) commencement by the Company of a voluntary case under any
applicable bankruptcy, insolvency or other similar Laws now or hereafter in
effect, or consent by the Company to the entry of an order for relief in any
involuntary case under any such Law or to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or any substantial part of its property, or
any general assignment by the Company for the benefit of creditors, or failure
by the Company generally to pay its debts as they become due, or any corporate
action by the Company in furtherance of any of the foregoing; or
(h) Ailicec has brought an action in a court of competent
jurisdiction claiming that a default has occurred under the Ailicec Agreement;
provided, however, that if Ailicec subsequently waives such default (as to
this Agreement) in writing, the Event of Default hereunder shall be considered
to be cured without prejudice to Ailicec's rights under such Purchase and Debt
Restructuring Agreement. Notwithstanding the foregoing, if any event referred
to in this clause (g) is otherwise considered to be an Event of Default
hereunder, this clause (g) shall not affect any of your rights under any other
provisions of this Agreement.
10.2 ACCELERATION. If any one or more of the foregoing Events of
Default occur, a Majority of the Investors may at any time (unless all
defaults shall theretofore have been remedied) declare the entire unpaid
principal of and all accrued interest on the Notes immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
24
<PAGE>
are hereby expressly waived by the Company. On any such acceleration of the
maturity of the Notes, the Company shall immediately pay to the holder of each
Note, in lawful money of the United States, the entire principal balance
unpaid on such Note, together with interest accrued thereon to the date of
such payment.
11. EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, the Company will pay the reasonable fees and expenses
of Shartsis, Friese & Ginsburg, special counsel to you, in connection with the
preparation, negotiation and execution of the Related Documents and the
reasonable costs of perfecting your security interest in any Collateral.
12. MISCELLANEOUS
12.1 ISSUANCE TAXES. The Company will pay all issuance taxes in
connection with the initial issuance and sale of the Notes to you and will
save you and any subsequent holder of Notes harmless, without limitation as to
time, against any and all liabilities with respect to all such taxes. The
obligations of the Company under this section 12.1 shall survive the payment
of the Notes and the termination of this Agreement.
12.2 EXCHANGE OF NOTE. At any time, and from time to time, upon
not less than 10 days' notice to that effect given by the registered holder of
a Note, and, upon surrender of such Note at its office, the Company shall
deliver in exchange therefor, without expense to the holder thereof, except as
set forth below, a Note of like tenor of such Note so surrendered, as the
holder thereof shall specify as permitted hereunder, dated as of the date to
which interest shall have been paid on such Note so surrendered or, if such
surrender is prior to the payment of any interest thereon, then dated as of
the date of issue, payable to such Person or Persons, or order, as may be
designated by the holder thereof. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
12.3 LOSS, THEFT, ETC. OF NOTE. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, mutilation or
destruction of a Note, and in the case of any such loss, theft or destruction
upon delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation
upon surrender and cancellation of such Note, the Company will make and
deliver without expense to the holder thereof, a new Note, of like tenor, in
lieu of such lost, stolen, destroyed or mutilated Note. If you or any
subsequent institutional holder is the owner of any such lost, stolen or
destroyed Note, then the affidavit of an authorized officer of such owner,
setting forth the fact of loss, theft or destruction and of its ownership of
such Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Note other than the written
agreement of such owner to indemnify the Company.
12.4 POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay
or
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<PAGE>
failure on your part in the exercise of any power or right shall operate as
a waiver thereof, nor shall any single or partial exercise of the same
preclude any other or further exercise thereof or the exercise of any other
power or right, and your rights and remedies are cumulative to and are not
exclusive of any rights or remedies you would otherwise have, and no waiver or
consent given or extended pursuant hereto shall extend to or affect any
obligation or right not expressly waived or consented to.
12.5 AMENDMENTS AND WAIVERS. Any term of the Related Documents may be
amended and the observance of any term of the Related Documents may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and a Majority of
the Investors. Any amendment or waiver effective in accordance with this
section 12.5 shall be binding upon each holder of any Notes or Warrants, each
future holder of all such Notes or Warrants and the Company.
12.6 NOTICES. Any notice, consent, authorization or other
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 three days after
being mailed by first class mail, or the next Business Day after being
deposited for next-day delivery with a nationally 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 the Company, to:
Jetfax, Inc.
1376 Willow Road
Menlo Park, CA 94025-1430
Attention: Rudy Prince
Telephone: (415) 324-0600
Facsimile: (415) 326-1975
with a copy to:
Clifford S. Robbins
General Counsel Associates
1891 Landings Drive
Mountain View, CA 94043
Telephone: (415) 428-3900
Facsimile: (415) 428-3901
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(b) if to you, to the address indicated on Schedule A, with copies to:
Endeavor Capital Management
Two Tudor City Place
Suite 2GN
New York, NY 10017
Attention: Anthony F. Buffa
Telephone: (212) 490-6975
Facsimile: (212) 490-8549
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: Eric M. Sippel, Esq.
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
12.7 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits), and the Related Documents contain the entire agreement of the parties
and supersede all prior negotiations, correspondence, agreements and
understandings, written and oral, between or among the parties, regarding the
subject matter hereof.
12.8 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns,
including each successive holder or holders of a Note or Warrant.
12.9 SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid or unenforceable, the remainder of this Agreement, or the application
of such provision to Persons or circumstances other than those to which it is
held to be invalid or unenforceable, shall not be affected thereby.
12.10 GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the Law of the State of New York.
12.11 INTERPRETATION. All parties have been assisted by counsel in
the preparation and negotiation of this Agreement and the transactions
contemplated hereby, and this Agreement shall be construed according to its
fair language. The rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
12.12 FURTHER ASSURANCES. Each party shall execute such other and
further certificates, instruments and other documents as may be necessary and
proper to implement, complete and perfect the transactions contemplated by
this Agreement.
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<PAGE>
12.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, and all of which
together shall be considered one and the same agreement.
12.14 ASSIGNMENT. You may assign or transfer all or any part of the
Securities provided that the conditions specified in this section are satisfied,
which conditions are intended to insure compliance with the provisions of the
1933 Act and state securities laws in respect of the transfer of any of the
Securities. Prior to any transfer or attempted transfer of any Securities, the
holder thereof shall give the Company written notice of its intention to
transfer, describing briefly the nature of any such proposed transfer. If, in
the written opinion of counsel for such holder, in form and substance reasonably
satisfactory to the Company and its counsel, the proposed transfer may be
effected without registration of such Securities, the Securities proposed to be
transferred may be transferred in accordance with the terms of said notice and
in compliance with applicable securities laws and regulations. The Company
shall not be required to effect any such transfer prior to the receipt of such
favorable opinion. If you transfer any interest in your Notes, you shall
transfer your related interest in the Security Agreement and Intercreditor
Agreement. The Company shall not assign this Agreement or any rights hereunder
or delegate any duties hereunder. Any attempted or purported assignment or
delegation in violation of the preceding sentence shall be void.
12.15 MAXIMUM INTEREST RATE. In no event shall the interest rate and
other charges under this Agreement and the Note exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that a court
determines that you have received interest and other charges under this
Agreement in excess of the highest permissible rate applicable hereto, such
excess shall be deemed received on account of, and shall automatically be
applied to reduce, the outstanding principal amount under the Note and the
provisions hereof shall be deemed amended to provide for the highest
permissible rate. If there is no outstanding principal amount thereof, you
shall refund such excess to the Company.
12.16 UPDATING SCHEDULES. Before each Closing, the Company shall
update the Schedules to this Agreement to account for any events that occur
subsequent to any prior Closing that the Company believes are appropriate for
inclusion therein.
13. DEFINITIONS.
13.1 GLOSSARY. For purposes of this Agreement, the following terms
shall have the following meanings, which shall be equally applicable to both
the singular and plural forms of any of such terms:
"AFFILIATE" shall mean any Person (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company (b) which beneficially owns or holds five
percent or more of any equity or capital interest of the
28
<PAGE>
Company, (c) five percent or more of the equity or capital interest of which is
beneficially owned or held by the Company or a subsidiary of the Company or (d)
any natural person who is a relative of any of the foregoing Persons. The term
"CONTROL" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting stock, as an officer or director, by contract or
otherwise.
"AUTHORITY" shall mean any government or political subdivision, or any
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury, arbitrator or
mediator, in each case whether federal, state, local or foreign.
"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.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the U.S. Securities and Exchange Commission.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign
Laws relating to pollution or protection of the environment, including, without
limitation, Laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices or
demand letters issued, entered, promulgated or approved thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA PLAN" shall mean any employee benefit plan within the meaning
of Section 3(3) of ERISA, which covers, or during the period of five years
ending on the date hereof, has covered, employees of the Company or any Commonly
Controlled Entity.
"GAAP" shall mean generally accepted accounting principles (as such
principles may change from time to time).
"HOLDER" means any holder of Warrants or Common Stock issued on
exercise of Warrants.
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<PAGE>
"INDEBTEDNESS" of the Company shall mean: (a) all indebtedness or
liability for or on account of money borrowed by the Company; (b) all
obligations of the Company evidenced by bonds, debentures, notes or similar
instruments; and (c) capitalized lease obligations of the Company.
"LAW" shall mean any judgment, decree, order, statute, law, ordinance,
rule or regulation of any Authority (including common law), constitution,
statute, treaty, regulation, rule, ordinance, judgment, order, foreign
injunction, writ, decree or award of any Authority.
"LIEN" shall mean any voluntary or involuntary lien, security
interest, mortgage, pledge, charge, encumbrance, title defect or title retention
agreement other than licenses permitting the commercial exploitation of
Proprietary Technology that are entered into in the ordinary course of business,
except that to the extent that any such license specifically creates a security
interest, such security interest shall be considered a Lien.
"MATERIAL CONTRACT" means any agreement to which the Company is a
party or by which any of its properties or assets are bound or affected material
to the Condition of the Company.
"MAJORITY OF THE INVESTORS" shall mean holders of Notes who in the
aggregate hold more than 50% of the unpaid principal amount of the outstanding
Notes,
"PERMITTED LIENS" means (i) liens for Taxes not yet due and payable or
which are being contested in good faith and with respect to which adequate
reserves have been established on the Unaudited Balance Sheet; (ii) carriers',
warehousemen's, mechanics', materialmen's and other like Liens and charges
incurred in the ordinary course of business and which are not delinquent or are
being contested in good faith and do not, individually or in the aggregate,
exceed $50,000; (iii) Liens on inventory held by suppliers thereof that are
incurred in the ordinary course of business and which are not delinquent or are
being contested in good faith; (iv) custom bonds incurred in the ordinary course
of business and which are not delinquent or are being contested in good faith
and do not, individually or in the aggregate, not exceed $50,000; (v) the
interests of the lessors and sublessors of any such leased properties; (vi)
existing Liens reflected on Schedule 6.12; (vii) Liens arising in connection
-------------
with worker's compensation and unemployment insurance incurred, in each case, in
the ordinary course of business that do not, individually or in the aggregate
exceed $50,000; (viii) purchase money Liens given to secure Indebtedness
permitted under section 8.9(a) hereof or to purchase or lease equipment to
secure Indebtedness permitted under section 8.9(e) hereof; (ix) restrictions on
the use of property or minor irregularities of title as normally exist with
respect to similar properties which do not in the aggregate materially impair
the use thereof in the operation of the Company's business; (x) Liens in favor
of any lender or factor extending credit to the Company or purchasing
receivables of the Company as permitted under section 8.9(d) hereof; (xi) Liens
in favor of any Holder pursuant to the Related Documents; (xii) the Lien in
favor of Ailicec pursuant to the Ailicec Agreement; (xiii) judgement Liens in
existence less than 40 days after the entry thereof or with respect to which
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<PAGE>
execution has been stayed, which, individually or in the aggregate secure an
amount less than $50,000 or the payment of which an insurance company has
acknowledged in writing is covered in full by an insurance policy under which
the Company is a beneficiary; (ix) extensions, renewals and replacements of the
foregoing Liens with respect to the property covered by the Lien extended,
renewed or replaced.
"PERSON" shall mean a natural person, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, limited
liability company, Authority, or any other entity.
"PROPRIETARY TECHNOLOGY" shall mean the full range of trade secrets,
technical knowledge and experience, confidential information and other
proprietary knowledge, whether or not patentable, possessed by or accumulated by
the Company concerning the design, formulation, manufacturing, quality control,
testing, storage, development, improvement, installation and operation of the
Company's products and services, including, without limitation, Intellectual
Property Rights, technical, engineering and operating data relating to the
products, designs, schematics, plans, operating principles, formulas, computer
software programs, electronically recordable data or concepts, marketing data,
inventions, improvements, research and development records and reports,
experimental and engineering reports, product specifications, manufacturing
specifications, raw materials specifications, drawings, photographs, models,
compilations of information, records, books and papers, quality control reports
and specifications, manufacturing and production techniques and methods and any
other information possessed by the Company, relating to its products or
services.
"REGISTRABLE SECURITIES" shall mean the shares of Common Stock
issuable or issued on exercise of the Warrants or any shares of Common Stock
issuable or issued with respect to such shares of Common Stock by way of a stock
dividend or stock split, or other distribution, with respect to or in exchange
for or replacement of such Common Stock or other securities.
"RELATED DOCUMENTS" shall mean this Agreement, the Notes, the
Warrants, the Security Agreement and the Intercreditor Agreement.
"TAX" or "TAXES" shall be understood to include any tax or similar
governmental charge, impost or levy (including, without limitation, income
taxes, franchise taxes, transfer taxes or fees, sales taxes, excise taxes, ad
valorem taxes, withholding taxes, minimum taxes, use taxes, occupancy taxes,
property taxes, employment taxes, stamp taxes or windfall profit taxes),
together with any related liabilities, penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency therefor.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
13.2. INDEX. The following terms shall have the respective
meanings specified on the indicated page of this Agreement:
Ailicec ........................... 2
Audited Financial Statements ...... 5
31
<PAGE>
Closing........................... 2
Company........................... 1
Condition......................... 3
Control........................... 28
Equity Closing.................... 22
Equity Documents.................. 22
Event of Default.................. 23
First Closing..................... 1
Intellectual Property Rights...... 8
Intercreditor Agreement........... 3
Liabilities....................... 6
Nonperfected Collateral........... 5
Notes............................. 1
PBGC.............................. 9
Purchase Price.................... 22
Security Agreement................ 3
Series F Preferred Stock.......... 22
Stop order........................ 21
Subsequent Closing................ 1
Subsequent Documents.............. 4
Unaudited Financial Statements.... 5
Warrants.......................... 3
32
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first set forth above.
Very truly yours,
JETFAX, INC.
By _______________________________
Rudy Prince
President
The foregoing Agreement is hereby agreed to and accepted.
[Name of Purchaser]
By:___________________________
Name:_________________________
Title:________________________
33
<PAGE>
EXHIBIT A
CERTIFICATE NO. ___________ DATE: _______________, 1994
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.
NOTE
$_____________ ________________, 1994
10% Menlo Park, California
FOR VALUED RECEIVED, the undersigned, JetFax, Inc., a Delaware
corporation ("Maker"), promises to pay to __________________ or order
("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 $_________ with interest thereon at the
rate of 10% 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.
1. PAYMENTS. Payments of interest only shall be due and payable in
quarterly installments as provided herein. Interest on the principal amount of
this Note remaining unpaid shall be due and payable on January 31, April 30,
July 31 and October 31 of each year during the term hereof. The entire unpaid
principal balance, together with all accrued but unpaid interest, shall be due
and payable on the date that is the later of (a) December 31, 1995 or (b) the
date that is one year from the date hereof. Should interest or principal not be
paid when due on this Note, the Maker shall pay, to the extend permitted by
applicable law, interest on such past due amounts from such due date until
payment in full thereof at a rate equal to 2% simple interest per annum above
the rate otherwise applicable under this Note. All interest shall be computed on
the basis of the actual number of days elapsed and on a year of 365 days.
2. PREPAYMENT. Maker shall have the right, at any time and from
time 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.
3. INCORPORATION OF NOTE PURCHASE AGREEMENT AND SECURITY AGREEMENT.
This Note is issued pursuant to the provisions of, and is the Note referred to
in, the Note Purchase agreement dated as of August 3, 1994 (the "Agreement"),
between Maker and the purchasers listed in Schedule A to the Agreement (the
"Purchasers"), and is secured by and pursuant to a Security
<PAGE>
Agreement dated August 3, 1994 in favor of each of the Purchasers (the "Security
Agreement").
4. DEFAULT. The Agreement contains certain Events of Default upon
the occurrence of which payment due under this Note may be accelerated as
provided therein.
5. ATTORNEYS FEES. 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 attorney's 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.
6. GOVERNING LAWS. This Note shall be governed by, construed and
interpreted in accordance with, the laws of the State of New York, without
regard to conflicts of law provisions thereof.
7. COMPLIANCE. In no event shall the interest rate and other
charges under this Note exceed the highest rate permissible under any law that
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that a court determines that Holder has received
interest and other charges under this Note in excess of the highest permissible
rate applicable hereto, such excess shall be deemed received on account of, and
shall automatically be applied to reduce, the outstanding principal amount
hereunder and the provisions hereof shall be deemed amended to provide for the
highest permissible rate. If there is no outstanding principal amount under this
Note, Holder shall refund such excess to Maker.
8. ASSIGNABILITY. This Note may be assigned or transferred only as
permitted in the Agreement.
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: ________________________
Edward R. Prince III
President
<PAGE>
EXHIBIT E
CERTIFICATE NO. ________ DATE: ____________, 1994
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE ON EXERCISE OF
THIS WARRANT (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE
SECURITIES LAW, AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN 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 THE CORPORATION AND CONCURRED IN BY
THE CORPORATION'S COUNSEL TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
JETFAX, INC.
COMMON STOCK PURCHASE WARRANT
TO PURCHASE UP TO _________ SHARES OF COMMON STOCK
VOID AFTER _______________, 1999
JetFax, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that, for good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged by the Corporation,____________________________
(the "Holder") is entitled, subject to the terms and conditions set forth below,
to purchase from the Corporation up to ___________ fully paid and nonassessable
shares (the "Shares") of the Common Stock, par value $.01 per share, of the
Corporation ("Common Stock"), at a purchase price of $2.15 per Share (the
"Purchase Price") at any time or times on or prior to the Expiration Date (as
defined below). This Warrant shall expire and be of no further force or effect
at the earlier of the time when it has been exercised with respect to all Shares
which the Holder is entitled to purchase hereunder or 5:00 p.m., California
time, on the Expiration Date. Such number of Shares and the Purchase Price are
subject to adjustment, as hereinafter provided. Such number shall be reduced at
such time or times as this Warrant is exercised in part by the number of Shares
as to which this Warrant is then exercised.
<PAGE>
14. Manner of Exercise. The Holder of this Warrant may exercise his or
------------------
her rights hereunder at any time by written notice to the Corporation as set
forth herein. This Warrant may be exercised as a whole at any time, or in part
from time to time, by the Holder by delivering this Warrant, for cancellation
if it is exercised as a whole or for endorsement if it is exercised in part,
together with a Subscription in the form appearing at the end hereof properly
completed and duly executed by or on behalf of the Holder and such other
information and investment representations as may be reasonably requested by
the Corporation for the purpose of complying with applicable securities laws,
to the Corporation at its office in Menlo Park, California (or at the office
of the agency maintained for such purpose or at such other office or agency of
the Corporation as it may designate by notice in writing to the Holder at the
address thereof appearing on the books of the Company), accompanied by payment
by certified or official bank check payable to the order of the Corporation,
in an aggregate amount equal to the Purchase Price as then adjusted times the
number of Shares as to which this Warrant is then being exercised.
Notwithstanding the foregoing, at the closing of the Corporation's initial
public offering of its capital stock at a price per share equal to or greater
than the Purchase Price as then adjusted (the "IPO"), this Warrant shall
automatically be exercised, with no notice required by the Holder and in lieu
of the cash exercise provided for in the preceding sentence, on a net issuance
basis so that the Holder will receive a number of Shares equal to the product
of (a) the price per share paid to the Corporation for its sale of Common
Stock in the IPO (the "IPO Price") minus the Purchase Price as then adjusted
and (b) a fraction, the numerator of which is the number of Shares the Holder
is entitled to purchase hereunder and the denominator of which is the IPO
Price. In the event of any exercise of this Warrant that is partial, the
Corporation shall endorse this Warrant as having been exercised to that extent
and return this Warrant to the Holder for the balance. Anything in this
Warrant to the contrary notwithstanding, this Warrant may not be exercised to
any extent after 5:00 p.m., California time, on the Expiration Date or after
it has been exercised in the aggregate for the number of Shares that the
Holder is entitled to purchase hereunder, and unless this Warrant is being
exercised with respect to all Shares subject to this Warrant, this Warrant may
be exercised only with respect to whole Shares.
15. Delivery of Stock Certificates on Exercise. The Corporation will,
------------------------------------------
or will direct its transfer agent to, issue, as soon as practicable after any
exercise of this Warrant, and in any event within thirty days thereafter, at
the Corporation's expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the Holder may direct
(on payment by the Holder of any applicable transfer taxes and compliance with
all restrictions on transferability set forth herein), a certificate or
certificates for the number of fully paid and nonassessable Shares as to which
this Warrant is so exercised, plus, in lieu of any fractional shares to which
the Holder would otherwise be entitled, cash equal to such fraction or
fractions multiplied by the Purchase Price as then adjusted.
<PAGE>
16. Anti-Dilution Adjustments.
-------------------------
16.1 Stock Dividends, Splits, Etc. The number of Shares
-----------------------------
purchasable on exercise of this Warrant shall be subject to adjustment from time
to time in the event that the Corporation shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock on any of its outstanding Common Stock,
(b) subdivide its outstanding shares of Common Stock into a greater number of
shares, (c) combine its outstanding shares of Common Stock into a smaller number
of shares or (d) issue by reclassification of its Common Stock any shares of
capital stock of the Corporation (other than a reclassification resulting from a
merger or consolidation covered in section 3.2 or a Buy-Out Event (as defined
below)). In any such case, the total number of Shares issuable upon exercise of
this Warrant immediately prior thereto shall be adjusted so that the Holder
shall be entitled to receive at the same aggregate Purchase Price (as set forth
in section 3.3) the number of shares of stock or other securities of the
Corporation or otherwise to which the Holder would have owned or would have been
entitled to receive immediately following the occurrence of any of the events
described above had this Warrant been exercised in full immediately prior to the
occurrence (or applicable record date) of such event. An adjustment made
pursuant to this section 3.1 shall, in the case of a stock dividend or
distribution, be made as of the record date therefor and, in the case of a
subdivision, combination or a reclassification, be made as of the effective date
thereof. In any such case, appropriate adjustments shall be made in the
application of the provisions hereof with respect to the rights of the Holder
after a recapitalization to the end that the provisions hereof shall be
applicable after that event as nearly equivalent as may be practicable.
16.2. Reorganization, Recapitalization, Consolidation, Merger or
----------------------------------------------------------
Sale of Assets. In the event of any reorganization or recapitalization of the
Corporation (other than as provided in section 3.1) or in the event that the
Corporation consolidates with or merges into another corporation in a
transaction in which the Corporation is not the resulting corporation or
transfers all or substantially all of its assets to another entity, then and
in each such event (other than a Buy-Out Event), the Holder, on exercise of
this Warrant as provided herein, at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or transfer, shall be
entitled to receive the stock or other securities or property to which the
Holder would have been entitled on such consummation if the Holder had
exercised this Warrant immediately prior thereto. In such case, the terms of
this Warrant shall survive the consummation of any such reorganization,
recapitalization, consolidation, merger or transfer and shall be applicable to
the shares of stock or other securities or property receivable on the exercise
of this Warrant after such consummation.
16.3 Adjustment of Purchase Price. On each adjustment of the number
----------------------------
of Shares or other securities issuable upon exercise of this Warrant pursuant
to this section 3, the Purchase Price shall thereafter be the number obtained
by dividing (a) the product of the number of Shares issuable on full exercise
of this Warrant immediately prior
<PAGE>
to such adjustment by the Purchase Price in effect immediately prior to such
adjustment by (b) the number of Shares or other securities issuable upon full
exercise of this Warrant after such adjustment.
16.4 Rounding. All calculations under this section 3 shall be made
--------
to the nearest cent or to the nearest one-hundredth of a Share, as the case
may be, but in no event shall the Corporation be obligated to issue any
fractional share on any exercise of this Warrant.
17. Expiration Date. This Warrant shall expire and shall be of no further
---------------
force or effect at the earlier of the following times (the "Expiration Date")
(a) the time when the Warrant has been exercised with respect to all Shares
which the Holder is or may be entitled to purchase hereunder, (b) 5:00 p.m.,
California time, on the fifth anniversary of the date of this Warrant, or (d)
a Buy-Out Event. A "Buy-Out Event" shall occur if a purchaser acquires more
than 66-2/3% of the fully diluted Common Stock of the Corporation, whether
through stock purchase, merger or otherwise.
18. Further Assurances. The Corporation will not, by amendment of its
------------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid, directly or
indirectly, the performance of any of the terms of this Warrant, but will at all
times in good faith take all necessary action to carry out all such terms.
Without limiting the generality of the foregoing, the Corporation (a) will not
create any par value, or increase the par value, of any shares of stock
receivable on exercise of this Warrant above the amount payable therefor on such
exercise, (b) will take all such action as may be necessary or appropriate so
that the Corporation may validly and legally issue fully paid and nonassessable
shares of stock on the exercise of this Warrant, and (c) will not transfer all
or substantially all of its assets to any person, or consolidate with or merge
into any person or permit any person to consolidate with or merge into the
Corporation (if the Corporation is not the surviving person), unless such person
shall be bound by all of the terms of this Warrant. This Warrant shall be
binding on the successors and assigns of the Corporation.
19. Notices of Record Dates, Etc.
----------------------------
(a) If the Corporation shall fix a record date of the holders of
Common Stock (or other stock or securities at the time deliverable on
exercise of this Warrant) for the purpose of entitling or enabling them
to receive any dividend (other than a stock dividend) or other
distribution, or to receive any right to subscribe for or purchase any
shares of any class of any other securities, or to receive any other
right,
(b) in the event of any reorganization or recapitalization of the
Corporation, any Buy-Out Event, any reclassification of the capital stock
<PAGE>
of the Corporation, any consolidation or merger of the Corporation with
or into another corporation or any transfer of all or substantially all
of the assets of the Corporation to another entity,
(c) in the event of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation or
(d) if the Corporation has filed a registration statement under the
Securities Act of 1933, as amended, with the Securities and Exchange
Commission for an offering of the Corporation's capital stock,
then, in any such event, the Corporation will mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which a record is to be taken for the purpose of voting on or
approving such reorganization, recapitalization, Buy-Out Event,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up and the date on which such event is to take place and the time, if
any is to be fixed, as of which the holders of record of Common Stock (or such
other stock or securities at the time deliverable on exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities) for securities or other property deliverable on such
reorganization, recapitalization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding up or (iii) the date on which
the Corporation's registration statement was filed and the class of securities
proposed to be registered. Such notice shall be mailed at least twenty-one
days prior to the record date therein specified or within twenty-one days after
filing the registration statement, as the case may be.
20. Replacement of Warrant. On receipt of evidence reasonably
----------------------
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, on
delivery of a bond or other indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Corporation covenants that it will issue a new
Warrant, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Warrant.
21. Covenant to Reserve Common Stock. The Corporation shall at all times
--------------------------------
reserve and keep available out of its authorized but unissued Common Stock the
full number of shares of Common Stock deliverable upon exercise of this Warrant
and shall, at its own expense, take all such actions and attain all such permits
and orders as may be necessary to enable the Corporation lawfully to issue such
Common Stock upon exercise of this Warrant.
22. Issuance Taxes. On exercise of this Warrant, the Corporation shall
--------------
pay any and all issuance taxes that may be payable in respect of any issuance or
<PAGE>
delivery of shares of Common Stock on such exercise. The Corporation shall
not, however, be required to pay, and the Holder shall pay, any tax that may
be payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that of the Holder, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax, where it is
established to the satisfaction of the Corporation, that such tax has been
paid.
23. Ownership of Warrant. Until this Warrant is transferred on the books
--------------------
of the Corporation, the Corporation may treat the person in whose name this
Warrant is registered on the books of the Corporation as the absolute owner
hereof for all purposes, notwithstanding any notice to the contrary.
24. Survival of Covenants, Representations and Warranties. All
-----------------------------------------------------
agreements, covenants, representations and warranties herein shall survive the
execution and delivery of this Warrant and any investigation at any time made on
behalf of any party and the exercise, sale and purchase of this Warrant and the
Common Stock issuable on exercise hereof.
25. Voting Rights. This Warrant shall not entitle the Holder, as such, to
-------------
any voting rights or other rights as a stockholder of the Corporation or to any
other rights except the rights stated herein.
26. Entire Agreement. This Warrant, and the Note Purchase Agreement
----------------
between the Corporation and the Holder relating to this Warrant (the "Note
Purchase Agreement"), together contain the entire agreement of the parties and
supersede all prior or contemporaneous written or oral negotiations,
correspondence, understandings and agreements between the parties, regarding the
subject matter hereof.
27. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Warrant shall bind and inure to the benefit of the Holder and the Corporation
and their respective successors and assigns.
28. Notices. All demands, notices and other communications to be given
-------
hereunder shall be in writing and shall be deemed duly given and received when
transmitted by facsimile transmission with receipt acknowledged by the
addressee, when delivered personally or three days after being mailed by first
class mail, postage prepaid, properly addressed, if to the Corporation, at 1376
Willow Road, Menlo Park, California 94025, facsimile number (415) 326-6003 or,
if to the Holder, at the Holder's address contained in the Note Purchase
Agreement between the Holder and the Corporation or at any other address or
facsimile number designated by notice by either party to the other party.
<PAGE>
29. Amendments; Waivers; Termination; Governing Law, Headings. This
---------------------------------------------------------
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be governed by and construed and interpreted in accordance with the laws of
the State of California. The headings in this Warrant are for convenience of
reference only and shall not affect the construction or interpretation of any
provision hereof.
30. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
----------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or legal holiday.
31. Assignability. This Warrant may not be assigned or transferred other
-------------
than as provided in the Note Purchase Agreement.
32. Adjustment of Purchase Price. In the event the Corporation at any
----------------------------
time or from time to time on or prior to the Expiration Date shall issue
Additional Shares (as defined herein) for a consideration per share less than
$2.15, then the Purchase Price shall be reduced to equal the consideration per
share received by the Corporation for such Additional Shares. No adjustment of
the number of Shares issuable upon exercise of this Warrant shall result from
any adjustment in the Purchase Price pursuant to this Section 19. For purposes
of this Section 19, "Additional Shares" shall mean shares of Common Stock, or
equity securities of the Corporation convertible into shares of Common Stock,
issued by the Corporation from time to time after the date hereof to one or more
investors. Notwithstanding the foregoing, Additional Shares shall not include
the first 100,000 shares in the aggregate (calculated without including any of
the securities described in Clauses (a), (b), (c) or (d) hereof) of Common
Stock, or equity securities of the Corporation convertible into shares of Common
Stock, issued by the Corporation after the date hereof and prior to January 1,
1996, and Additional Shares shall not include any securities issued or issuable
(a) to Ailicec in connection with the Purchase and Debt Restructuring Agreement
dated as of August 3, 1994 between the Corporation and Ailicec International
Enterprises Limited, (b) to officers, directors, employees or consultants of the
Corporation or issued or issuable pursuant to any employee stock purchase or
employee stock option plan of the Corporation approved by the Corporation's
Board of Directors, (c) pursuant to the Note Purchase Agreement or (d) upon
conversion of any Preferred Stock of the Corporation.
Dated as of ________________, 1994
[SEAL] JETFAX, INC.
By:_____________________________
Rudy Prince
President
<PAGE>
ENDORSEMENTS
------------
Number
Number of of Shares
Shares as Remaining
Exercise to which Available Signature of Authorized
Date Exercised for Exercise Officer of the Corporation
- -------- --------- ------------ --------------------------
<PAGE>
SUBSCRIPTION
(To be completed and signed only on
an exercise of the Warrant.)
To JetFax, Inc.:
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________ shares of the Common Stock of JetFax, Inc. of
those to which such Holder is entitled thereunder, and herewith makes payment of
$__________ therefor by certified or official bank check. The undersigned
hereby requests that the certificate(s) for such shares be issued in the name(s)
and delivered to the address(es) as follows:
___________________________
_________________________________________
_________________________________________
_________________________________________
Dated: ___________ ___________________________
__________________________, Holder
By ________________________
Its _______________________
<PAGE>
SCHEDULE A
List of Purchasers
Name, Address and Principal Amount of
Facsimile Number Notes to be Purchased Closing Date
- ------------------ --------------------- ------------
<PAGE>
Schedule A
----------
Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address Notes to be Purchased Closing Date
- ------------------------------ --------------------- ------------
<S> <C> <C>
John P. Rosenthal $ 25,000 8/26/94
Burnham Securities
1325 Ave. of Americas
New York, NY 10019
Irwin W. Silverberg $ 25,000 8/26/94
Burnham Securities
1325 Ave. of Americas
New York, NY 10019
Dorothy G. Gorman $ 25,000 8/26/94
12 Highland Drive
Livingston, NJ 07039
Newman Family $ 25,000 8/26/94
1990 Revocable Trust
916 Jackling Drive
Burlingame, CA 94010
John D. & Patricia G. Cook $ 20,000 8/26/94
1944 North Cleveland Avenue
Chicago, IL 60614
Cook Investors $ 30,000 8/26/94
Limited Partnership
1841 Resort Road
Burt Lake, MI 49717
Thomas & Karen Akin $150,000 8/26/94
10 Via Elverano
Tiburon, CA 94920
Jeffrey S. Gilmore $ 25,000 8/26/94
20 Anderson Way
Menlo Park, CA 94025
Katherine Pennell $ 25,000 1/20/95
433 Hicks St., Apt. 3E
Brooklyn, NY 11201
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount of
Name and Address Notes to be Purchased Closing Date
- -------------------------------- --------------------- ------------
<S> <C> <C>
Abdulwahab Al-Qatami $ 10,000 1/20/95
KME Management Services, Inc.
550 California Avenue
Suite 330
Palo Alto, CA 94306
Timothy Draper $ 16,912 1/20/95
Draper Associates
400 Seaport Ct.
Suite 250
Redwood City, CA 94063
Polly Draper $ 8,901 1/20/95
Draper Associates
400 Seaport Ct.
Suite 250
Redwood City, CA 94063
Draper Associates $117,553 1/20/95
400 Seaport Ct.
Suite 250
Redwood City, CA 94063
Rebecca Draper $ 6,633 1/20/95
Draper Associates
400 Seaport Ct.
Suite 250
Redwood City, CA 94063
Evelyn Morrow $ 25,000 1/20/95
175 W. 73rd St., Apt. 12J
New York, NY 10023
Kenneth Alpart $ 50,000 1/20/95
2054 N. Burling
Chicago, IL 60614
Shartsis, Friese $ 20,000 1/20/95
& Ginsburg
One Maritime Plaza
18th Floor
San Francisco, CA 94111
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount of
Name and Address Notes to be Purchased Closing Date
- --------------------------------- --------------------- ------------
<S> <C> <C>
Paul Lego $ 50,000 1/20/95
2960 Divisadero St., #4
San Francisco, CA 94123
Rose and Haar $ 10,000 1/20/95
Certified Public Accountants
150 Great Neck Road
Great Neck, NY 11021
Saratoga Springs Co., Ltd. $ 50,000 1/20/95
P.O. Box 694
Georgetown, Grand Cayman
Cayman Islands,
British West Indies
"Trust Dated 10/12/82 for $150,000 1/20/95
the Benefit of William
Beinecke's grandchildren"
420 Lexington Ave, Ste. 3020
New York, NY 10170
Antaeus Enterprises, Inc. $100,000 1/20/95
420 Lexington Ave, Ste. 3020
New York, NY 10170
Fred and Nancy Lovell $ 50,000 1/20/95
2912 Via Rivera
Palos Verdes Estates, CA 92074
Janet Orttung-Morrow $ 25,000 1/20/95
Family Trust
239 North Parkview Avenue
Columbus, OH 43209
Ken Alpart $ 50,000 1/20/95
2054 N. Burling
Chicago, IL 60614
PolyVentures II, $250,000 1/20/95
Limited Partnership
901 Route 110
Farmingdale, NY 11735
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount of
Name and Address Notes to be Purchased Closing Date
- ---------------------------- --------------------- ------------
<S> <C> <C>
Charles C. McLeod, Jr. $ 25,000 1/20/95
61 Glen Alpine Road
Piedmont, CA 94611
Scott P. Peters $ 50,000 1/20/95
2755 Webster, Apt. 12
San Francisco, CA 94123
Curtis J. Pabst $ 50,000 1/20/95
c/o Merrill Lynch
101 California St., #1400
San Francisco, CA 94111
Robert G. Lundgren $ 50,000 1/20/95
c/o Merrill Lynch
101 California St., #1400
San Francisco, CA 94111
Dennis M. Schaney $ 50,000 1/20/95
141 Jelliff Mill Road
New Canaan, CT 06840
Dalton W. Martin $ 25,000 1/20/95
7375 Via Montecitos
San Jose, CA 94920
Thomas & Karen Akin $150,000 1/20/95
10 Via Elverano
Tiburon, CA 94920
PolyVentures II, $250,000 1/20/95
Limited Partnership
901 Route 110
Farmingdale, NY 11735
Thomas & Karen Akin $200,000 10/10/95
10 Via Elverano
Tiburon, CA 94920
Robert G. Lundgren $ 50,000 10/10/95
c/o Merrill Lynch
101 California St., #1400
San Francisco, CA 94111
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount of
Name and Address Notes to be Purchased Closing Date
- --------------------------------- --------------------- ------------
<S> <C> <C>
David A. Evans $100,000 10/10/95
130 Gramercy Drive
San Mateo, CA 94402
Dennis M. Schaney $ 50,000 10/10/95
141 Jelliff Mill Road
New Canaan, CT 06840
Scott P. Peters $ 25,000 10/10/95
2755 Webster, Apt 12
San Francisco, CA 94123
Charles C. McCleod, Jr. $ 25,000 10/10/95
61 Glenn Alpine Road
Piedmont, CA 94611
Paul Distefano $ 20,000 10/10/95
2420 Trellis Lane
Plano, TX 75075
Paul W. Chargois $ 15,000 10/10/95
P.O. Box 7097
Beaumont, TX 77726
Traslader SA $ 50,000 10/10/95
CP500
1920 Martigny, Switzerland
Granite Capital, LP $250,000 10/10/95
375 Park Ave.
18th Floor
New York, NY 10152
Strome Family Trust $150,000 10/10/95
c/o Strome Susskind
Investment Mgmt., L.P.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401
Lambert Family Trust $ 12,500 10/10/95
c/o Strome Susskind
Investment Mgmt., L.P.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount of
Name and Address Notes to be Purchased Closing Date
- --------------------------------- --------------------- ------------
<S> <C> <C>
James Herrell $12,500 10/10/95
c/o Strome Susskind
Investment Mgmt., L.P.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401
Curtis J. Pabst $50,000 10/10/95
c/o Merrill Lynch
101 California St., #1400
San Francisco, CA 94111
_______________
TOTAL $2,999,999
</TABLE>
<PAGE>
FIRST AMENDMENT TO
NOTE PURCHASE AGREEMENT
THIS AMENDMENT is made as of December [__], 1994, by and among JetFax,
Inc., a Delaware corporation (the "Company"), and each of the persons listed on
Schedule A attached to the Note Purchase Agreement (as hereinafter defined).
The persons listed on such Schedule A are hereinafter referred to collectively
as the "Investors" and individually as an "Investor".
WHEREAS, the Company and the Investors are parties to a Note Purchase
Agreement dated as of August 3, 1994 (the "Note Purchase Agreement"); and
WHEREAS, the Company and the Investors desire to amend the Note Purchase
Agreement and the other Related Documents (as defined in the Note Purchase
Agreement) as set forth below pursuant to the provisions of Section 12.5 of the
Note Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and each Investor hereby agree as follows:
1. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Note Purchase Agreement.
2. The first sentence of Section 1 of the Note Purchase Agreement is
hereby amended by deleting the text thereof and substituting the following:
"The Company will authorize the issuance and sale of up to $3,000,000
aggregate principal amount of its 10% Senior Secured Convertible Notes (the
"NOTES", such term to include any such notes issued in substitution
therefor pursuant to section 12) due the later of December 31, 1995 or the
date that is one year from the date of issuance and sale (the "STATED
MATURITY DATE") to be substantially in the form of the Notes set out in
Exhibit A, with such changes therefrom, if any, as may be approved by you
---------
and the Company."
<PAGE>
3. Section 4.9 of the Note Purchase Agreement is hereby amended by
deleting the text thereof and substituting the following:
"The Company shall have issued and delivered to you a Warrant in the
form set forth in Exhibit E (collectively, the "WARRANTS") for an amount
---------
of shares of Common Stock of the Company equal to (a) if such Closing
occurs on or before December 31, 1994, 60% of the principal amount of Notes
purchased by you divided by $2.15, or (b) if such Closing occurs after
December 31, 1994, 20% of the principal amount of Notes purchased by you
divided by $2.15."
4. Section 8.14 of the Note Purchase Agreement is hereby amended by
deleting the text thereof and substituting the following:
"If all amounts owed by the Company to you or your assigns under any
Note issued to you are not repaid by or upon the Stated Maturity Date of
such Note, the Company shall issue and deliver a Warrant to you, or your
permitted assigns, as the case may be, on the last day of each month
thereafter, for as long as any amount under each Note remains outstanding,
for an amount of shares of Common Stock of the Company equal to 2% of the
principal amount of that Note outstanding at that time divided by $2.15."
5. The first three sentences of Section 1 of Exhibit A to the Note
Purchase Agreement are hereby amended by deleting the text thereof and
substituting the following:
"Payments of interest only shall be due and payable in quarterly
installments as provided herein. Interest on the principal amount of this
Note remaining unpaid shall be due and payable on January 31, April 30,
July 31 and October 31 of each year during the term hereof. The entire
unpaid principal balance, together with all accrued but unpaid interest,
shall be due and payable on the date that is the later of (a) December 31,
1995 or (b) the date that is one year from the date hereof."
6. Exhibit E to the Note Purchase Agreement is hereby amended by adding
the following new Section 19:
-53-
<PAGE>
"19. Adjustment of Purchase Price. In the event the Corporation at
----------------------------
any time or from time to time on or prior to the Expiration Date shall
issue Additional Shares (as defined herein) for a consideration per share
less than $2.15, then the Purchase Price shall be reduced to equal the
consideration per share received by the Corporation for such Additional
Shares. No adjustment of the number of Shares issuable upon exercise of
this Warrant shall result from any adjustment in the Purchase Price
pursuant to this Section 19. For purposes of this Section 19, "Additional
Shares" shall mean shares of Common Stock, or equity securities of the
Corporation convertible into shares of Common Stock, issued by the
Corporation from time to time after the date hereof to one or more
investors for gross consideration received by the Corporation that in the
aggregate exceeds $1,000,000. Notwithstanding the foregoing, Additional
Shares shall not include any securities issued or issuable (a) to Ailicec
in connection with the Purchase and Debt Restructuring Agreement dated as
of August 3, 1994 between the Corporation and Ailicec International
Enterprises Limited, (b) to officers, directors, employees or consultants
of the Corporation or issued or issuable pursuant to any employee stock
purchase or employee stock option plan of the Corporation approved by the
Corporation's Board of Directors, (c) pursuant to the Note Purchase
Agreement or (d) upon conversion of any Preferred Stock of the
Corporation."
7. All Notes and Warrants outstanding as of the date hereof are hereby
amended to be identical in form and substance with the terms set forth in this
Amendment. All such outstanding Notes and Warrants shall be deemed so amended
(including without limitation with respect to the amount of shares purchasable
under all such Warrants and the maturity date of all such Notes),
notwithstanding the failure of any Investor to deliver any Note or Warrant for
exchange as provided herein. Upon execution of this Amendment by the Company
and a Majority of the Investors, all Investors shall deliver to the Company all
Notes and Warrants issued to them in exchange for replacement Notes and Warrants
of like tenor with text consistent to the terms set forth in this Amendment.
8. The second and third sentences of the first paragraph of Exhibit C to
the Note Purchase Agreement are
-54-
<PAGE>
hereby amended by deleting the text thereof and substituting the following:
"Pursuant to the Agreement, the Investors propose to make a bridge
loan in the aggregate principal amount of up to U.S. $3,000,000, which loan
shall (i) be evidenced by several notes issued to the Investors (the
"Notes"), (ii) mature in no less than twelve months and (iii) be secured by
a security interest in the Collateral (as defined below). Any such loans
in excess of U.S. $3,000,000 principal amount, in the aggregate, shall not
be covered by this Intercreditor Agreement."
9. The second and third sentences of the first paragraph of the
Intercreditor Agreement dated as of August 3, 1994 among the Company, Ailicec
International Enterprises Limited and the Investors are hereby amended by
deleting the text thereof and substituting the following:
"Pursuant to the Agreement, the Investors propose to make a bridge
loan in the aggregate principal amount of up to U.S. $3,000,000, which loan
shall (i) be evidenced by several notes issued to the Investors (the
"Notes"), (ii) mature in no less than twelve months and (iii) be secured by
a security interest in the Collateral (as defined below). Any such loans
in excess of U.S. $3,000,000 principal amount, in the aggregate, shall not
be covered by this Intercreditor Agreement."
10. The term "Agreement" as used in the Note Purchase Agreement, the other
Related Documents and all other instruments and agreements executed thereunder
shall for all purposes refer to the Note Purchase Agreement as amended by this
Amendment.
11. Except to the extent expressly amended by the terms of this Amendment,
all the terms and conditions of the Note Purchase Agreement, the other Related
Documents and all other instruments and agreements executed thereunder remain in
full force and effect.
12. This Amendment may be executed in any number of duplicate
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
-55-
<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Amendment as of the
day and year first written above.
JETFAX, INC. JOHN P. ROSENTHAL
By: _____________________ __________________________
Rudy Prince
President
IRWIN W. SILVERBERG DOREE GORMAN
________________________ _________________________
NEWMAN FAMILY 1990 REVOCABLE JOHN D. & PATRICIA G.COOK
TRUST
By: ___________________ _________________________
Name:___________________ _________________________
Title: _________________
COOK INVESTORS LIMITED THOMAS & KAREN AKIN
PARTNERSHIP
By: ___________________ _________________________
Name: _________________ _________________________
Title: _________________
JEFFREY S. GILMORE KATHERINE PENNELL
________________________ __________________________
-56-
<PAGE>
ABDULWAHAB AL-QATAMI TIMOTHY DRAPER
_______________________ _________________________
POLLY DRAPER DRAPER ASSOCIATES
________________________ By:______________________
Name:____________________
Title:___________________
REBECCA DRAPER EVELYN MORROW
_________________________ _________________________
KENNETH ALPART SHARTSIS, FRIESE &
GINSBURG
_________________________ By:______________________
Name: ___________________
Title:___________________
PAUL LEGO ROSE AND HAAR
________________________ By:______________________
Name:___________________
Title: __________________
-57-
<PAGE>
SARATOGA SPRINGS CO., LTD. TRUST DATED 10/12/82 FOR THE
BENEFIT OF WILLIAM
BEINECKE'S GRANDCHILDREN
By:_____________________ By:______________________
Name:___________________ Name: ___________________
Title:__________________ Title: _________________
ANTAEUS ENTERPRISES, INC.
By: ___________________
Name: __________________
Title: _________________
READ AND AGREED TO:
AILICEC INTERNATIONAL ENTERPRISES LIMITED
By: ___________________
Name: __________________
Title: _________________
-58-
<PAGE>
SECOND AMENDMENT TO
NOTE PURCHASE AGREEMENT
THIS AMENDMENT is made as of January 4, 1995, by and among JetFax, Inc., a
Delaware corporation (the "Company"), and each of the persons listed on Schedule
A attached to the Note Purchase Agreement (as hereinafter defined). The
persons listed on such Schedule A are hereinafter referred to collectively as
the "Investors" and individually as an "Investor".
WHEREAS, the Company and the Investors are parties to a Note Purchase
Agreement dated as of August 3, 1994, as amended by the First Amendment to Note
Purchase Agreement dated as of December 7, 1994 (the "Note Purchase Agreement");
and
WHEREAS, the Company and the Investors desire to amend the Note Purchase
Agreement and the Warrants (as defined in the Note Purchase Agreement) as set
forth below pursuant to the provisions of Section 12.5 of the Note Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and each Investor hereby agree as follows:
1. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Note Purchase Agreement.
2. Section 4.9 of the Note Purchase Agreement is hereby amended by
replacing the term "December 31, 1994" in clauses (a) and (b) thereof in both
instances where it appears with the term "January 20, 1995".
3. The third and fourth sentences of Section 19 of Exhibit E to the Note
Purchase Agreement are hereby amended by deleting the text thereof and
substituting the following:
"For purposes of this Section 19, "Additional Shares" shall mean shares of
Common Stock, or equity securities of the Corporation convertible into
shares of Common Stock, issued by the Corporation from time to time after
the date hereof to one or more investors. Notwithstanding the foregoing,
Additional Shares shall not include the first 100,000 shares in the
aggregate
<PAGE>
(calculated without including any of the securities described in
Clauses (a), (b), (c) or (d) hereof) of Common Stock, or equity securities
of the Corporation convertible into shares of Common Stock, issued by the
Corporation after the date hereof and prior to January 1, 1996, and
Additional Shares shall not include any securities issued or issuable (a)
to Ailicec in connection with the Purchase and Debt Restructuring Agreement
dated as of August 3, 1994 between the Corporation and Ailicec
International Enterprises Limited, (b) to officers, directors, employees or
consultants of the Corporation or issued or issuable pursuant to any
employee stock purchase or employee stock option plan of the Corporation
approved by the Corporation's Board of Directors, (c) pursuant to the Note
Purchase Agreement or (d) upon conversion of any Preferred Stock of the
Corporation."
4. All Warrants outstanding as of the date hereof are hereby amended to be
identical in form and substance with the terms set forth in this Amendment. All
such outstanding Warrants shall be deemed so amended, notwithstanding the
failure of any Investor to deliver any Warrant for exchange as provided herein.
Upon execution of this Amendment by the Company and a Majority of the Investors,
all Investors shall deliver to the Company all Warrants issued to them in
exchange for replacement Warrants of like tenor with text consistent to the
terms set forth in this Amendment.
5. The term "Agreement" as used in the Note Purchase Agreement, the other
Related Documents and all other instruments and agreements executed thereunder
shall for all purposes refer to the Note Purchase Agreement as amended by this
Amendment.
6. Except to the extent expressly amended by the terms of this Amendment,
all the terms and conditions of the Note Purchase Agreement, the Warrants, the
other Related Documents and all other instruments and agreements executed
thereunder remain in full force and effect.
7. This Amendment may be executed in any number of duplicate counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly signed this
-60-
<PAGE>
Amendment as of the day and year first written above.
JETFAX, INC. JOHN P. ROSENTHAL
By: ___________________ _________________________
Rudy Prince
President
IRWIN W. SILVERBERG DOREE GORMAN
________________________ ________________________
NEWMAN FAMILY 1990 REVOCABLE JOHN D. & PATRICIA G.COOK TRUST
By: ___________________ ________________________
Name:___________________ ________________________
Title: _________________
COOK INVESTORS LIMITED THOMAS & KAREN AKIN
PARTNERSHIP
By: ___________________ _________________________
Name: _________________ _________________________
Title: _________________
JEFFREY S. GILMORE KATHERINE PENNELL
________________________ ________________________
-61-
<PAGE>
ABDULWAHAB AL-QATAMI TIMOTHY DRAPER
________________________ ________________________
POLLY DRAPER DRAPER ASSOCIATES
________________________ By:______________________
Name:____________________
Title:___________________
REBECCA DRAPER EVELYN MORROW
_________________________ _______________________
KENNETH ALPART SHARTSIS, FRIESE &
GINSBURG
_________________________ Name: ___________________
Title:___________________
PAUL LEGO ROSE AND HAAR
________________________ By:______________________
Name:___________________
Title: __________________
-62-
<PAGE>
SARATOGA SPRINGS CO., LTD. TRUST DATED 10/12/82 FOR THE
BENEFIT OF WILLIAM
BEINECKE'S GRANDCHILDREN
By:_____________________ By:______________________
Name:___________________ Name: ___________________
Title:__________________ Title: _________________
ANTAEUS ENTERPRISES, INC. FRED AND NANCY LOVELL
By: _______________________ _________________________
Name: ______________________ _________________________
Title: _____________________
JANET ORTTUNG-MORROW FAMILY
TRUST
By: ______________________
Name: ______________________
Title: _____________________
-63-
<PAGE>
THIRD AMENDMENT TO
NOTE PURCHASE AGREEMENT
THIS AMENDMENT is made as of January 13, 1995, by and among JetFax, Inc., a
Delaware corporation (the "Company"), and each of the persons listed on Schedule
A attached to the Note Purchase Agreement (as hereinafter defined). The
persons listed on such Schedule A are hereinafter referred to collectively as
the "Investors" and individually as an "Investor".
WHEREAS, the Company and the Investors are parties to a Note Purchase
Agreement dated as of August 3, 1994, as amended by the First Amendment to Note
Purchase Agreement dated as of December 7, 1994 and the Second Amendment to Note
Purchase Agreement dated as of January 4, 1995 (the "Note Purchase Agreement");
and
WHEREAS, the Company and the Investors desire to amend the Note Purchase
Agreement as set forth below pursuant to the provisions of Section 12.5 of the
Note Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and each Investor hereby agree as follows:
1. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Note Purchase Agreement.
2. Section 4.9 of the Note Purchase Agreement is hereby amended by adding
the following text at the end of clause (b) of such Section 4.9:
"; provided, however, that notwithstanding anything to the contrary
contained herein, if any Person purchasing Notes hereunder at a Closing
occurring on or before January 20, 1995 executes this Agreement and pays
the purchase price for at least 50% of the Notes such Person is agreeing to
purchase (as indicated on Schedule A hereto) on or before such Closing and
----------
pays the balance for such Notes on or before February 2, 1995, then the
Company shall issue and deliver to such Person, upon the payment of such
balance, Warrants for an amount of shares of Common Stock of the Company
equal to 60% of the principal amount of all of the
-64-
<PAGE>
Notes purchased by such Person divided by $2.15."
3. The term "Agreement" as used in the Note Purchase Agreement, the other
Related Documents and all other instruments and agreements executed thereunder
shall for all purposes refer to the Note Purchase Agreement as amended by this
Amendment.
4. Except to the extent expressly amended by the terms of this Amendment,
all the terms and conditions of the Note Purchase Agreement, the Warrants, the
other Related Documents and all other instruments and agreements executed
thereunder remain in full force and effect.
5. This Amendment may be executed in any number of duplicate counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
-65-
<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Amendment as of the
day and year first written above.
JETFAX, INC. JOHN P. ROSENTHAL
By: /s/ Rudy Prince /s/ John P. Rosenthal
-------------------- -----------------------
Rudy Prince
President
IRWIN W. SILVERBERG DOREE GORMAN
/s/ Irwin W. Silverberg /s/ Doree Gorman
- ------------------------ ----------------
NEWMAN FAMILY 1990 REVOCABLE JOHN D. & PATRICIA G.COOK
TRUST
By: /s/Jan Harleen Newman
----------------------
By: /s/Rober L. Newman /s/John D. Cook
---------------------- -------------------------
Name: Newman Family 1990 Revocable /s/Patricia G. Cook
---------------------------- -------------------------
Trust
-----
Title: Trustees
--------
COOK INVESTORS LIMITED THOMAS & KAREN AKIN
PARTNERSHIP
By: ___________________ _________________________
Name: _________________ _________________________
Title: _________________
-66-
<PAGE>
JEFFREY S. GILMORE KATHERINE PENNELL
________________________ ________________________
ABDULWAHAB AL-QATAMI TIMOTHY DRAPER
________________________ ________________________
POLLY DRAPER DRAPER ASSOCIATES
________________________ By:______________________
Name:____________________
Title:___________________
REBECCA DRAPER EVELYN MORROW
_________________________ _______________________
KENNETH ALPART SHARTSIS, FRIESE & GINSBURG
_________________________ Name: ___________________
Title:___________________
PAUL LEGO ROSE AND HAAR
________________________ By:______________________
Name:___________________
Title: __________________
-67-
<PAGE>
SARATOGA SPRINGS CO., LTD. TRUST DATED 10/12/82 FOR THE
BENEFIT OF WILLIAM
BEINECKE'S GRANDCHILDREN
By:_____________________ By:______________________
Name:___________________ Name: ___________________
Title:__________________ Title: _________________
ANTAEUS ENTERPRISES, INC. FRED AND NANCY LOVELL
By: _______________________ _________________________
Name: ______________________ _________________________
Title: _____________________
JANET ORTTUNG-MORROW FAMILY
TRUST
By: ______________________
Name: ______________________
Title: _____________________
<PAGE>
EXHIBIT 10.23
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE ON EXERCISE OF THIS-
WARRANT (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES
LAW, AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN 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 REASONABLY SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY AND REASONABLY CONCURRED IN BY THE COMPANY'S COUNSEL TO
THE EFFECT THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
JETFAX, INC.
WARRANT TO PURCHASE STOCK
Void After 5:00 P.M., Pacific Time, on October 4, 1999
NO. OF SHARES FOR WHICH THIS WARRANT IS
INITIALLY EXERCISABLE: 388,500
THIS WARRANT (the "WARRANT") dated as of December 31, 1994 is issued by
-------
JetFax, Inc., a Delaware corporation ("Company"), for the benefit of Ailicec
International Enterprises Limited, a Hong Kong corporation ("PURCHASER").
---------
RECITAL
WHEREAS, the Company and Purchaser have entered into that certain Purchase and
Debt Restructuring Agreement dated as of August 3, 1994 (the "RESTRUCTURING
-------------
AGREEMENT"), under which the Company has agreed to issue a Warrant to Purchaser
- ---------
representing the right to purchase a number of shares of Series E Preferred
Stock, par value $.01 per share, of the Company ("PREFERRED STOCK");
---------------
NOW THEREFORE, in consideration of the premises and of the agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
Exercise and Expiration
-----------------------
1.01. Number of Shares and Initial Warrant Price. This Warrant shall entitle
------------------------------------------
Purchaser, subject to the provisions hereof, to purchase from the Company
388,500 shares of Preferred Stock, or
<PAGE>
if on any date after the date of issuance of this Warrant there ceases to be
outstanding any shares of Preferred Stock, a corresponding number of shares of
Common Stock, par value $.01 per share, of the Company (the "COMMON STOCK"),
------------
(such shares, whether Preferred Stock or Common Stock, as the case may be, being
herein described as "UNDERLYING STOCK") at the price of $2.75 per share, subject
----------------
to adjustment as provided herein, payable in full at the time of purchase. The
term "WARRANT PRICE" as used herein refers to the foregoing price per share, as
-------------
adjusted, in effect at any time.
1.02. Manner of Exercise: Expiration. (a)(i) In order to exercise all or any
------------------------------
of this Warrant, Purchaser must surrender this Warrant to the Company at its
principal office, with the form of exercise on the last page of this Warrant
properly completed and duly executed and with such other information and
investment representations as may be reasonably requested by the Company for the
purpose of complying with applicable securities laws, together with payment in
full of the Warrant Price as then in effect for each share of Underlying Stock
to which the holder is entitled as to which with this Warrant is submitted for
exercise. Any such payment of the Warrant Price is to be (A) in cash or (B) by
certified or official bank or bank cashier's check or by bank wire transfer
payable to the order of the Company (or the Acquiring Company in the case of a
Transaction (as such terms are defined in Paragraph 2.01(b)), except as provided
in Section 1.03 below.
(ii) If this Warrant is to be exercised for less than all the shares
of Underlying Stock for which this Warrant may be exercised, this Warrant shall
be surrendered and a new Warrant of the same tenor and for the number of
remaining shares of Preferred Stock shall be executed by the Company and be
delivered to the person entitled to receive the same. Upon surrender of this
Warrant in conformity with the foregoing provisions, the Company (or the
Acquiring Company in the case of a Transaction) shall transfer to Purchaser
appropriate evidence of ownership of any shares of Underlying Stock to which the
Purchaser is entitled and shall deliver such evidence of ownership to the
Purchaser. If more than one warrant (including this Warrant) shall be
surrendered for exercise at one time by Purchaser, the total number of full
shares of Underlying Stock to which Purchaser is entitled which shall be
deliverable upon tender thereof shall be computed on the basis of the aggregate
number of shares of Underlying Stock to which the aggregate tendered warrants
are to be exercised. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for such
exercise of this
2
<PAGE>
Warrant and the Purchaser shall, as between such Purchaser and the Company (or
the Acquiring Company in the case of a Transaction), be deemed to be the holder
of such shares of Underlying Stock of record as of the close of business on such
date.
(iii) Without limiting the foregoing, if, at the date referred to
above, the transfer books for the shares of Underlying Stock purchasable upon
the exercise of this Warrant shall be closed, the certificates for the shares of
Underlying Stock in respect of which this Warrant is then exercised, shall be
transferred when such transfer book shall next be opened and until such date the
Company (or the Acquirer in the case of a Transaction) shall be under no duty to
deliver any certificates for such shares of Underlying Stock; provided, however,
that the transfer books of record, unless required by law, shall not be closed
at any time for a period longer than 20 days.
(iv) The initial issuance of certificates of Underlying Stock
upon the exercise of this Warrant shall be made without charge to Purchaser for
any tax in respect of the issuance of such stock certificates, and such stock
certificates shall be issued in the name of Purchaser, or (subject to compliance
with applicable securities laws) in such name or names as may be directed by
Purchaser; provided, however, that the Company shall not be required to issue or
deliver such certificates unless and until the person or persons requesting the
issuance thereof shall have established to the satisfaction of the Company that
such tax, if any, has been paid.
(b) In the event this Warrant has not been exercised in accordance
with the provisions of this Warrant by surrender in proper form to the Company
by 5:00 P.M., Pacific time, on October 4, 1999 (the "EXPIRATION DATE"), this
---------------
Warrant shall expire and all rights of the holder thereof shall terminate and
cease as of such time.
1.03 Net Exercise.
------------
(a) In the event all (or the remaining balance) of the purchase rights
represented by this Warrant are exercised by the Purchaser pursuant to Section
1.02 above, in lieu of payment of the Warrant Price pursuant to Section
1.02(a)(i) the Purchaser may elect to receive a number of shares of Underlying
Stock to which the Purchaser is entitled computed using the following formula:
3
<PAGE>
X=Y(A-B)
-----
A
where: X= the number of shares of Underlying Stock to be issued to the
Purchaser,
Y= the number of shares of Underlying Stock purchasable under
this Warrant,
A= the Fair Market Value (as defined below) of one share of
Underlying Stock to which the Purchaser is entitled, and
B= the Warrant Price.
(b) Determination of Fair Market Value. As used herein, the term "FAIR
---------------------------------- ----
MARKET VALUE" of a share of Underlying Stock to which the Purchaser is entitled
- ------------
as of a particular date (the "DETERMINATION DATE") shall mean:
------------------
(i) if the shares of Underlying Stock to which the Purchaser is
entitled are traded on an exchange or are quoted on the National Association of
Securities Dealers, Inc. automated quotation ("NASDAQ") National Market System,
------
the average of the closing or last sale price, respectively, of such stock as
reported for the ten (10) trading days immediately preceding the Determination
Date;
(ii) if the Underlying Stock to which the Purchaser is entitled is
not traded on an exchange or on the NASDAQ National Market System but is traded
in the over-the-counter market, then the average of the mean of the closing bid
and asked prices for a share of such stock reported for the ten (10) trading
days immediately preceding the Determination Date; and
(iii) if the Underlying Stock to which the Purchaser is entitled
is not publicly traded, then as determined in good faith by the Company's Board
of Directors as being the highest price per share which the Company could
reasonably obtain from a willing buyer (who is not an employee or director) for
authorized but unissued shares of Underlying Stock to which the Purchaser is
entitled.
(c) Limits on Exercise of Conversion Right. The rights under this Section
--------------------------------------
1.03 may only be exercised if the value
4
<PAGE>
of A minus B (where "A" and "B" are as defined in Section 1.03(a) above) is a
positive number.
1.04. No Fractional Shares to Be Issued. Notwithstanding anything to the
---------------------------------
contrary contained in this Warrant, the Company shall not be required to issue
any fraction of a share of Underlying Stock or to distribute stock certificates
that evidence fractional shares of Underlying Stock. If warrants (including this
Warrant) evidencing the right to purchase a number of shares of stock shall be
surrendered for exercise at one time by Purchaser, the number of full shares
which shall be issuable upon exercise thereof shall be computed on the basis of
the aggregate number of shares to be so issued. Purchaser, by its acceptance of
this Warrant, expressly waives its right to receive any fraction of a share of
Underlying Stock or a stock certificate representing a fraction of a share of
Underlying Stock.
1.05. Covenant to Reserve Shares for Issuance on Exercise. The Company
---------------------------------------------------
covenants that it will at all times reserve and keep available out of its
authorized Preferred Stock and Common Stock, solely for the purpose of issue
upon exercise of this Warrant (or conversion of the Preferred Stock so
issuable), the full number of shares of Underlying Stock, if any, then issuable
if this Warrant were to be exercised. The Company covenants that all shares of
Underlying Stock, upon issuance, shall be duly and validly issued and fully paid
and nonassessable. The Company hereby authorizes and directs its current and
future transfer agents for the Underlying Stock at all times to reserve such
number of authorized shares as shall be requisite for such purpose. After the
Expiration Date, no shares need continue to be reserved in respect of this
Warrant.
1.06. Compliance with Governmental Requirements. Before taking any action
-----------------------------------------
that would cause an adjustment reducing the Warrant Price below the then par
value of any of the shares of Underlying Stock issuable upon exercise of this
Warrant, the Company will take any corporate action that may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of such Underlying Stock at such
adjusted Warrant Price. The Company covenants that if any shares of Underlying
Stock required to be reserved for purposes of exercise of this Warrant require,
under any U.S. Federal or state law, registration with or approval of any
governmental authority before such shares may be issued to Purchaser upon
exercise, the Company will in good faith and as
5
<PAGE>
expeditiously as possible endeavor to cause such shares to be duly registered,
or approved, as the case may be; provided, however, that in no event shall such
shares of Underlying Stock be issued, and the Company is hereby authorized to
suspend the exercise of this Warrant, for the period during which such
registration or approval is required but not in effect.
1.07. Rights upon Dissolution or Liquidation. Notwithstanding any other
--------------------------------------
provision of this Warrant, in the event that, at any time after the date hereof
and prior to the expiration of this Warrant and the termination of the rights of
Purchaser hereunder, there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then the Company shall give notice by
first-class mail to Purchaser at Purchaser's address last know to the Company at
the earliest practicable time (and, in any event, not less than 20 days before
any date set for definitive action), of the date on which such dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of the shares of record of
Underlying Stock to which the Purchaser shall be entitled shall be entitled to
exchange their shares for securities, money or other property deliverable upon
such dissolution, liquidation or winding up, as the case may be, on which date
Purchaser shall receive the cash or other property which it would have been
entitled to receive had this Warrant been exercised immediately prior to such
dissolution, liquidation or winding up (net of the then applicable Warrant
Price), and the rights to exercise this Warrant shall terminate.
1.08. Company's Option to Accelerate Expiration. In the event that, at the
-----------------------------------------
time on or prior to the Expiration Date, when (a) a registration statement
pursuant to the Securities Act of 1933, as amended from time to time (the
"SECURITIES ACT"), in respect of the Company's Common Stock is effective, (b) at
- ---------------
least 1,000,000 shares of Common Stock are held by persons which are not
subsidiaries or affiliates and may be traded publicly without restriction, (c)
the Market Price (as defined below) can be determined on each of the 30 days
referred to below and (d) the Market Price for publicly traded Common Stock
exceeds 150% of the then effective Warrant Price at the close of business in New
York City for 20 trading days within 30 consecutive days on which securities
markets in New York City are open for trading, the Company will have the right,
upon giving notice by facsimile and internationally recognized overnight courier
within five business days after the end of such 30 consecutive days to Purchaser
at
6
<PAGE>
Purchaser's address as is last known to the Company, to provide that if this
Warrant is not exercised on or before a date not less than 30 days following the
date of such notice, then this Warrant shall expire and all rights of holders
thereof shall thereupon terminate and cease, provided that a registration
statement in respect of the Company's Common Stock is continuously effective
from the first of such 30 consecutive days until the date fixed for expiration
of this Warrant. Any such notice which is sent in the manner herein provided
shall be presumed to have been duly given when sent. Neither the failure to send
such notice, nor any defect in any notice so sent, to any particular holder
shall affect the sufficiency of such notice with respect to any other holder.
For purposes of this Paragraph 1.08, the "MARKET PRICE" for Common Stock for
------------
each business day shall be: (x) in the case of Common Stock listed or admitted
to trading on any securities exchange, the closing price, regular way, on such
day on the principal exchange on which the Common Stock is traded, or if no sale
takes place on such day, the average of the closing bid and asked prices on such
day, or (y) in the case of Common Stock not then listed or admitted to trading
on any securities exchange, the last reported sale price on such day, or if no
sale takes place on such day, the average of the closing bid and asked prices on
such day, as reported by a reputable quotation source designated by the Company.
If on any day there is no reported sale and such closing bid and asked prices
are not available, the Market Price will not be determinable for such day.
ARTICLE II
Adjustment of Warrant Price and Shares
of Stock Purchasable
--------------------
2.01. Adjustment of Warrant Price and Shares of Stock Purchasable upon
----------------------------------------------------------------
Exercise of Warrants. The Warrant Price and shares of Underlying Stock
- --------------------
purchasable upon exercise of this Warrant shall be subject to adjustment from
time to time as follows:
(a) Stock Dividends, Subdivisions and Combinations. In case at any time or
----------------------------------------------
from time to time the Company shall (i) take a record of the holders of its
Underlying Stock for the purpose of entitling them to receive a dividend payable
in, or other distribution of, Underlying Stock, or (ii) subdivide its
outstanding shares of Underlying Stock into a larger number of shares of
Underlying Stock, or (iii) combine its outstanding shares of Underlying Stock
into a smaller number of shares of Underlying
7
<PAGE>
Stock, or (iv) increase or decrease the number of shares of Underlying Stock
outstanding by reclassification of its Underlying Stock, then the number of
shares of Underlying Stock purchasable upon exercise of this Warrant immediately
after the happening of such event shall be adjusted so as to consist of the
number of shares of Underlying Stock which a record holder of the number of
shares of Underlying Stock purchasable upon exercise of this Warrant immediately
prior to the happening of such event would own or be entitled to receive after
the happening of such event.
(b) Changes in Underlying Stock. In case at any time the Company shall be a
---------------------------
party to any transaction (including, without limitation, a merger,
consolidation, sale of all or substantially all of the Company's assets,
liquidation or recapitalization (including without limitation, the automatic
conversion of the Preferred Stock into Common Stock pursuant to the Company's
Certificate of Incorporation) of the Underlying Stock) in which the previously
outstanding Underlying Stock shall be changed into or exchanged for different
securities of the Company or common stock or other securities of another
corporation or interests in a noncorporate entity or other property (including
cash) or any combination of the foregoing (each such transaction being herein
called a "TRANSACTION"), the Company (in the case of the recapitalization of the
-----------
Underlying Stock) or such other corporation or entity (in the case of a merger,
consolidation or such sale) being herein called the "ACQUIRING COMPANY" and the
-----------------
common stock (or equivalent equity interests) of the Acquiring Company being
herein called the "ACQUIRER UNDERLYING STOCK", then, as a condition of the
-------------------------
consummation of the Transaction, lawful and adequate provision shall be made so
that the holder of this Warrant, upon the exercise thereof at any time on or
after the consummation of the Transaction, shall be entitled to receive, and
this Warrant shall thereafter represent the right to receive, in lieu of the
Underlying Stock issuable upon such conversion prior to such consummation, the
securities or other property to which such holder would have been entitled upon
consummation of the Transaction if such holder had exercised this Warrant
immediately prior thereto (subject to adjustments from and after the
consummation date as nearly equivalent as possible to the adjustments provided
for in this Article II). The Company will not effect any Transaction unless
prior to the consummation thereof each corporation or entity (other than the
Company) which may be required to deliver any securities or other property upon
the exercise of this Warrant as provided herein shall legally and validly assume
the obligation to deliver to such holder such securities or other property as in
8
<PAGE>
accordance with the foregoing provisions such holder may be entitled to receive.
The foregoing provisions of this Paragraph 2.01(b) shall similarly apply to
successive mergers, consolidations, sales of assets, liquidations and
recapitalizations.
(c) Minimum Adjustment Requirements. The adjustments required by the
-------------------------------
preceding paragraphs of this Article II shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the number of shares of Underlying Stock purchasable upon exercise
of this Warrant that would otherwise be required shall be made (except in the
case of a subdivision or combination of shares of Underlying Stock, as provided
for in Paragraph 2.01(a)) unless and until such adjustment either by itself or
with other adjustments not previously made increases or decreases by at least
five percent of the number of shares of Underlying Stock purchasable upon
exercise of this Warrant immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) shall be carried forward and made as soon as such adjustment,
together with other adjustments required by this Article II and not previously
made, would result in a minimum adjustment. For the purpose of any adjustment,
any specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.
(d) Fractional Interests. All calculations under this Section 2.01 shall
--------------------
be made to the nearest cent or the nearest one-hundredth of a share, as the case
may be, but in no event shall the Company be obligated to issue any fractional
share on any exercise of this Warrant.
(e) When Adjustment Not Required. If the Company shall take a record of
----------------------------
the holders of its Underlying Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to shareholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(f) Warrant Price Adjustment. Whenever the number of shares of Underlying
------------------------
Stock purchasable upon exercise of this Warrant is adjusted as provided herein,
the Warrant Price payable
9
<PAGE>
upon exercise of this Warrant shall be adjusted by multiplying such Warrant
Price immediately prior to such adjustment by a fraction, the numerator of which
shall be the number of shares of Underlying Stock purchasable upon exercise of
this Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of shares of Underlying Stock purchasable immediately
thereafter.
2.02. Notice of Adjustment. Whenever the Warrant Price and the number of
--------------------
shares of Underlying Stock purchasable upon exercise of this Warrant is
adjusted, in accordance with Paragraph 2.01(c), as herein provided, the Company
shall mail to Purchaser, a copy of a certificate of the Chief Financial Officer
of the Company setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
description of the basis on which the Board of Directors of the Company
determined the fair value of any evidences of indebtedness, shares of stock,
other securities or property or warrants or other subscription or purchase
rights), and specifying the Warrant Price and the number of shares of Underlying
Stock purchasable upon exercise of this Warrant after giving effect to such
adjustment.
2.03. Notice of Certain Action. In case the Company shall propose (a) to pay
------------------------
any dividend payable in securities of any class to the holders of its Underlying
Stock or to make any other similar distribution to the holders of its Underlying
Stock, or (b) to effect any capital reorganization, consolidation or merger,
then, in each such case, the Company shall give to Purchaser a notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such dividend or distribution, or the date such issuance is
to take place and the date of participation therein by the holders of Underlying
Stock, if any such date is to be fixed, and shall be reasonably necessary to
indicate the effect of such action on the Underlying Stock and the number and
kind of any other shares of stock and other property, if any, and the Warrant
Price per share after giving effect to any adjustment which will be required as
a result of such action. Such notice shall be so given at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of Underlying Stock, whichever shall be the earlier.
10
<PAGE>
2.04. Statements on Warrant. The form of this Warrant need not be changed
---------------------
because of any adjustment made pursuant to this Article II.
ARTICLE III
Other Provisions Relating to Rights and
Obligations of Holders of Warrant Certificates
----------------------------------------------
3.01. No Rights as Stockholder Conferred by Warrants or Warrant
---------------------------------------------------------
Certificates. This Warrant shall not entitle the holder thereof to any of the
rights of a holder of Underlying Stock, including, without limitation, the right
to vote at, or to receive notice of, any meeting of stockholders of the Company;
the consent of any such holder shall not be required with respect to any action
or proceeding of the Company; no such holder, by reason of the ownership or
possession of this Warrant, either at, before or after exercising this Warrant,
shall have any right to receive any cash dividends, stock dividends, allotments
or rights, or other distributions (except as specifically provided herein),
paid, allotted or distributed or distributable to the stockholders of the
Company prior to the date of the exercise of this Warrant; and no such holder
shall have any right not expressly conferred by this Warrant.
3.02. Lost, Stolen, Mutilated or Destroyed Warrant Certificates. Upon receipt
---------------------------------------------------------
by the Company of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of this Warrant and of indemnity
reasonably satisfactory to it and, in the case of mutilation, upon surrender
thereof to the Company for cancellation, then the Company shall execute and
deliver, in exchange for or in lieu of the lost, stolen, destroyed or mutilated
Warrant, a new Warrant of the same tenor and evidencing the right to purchase a
like number of shares. Upon the issuance of any new Warrant under this Paragraph
3.02, the Company may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto and any
other expenses in connection therewith.
ARTICLE IV
Miscellaneous
-------------
4.01. Applicable Law. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS
--------------
WARRANT AND OF THE RESPECTIVE TERMS AND
11
<PAGE>
PROVISIONS THEREOF SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
4.02. Headings. The descriptive headings of the several Articles and
--------
paragraphs of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
4.03 Ownership of Warrant. Until this Warrant is transferred on the books
--------------------
of the Company, the Company may treat the person in whose name this Warrant is
registered on the books of the Company as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
4.04 Entire Agreement. This Warrant, and the Restructuring Agreement,
----------------
together contain the entire agreement of the parties and supersede all prior or
contemporaneous written or oral negotiations, correspondence, understandings and
agreements between the parties, regarding the subject matter hereof.
4.05 Notices. All demands, notices and other communications to be given
-------
hereunder shall be in writing and shall be deemed duly given and received when
transmitted by facsimile transmission with receipt acknowledged by the
addressee, when delivered personally or five days after being mailed by first
class international air mail, postage prepaid, properly addressed, if to the
Company, at 1376 Willow Road, Menlo Park, California 94025, facsimile number
(415) 326-6003 or, if to the Purchaser, at the Purchaser's address contained in
the Restructuring Agreement or at any other address or facsimile number
designated by notice by either party to the other party.
4.06 Amendments and Waivers. Neither this Warrant nor any term hereof may
----------------------
be amended, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the amendment, waiver,
discharge or termination is sought. Any waiver under this Warrant must be in
writing, and any waiver of one event shall not be construed as a waiver of
subsequent events.
4.07 Adjustment of Warrant Price. In the event the Company at any time
---------------------------
prior to the Expiration Date shall issue Additional Shares (as defined herein)
for a consideration per share less than $2.75, then the Warrant Price shall be
reduced to equal
12
<PAGE>
the lowest consideration per share (on an as-converted to Common Stock basis)
received by the Company for such Additional Shares. No adjustment of the number
of Shares issuable upon exercise of this Warrant shall result from any
adjustment in the Warrant Price pursuant to this Section 4.07. For purposes of
this Section 4.07, "ADDITIONAL SHARES" shall mean the first issuance and sale of
-----------------
shares of the next series of preferred stock of the Company (other than the
Company's Series P Preferred Stock) designated after the date of this Warrant.
Notwithstanding the foregoing, Additional Shares shall not include any
securities issued or issuable to Purchaser in connection with the Restructuring
Agreement, including without limitation shares of the Company's Series P
Preferred Stock.
4.08 Transfer. The Purchaser, by acceptance hereof, agrees that, absent an
--------
effective registration statement under the Securities Act and qualification
under any applicable state securities law (the "LAW") covering the disposition
---
of this Warrant or Underlying Stock issued or issuable upon exercise hereof, the
Purchaser will not sell or transfer any or all of such Warrant or Underlying
Stock, without first providing the Company with an opinion of counsel reasonably
acceptable to the Company and its counsel to the effect that such sale or
transfer will be exempt from the registration requirements of the Securities Act
and the qualification requirements of the Law, and Purchaser consents to the
Company making a notation on its records in order to implement such restrictions
on transferability. Subject to the foregoing, this Warrant and the rights
hereunder may be transferred, in whole or in part, on the books of the Company
maintained for such purpose at the principal office of the Company, by the
Purchaser, in person or by duly authorized attorney, upon surrender of this
Warrant properly endorsed. The transferee of this Warrant, when this Warrant
shall have been so endorsed, will be deemed the "Purchaser" with respect to the
shares of Underlying Stock with respect to which this Warrant is so transferred
and will be deemed to have agreed to all of the terms and conditions of this
Warrant. Upon any permitted partial transfer, the Company will promptly issue
and deliver to the Purchaser a new Warrant with respect to the shares of
Underlying Stock not so transferred.
4.09. Registration Rights. The Purchaser shall be entitled to registration
-------------------
rights with respect to the Underlying Stock issuable upon exercise of this
Warrant equivalent to the registration rights granted with respect to the
Preferred Stock currently held by an affiliate of the Purchaser as set forth in
13
<PAGE>
that certain Series E Preferred Stock Purchase Agreement dated as of August 18,
1991 (the "PURCHASE AGREEMENT") and shall be entitled to all of the rights and
------------------
benefits and subject to all of the terms, conditions and obligations thereunder.
The registration rights granted hereunder pursuant to the Purchase Agreement may
be changed at any time, and from time to time, upon amendment of the Purchase
Agreement and such registration rights, as amended, shall be deemed to be the
registration rights applicable hereto. The registration rights granted hereunder
pursuant to the Purchase Agreement may not be assigned or transferred except in
connection with an assignment or transfer of all or any part of this Warrant
pursuant to the terms and conditions of this Warrant, or the proper assignment
or transfer of securities purchased upon exercise hereof.
IN WITNESS WHEREOF, JetFax, Inc. executes this Warrant for the benefit of
Purchaser, its permitted successors and assigns, as of the day and year first
above written.
JETFAX, INC.
By:
/s/ Edward R. Prince III
-------------------------
Edward R. Prince III, President
14
<PAGE>
ELECTION TO EXERCISE WARRANT
Purchaser hereby irrevocably elects to exercise the right of purchase
represented by this Warrant for, and to purchase thereunder, shares of the
Underlying Stock provided for therein, and, subject to the terms and conditions
of the Warrant, requests that certificates for such shares be issued in the name
of:
Name:___________________________________________________
Address:________________________________________________
________________________________________________
Social Security or Taxpayer's
Identification Number:__________________________________
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable hereunder then be issued, subject to the terms and conditions of the
Warrant, in the name of the undersigned as below indicated and delivered to the
address stated below.
Name:
_______________________________________________________
Address:
_____________________________________________________
_____________________________________________________
Social Security or Taxpayer's
Identification Number:
_______________________________________
_______________________________
Signature
Title:_________________________
15
<PAGE>
EXHIBIT 10.24
CERTIFICATE NO. 100 DATE: December 16, 1996
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE ON EXERCISE OF THIS
WARRANT (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAW, AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN 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 THE
CORPORATION AND CONCURRED IN BY THE CORPORATION'S COUNSEL TO THE EFFECT THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
JETFAX, INC.
COMMON STOCK PURCHASE WARRANT
TO PURCHASE UP TO 75,000 SHARES OF COMMON STOCK
THIS WARRANT SHALL NOT BE EXERCISABLE
BEFORE THE EFFECTIVE DATE OR AFTER THE EXPIRATION DATE
JetFax, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that, for good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged by the Corporation, Michael Crandell (the
"Holder"), is entitled, subject to the terms and conditions set forth below, to
purchase from the Corporation up to 75,000 fully paid and nonassessable shares
(the "Shares") of the Common Stock, par value $.01 per share, of the Corporation
("Common Stock"), at a purchase price of $1.75 per Share (the "Purchase Price")
at any time or times on or after the Effective Date (as defined below) and on or
prior to the Expiration Date (as defined below). This Warrant shall expire and
be of no further force or effect at the earlier of the time when it has been
exercised with respect to all Shares which the Holder is entitled to purchase
hereunder or 5:00 p.m., California time, on the Expiration Date. Such number of
Shares are subject to adjustment, as hereinafter provided. Such number shall be
reduced at such time or times as this Warrant is exercised in part by the number
of Shares as to which this Warrant is then exercised.
Exercise.
--------
1.1 Manner of Exercise. The Holder of this Warrant may exercise his
------------------
or her rights hereunder at any time after the Effective Date and before the
Expiration Date by written notice to the Corporation as set forth herein. This
Warrant may be exercised as a whole
<PAGE>
at any time, or in part from time to time, by the Holder by delivering this
Warrant, for cancellation if it is exercised as a whole or for endorsement if it
is exercised in part, together with a Subscription in the form appearing at the
end hereof properly completed and duly executed by or on behalf of the Holder
and such other information and investment representations as may be reasonably
requested by the Corporation for the purpose of complying with applicable
securities laws, to the Corporation at its office in Menlo Park, California (or
at the office of the agency maintained for such purpose or at such other office
or agency of the Corporation as it may designate by notice in writing to the
Holder at the address thereof appearing on the books of the Corporation),
accompanied by payment by certified or official bank check payable to the order
of the Corporation, in an aggregate amount equal to the Purchase Price times the
number of Shares as to which this Warrant is then being exercised. In the event
of any exercise of this Warrant that is partial, the Corporation shall endorse
this Warrant as having been exercised to that extent and return this Warrant to
the Holder for the balance. Anything in this Warrant to the contrary
notwithstanding, this Warrant may not be exercised to any extent after 5:00
p.m., California time, on the Expiration Date or after it has been exercised in
the aggregate for the number of Shares that the Holder is entitled to purchase
hereunder, and unless this Warrant is being exercised with respect to all Shares
subject to this Warrant, this Warrant may be exercised only with respect to
whole Shares.
1.2 Effective Date. For purposes hereof, the "Effective Date" shall
--------------
be the effective date of the first registered public offering (the "IPO")
sufficient to trigger automatic conversion of the Corporation's Series F
Preferred Stock (under the terms of the Corporation's Certificate of
Designations, Preferences and Rights of Series F Preferred Stock), if and only
if such date occurs on or prior to July 31, 1998.
2. Delivery of Stock Certificates on Exercise. The Corporation will, or
------------------------------------------
will direct its transfer agent to, issue, as soon as practicable after any
exercise of this Warrant, and in any event within thirty days thereafter, at the
Corporation's expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the Holder may direct
(on payment by the Holder of any applicable transfer taxes and compliance with
all restrictions on transferability set forth herein), a certificate or
certificates for the number of fully paid and nonassessable Shares as to which
this Warrant is so exercised, plus, in lieu of any fractional shares to which
the Holder would otherwise be entitled, cash equal to such fraction or fractions
multiplied by the Purchase Price as then adjusted.
3. Anti-Dilution Adjustments.
-------------------------
3.1 Stock Dividends, Splits, Etc. The number of Shares purchasable
----------------------------
on exercise of this Warrant shall be subject to adjustment from time to time in
the event that the Corporation shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock on any of its outstanding Common Stock,
(b) subdivide its outstanding shares of Common Stock into a greater number of
shares, (c) combine its outstanding shares of Common Stock into a smaller number
of shares or (d) issue by reclassification of its Common Stock any shares of
capital stock
2
<PAGE>
of the Corporation (other than a reclassification resulting from a merger or
consolidation covered in Section 3.2). In any such case, the total number of
Shares issuable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive at the same aggregate
Purchase Price (as set forth in Section 3.3) the number of shares of stock or
other securities of the Corporation or otherwise to which the Holder would have
owned or would have been entitled to receive immediately following the
occurrence of any of the events described above had this Warrant been exercised
in full immediately prior to the occurrence (or applicable record date) of such
event. An adjustment made pursuant to this Section 3.1 shall, in the case of a
stock dividend or distribution, be made as of the record date therefor and, in
the case of a subdivision, combination or a reclassification, be made as of the
effective date thereof. In any such case, appropriate adjustments shall be made
in the application of the provisions hereof with respect to the rights of the
Holder after a recapitalization to the end that the provisions hereof shall be
applicable after that event as nearly equivalent as may be practicable.
3.2 Reorganization, Recapitalization, Consolidation, Merger or Sale
---------------------------------------------------------------
of Assets. In the event of any reorganization or recapitalization of the
- ---------
Corporation (other than as provided in Section 3.1) or in the event that the
Corporation consolidates with or merges into another corporation in a
transaction in which the Corporation is not the resulting corporation or
transfers all or substantially all of its assets to another entity, then and in
each such event, the Holder, on exercise of this Warrant as provided herein, at
any time after the consummation of such reorganization, recapitalization,
consolidation, merger or transfer, shall be entitled to receive the stock or
other securities or property to which the Holder would have been entitled on
such consummation if the Holder had exercised this Warrant immediately prior
thereto. In such case, the terms of this Warrant shall survive the consummation
of any such reorganization, recapitalization, consolidation, merger or transfer
and shall be applicable to the shares of stock or other securities or property
receivable on the exercise of this Warrant after such consummation.
3.3 Adjustment of Purchase Price. On each adjustment of the number
----------------------------
of Shares or other securities issuable upon exercise of this Warrant pursuant to
this Section 3, the Purchase Price shall thereafter be the number obtained by
dividing (a) the product of the number of Shares issuable on full exercise of
this Warrant immediately prior to such adjustment by the Purchase Price in
effect immediately prior to such adjustment by (b) the number of Shares or other
securities issuable upon full exercise of this Warrant after such adjustment.
3.4 Rounding. All calculations under this Section 3 shall be made to
--------
the nearest cent or to the nearest one-hundredth of a Share, as the case may be,
but in no event shall the Corporation be obligated to issue any fractional share
on any exercise of this Warrant.
4. Expiration Date. This Warrant shall expire and shall be of no further
---------------
force or effect at the earlier of the following times (the "Expiration Date")
(a) the time when the Warrant has been exercised with respect to all Shares
which the Holder is or may be entitled to purchase hereunder, (b) August 1,
1998, if the effective date of the IPO has not occurred by that time, or (c)
5:00 p.m. California time on the fifth anniversary of the Effective Date.
3
<PAGE>
5. Adjustment to Number of Shares Purchasable. The number of Shares
------------------------------------------
purchasable on exercise of this Warrant shall be subject to adjustment in
accordance with the provisions of this Section 5. In the event that (a) the
effective date of the IPO occurs after April 30, 1997, and (b) the amount
payable by the Corporation to Crandell Group, Inc. ("CGI") pursuant to Section
9(b) of the Amendment Agreement (the "Amendment Agreement") dated as of December
16, 1996, by and between the Corporation and CGI is reduced as provided in
Section 11 of the Amendment Agreement to $0.00 (the point at which such amount
is reduced to $0.00 shall hereinafter be referred to as the "Reduction Point"),
then, the number of Shares purchasable on exercise of this Warrant shall be
determined by the following formula:
Number of Shares purchasable = 75,000 - .75 x A
-------
on exercise of this Warrant B
Where "A" equals the amounts due to CGI under Sections 3.1(a), (b) and (c)
of the Asset Purchase Agreement (as defined below) by and between the
Corporation and CGI, as amended, (with respect to Sections 3.1(b) and (c), as
"Earned", even though not yet payable based on receipt) from and after the
Reduction Point and prior to the termination thereof pursuant to Section 9(a) of
the Amendment Agreement; and
Where "B" equals the price per share of the Corporation's Common Stock sold
at the IPO minus $1.75.
Nothing in this Section 5 shall result in any adjustment of the Purchase Price.
6. Further Assurances. The Corporation will not, by amendment of its
------------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid, directly or
indirectly, the performance of any of the terms of this Warrant, but will at all
times in good faith take all necessary action to carry out all such terms.
Without limiting the generality of the foregoing, the Corporation (a) will not
create any par value, or increase the par value, of any shares of stock
receivable on exercise of this Warrant above the amount payable therefor on such
exercise, (b) will take all such action as may be necessary or appropriate so
that the Corporation may validly and legally issue fully paid and nonassessable
shares of stock on the exercise of this Warrant, and (c) will not transfer all
or substantially all of its assets to any person, or consolidate with or merge
into any person or permit any person to consolidate with or merge into the
Corporation (if the Corporation is not the surviving person), unless such person
shall be bound by all of the terms of this Warrant. This Warrant shall be
binding on the successors and assigns of the Corporation.
7. Notices of Record Dates, Etc.
----------------------------
(a) If the Corporation shall fix a record date of the holders of
Common Stock (or other stock or securities at the time deliverable on
exercise of this
4
<PAGE>
Warrant) for the purpose of entitling or enabling them to receive any
dividend (other than a stock dividend) or other distribution, or to receive
any right to subscribe for or purchase any shares of any class of any other
securities, or to receive any other right,
(b) in the event of any reorganization or recapitalization of the
Corporation, any reclassification of the capital stock of the Corporation,
any consolidation or merger of the Corporation with or into another
corporation or any transfer of all or substantially all of the assets of the
Corporation to another entity,
(c) in the event of the voluntary or involuntary dissolution, liquidation
or winding up of the Corporation or
(d) if the Corporation has filed a registration statement under the
Securities Act of 1933, as amended, with the Securities and Exchange
Commission for an offering of the Corporation's capital stock,
then, in any such event, the Corporation will mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which a record is to be taken for the purpose of voting on or
approving such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up and
the date on which such event is to take place and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable on exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable on such reorganization,
recapitalization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up or (iii) the date on which the
Corporation's registration statement was filed and the class of securities
proposed to be registered. Such notice shall be mailed at least twenty-one
days prior to the record date therein specified or within twenty-one days after
filing the registration statement, as the case may be.
8. Replacement of Warrant. On receipt of evidence reasonably
----------------------
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, on
delivery of a bond or other indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Corporation covenants that it will issue a new
Warrant, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Warrant.
9. Covenant to Reserve Common Stock. The Corporation shall at all times
--------------------------------
reserve and keep available out of its authorized but unissued Common Stock the
full number of shares of Common Stock deliverable upon exercise of this Warrant
and shall, at its own expense, take all such actions and attain all such permits
and orders as may be necessary to enable the
5
<PAGE>
Corporation lawfully to issue such Common Stock upon exercise of this Warrant.
10. Issuance Taxes. On exercise of this Warrant, the Corporation shall
--------------
pay any and all issuance taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock on such exercise. The Corporation shall not,
however, be required to pay, and the Holder shall pay, any tax that may be
payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that of the Holder, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax, where it is
established to the satisfaction of the Corporation, that such tax has been paid.
11. Ownership of Warrant. Until this Warrant is transferred on the books
--------------------
of the Corporation, the Corporation may treat the person in whose name this
Warrant is registered on the books of the Corporation as the absolute owner
hereof for all purposes, notwithstanding any notice to the contrary.
12. Survival of Covenants, Representations and Warranties. All
-----------------------------------------------------
agreements, covenants, representations and warranties herein shall survive the
execution and delivery of this Warrant and any investigation at any time made on
behalf of any party and the exercise, sale and purchase of this Warrant and the
Common Stock issuable on exercise hereof.
13. Voting Rights. This Warrant shall not entitle the Holder, as such, to
-------------
any voting rights or other rights as a stockholder of the Corporation or to any
other rights except the rights stated herein.
14. Entire Agreement. This Warrant contains the entire agreement of the
----------------
parties and supersedes all prior or contemporaneous written or oral
negotiations, correspondence, understandings and agreements between the parties,
regarding the subject matter hereof.
15. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Warrant shall bind and inure to the benefit of the Holder and the Corporation
and their respective successors and assigns.
16. Notices. All demands, notices and other communications to be given
-------
hereunder shall be in writing and shall be deemed duly given and received when
transmitted by facsimile transmission with receipt acknowledged by the
addressee, when delivered personally or three days after being mailed by first
class mail, postage prepaid, properly addressed, if to the Corporation, at 1376
Willow Road, Menlo Park, California 94025, facsimile number (415) 326-6003 or,
if to the Holder, at the Holder's address set forth below (or at any other
address or facsimile number designated by notice by either party to the other
party):
Michael Crandell
125 E. Victoria Street, Suite A
6
<PAGE>
Santa Barbara, CA 93101
Fax: 805-962-5650
17. Amendments; Waivers; Termination; Governing Law, Headings. This
---------------------------------------------------------
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be governed by and construed and interpreted in accordance with the laws of the
State of California. The headings in this Warrant are for convenience of
reference only and shall not affect the construction or interpretation of any
provision hereof.
18. Saturdays, Sundays, Holidays, etc.. If the last or appointed day for
----------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or legal holiday.
19. Assignability. This Warrant may not be assigned or transferred other
-------------
than in compliance with federal and state securities laws and subject to the
transfer restrictions described in the legend on the first page hereof.
20. Asset Purchase Agreement. This Warrant is issued pursuant to that
------------------------
certain Asset Purchase Agreement dated as of July 31, 1996, as amended, by and
between the Corporation and CGI (the "Asset Purchase Agreement"), which
agreement is hereby incorporated by reference and made a part of this instrument
and is hereby referred to for a description of the additional rights,
limitations of rights and obligations of the Corporation and Holder not
otherwise set forth herein.
21. Lock-Up. The Holder shall, if requested by the managing underwriter
-------
or underwriters of any proposed firm underwritten public offering of securities
by the Corporation, agree not to sell any Common Stock issued upon exercise
hereof or any other securities of the Corporation owned by such Holder in any
transaction other than pursuant to such underwritten public offering for a
period of up to 180 days beginning on the effective date of the applicable
registration statement. The Holder shall upon request execute a separate
written agreement confirming and agreeing as to the foregoing.
Dated as of December 16, 1996
JETFAX, INC.
By:/s/ Edward R. Prince, III
---------------------------
Edward R. Prince, III
President
7
<PAGE>
ENDORSEMENTS
------------
Number
Number of of Shares
Shares as Remaining
Exercise to which Available Signature of Authorized
Date Exercised for Exercise Officer of the Corporation
-------- --------- ------------ --------------------------
<PAGE>
SUBSCRIPTION
(To be completed and signed only on
an exercise of the Warrant.)
To JetFax, Inc.:
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________ shares of the Common Stock of JetFax, Inc. of
those to which such Holder is entitled thereunder, and herewith makes payment of
$__________ therefor by certified or official bank check. The undersigned
hereby requests that the certificate(s) for such shares be issued in the name(s)
and delivered to the address(es) as follows:
_________________________________________
_________________________________________
_________________________________________
_________________________________________
Dated: __________________ __________________________________
__________________________, Holder
By ___________________________
Its _______________________
<PAGE>
[Execution Copy]
WARRANT AMENDMENT
THIS WARRANT AMENDMENT is made as of February 13, 1997, by and between
JetFax, Inc., a Delaware corporation with its principal place of business at
1376 Willow Road, Menlo Park, CA 94025 (the "Corporation"), and Michael Crandell
(the "Holder").
WHEREAS, the Holder is the holder of that certain Common Stock Purchase
Warrant (the "Warrant") of the Corporation dated December 16, 1996 for the
purchase of up to 75,000 shares of the Common Stock of the Corporation; and
WHEREAS, the Corporation and the Holder desire to amend the Warrant as set
forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Warrant.
2. Section 1 of the Warrant is hereby amended by adding the following new
Section 1.3 at the end thereof:
"1.3 Net Exercise.
------------
(a) In the event all (or the remaining balance) of the purchase
rights represented by this Warrant are exercised by the Holder pursuant to
Section 1.1 above, in lieu of payment of an aggregate amount equal to the
Purchase Price times the number of Shares as to which this Warrant is then
being exercised as provided in Section 1.1 the Holder may elect to receive
a number of Shares to which the Holder is entitled computed using the
following formula:
X=Y(A-B)
-----
A
where: X= the number of Shares of Common Stock to be issued to the
Holder,
<PAGE>
Y= the number of Shares of Common Stock purchasable under
this Warrant,
A= the Fair Market Value (as defined below) of one Share
of Common Stock to which the Holder is entitled, and
B= the Purchase Price.
(b) Determination of Fair Market Value. As used herein, the term
----------------------------------
"Fair Market Value" of a Share of Common Stock to which the Holder is
entitled as of a particular date (the "Determination Date") shall mean:
(i) if the Common Stock to which the Holder is entitled is
traded on an exchange or are quoted on the National Association of
Securities Dealers, Inc. automated quotation ("NASDAQ") National Market
System, the average of the closing or last sale price, respectively, of
such stock as reported for the ten (10) trading days immediately preceding
the Determination Date;
(ii) if the Common Stock to which the Holder is entitled is not
traded on an exchange or on the NASDAQ National Market System but is traded
in the over-the-counter market, then the average-of the mean of the closing
bid and asked prices for a share of such stock reported for the ten (10)
trading days immediately preceding the Determination Date; and
(iii) if the Common Stock to which the Holder is entitled is not
publicly traded, then as determined in good faith by the Company's Board of
Directors as being the highest price per share which the Company could
reasonably obtain from a willing buyer (who is not an employee or director)
for authorized but unissued shares of Common Stock to which the Holder is
entitled.
(c) Limits on Exercise of Net Exercise Right. The rights under
----------------------------------------
this Section 1.3 may only be exercised if the value of A minus B (where "A"
and "B" are as defined in Section 1.3(a) above) is a positive number."
3. The term "Warrant" as used in the Warrant shall for all purposes refer
to the Warrant as amended by this Warrant Amendment.
-2-
<PAGE>
4. Except to the extent expressly amended by the terms of this Warrant
Amendment, all the terms and conditions of the Warrant remain in full force and
effect.
5. This Warrant Amendment may be executed in any number of duplicate
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
[balance of this page intentionally left blank]
-3-
<PAGE>
[Warrant Amendment]
IN WITNESS WHEREOF, the parties have duly signed this Warrant
Amendment as of the day and year first written above.
JETFAX, INC. MICHAEL CRANDELL
By: /s/Edward R. Prince III By: /s/Michael Crandell
----------------------- -------------------
Edward R. Prince III
President
<PAGE>
EXHIBIT 10.25
CERTIFICATE NO. 101 DATE: December 16, 1996
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE ON EXERCISE
OF THIS WARRANT (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE
SECURITIES LAW, AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN 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 THE CORPORATION AND
CONCURRED IN BY THE CORPORATION'S COUNSEL TO THE EFFECT THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
JETFAX, INC.
COMMON STOCK PURCHASE WARRANT
TO PURCHASE UP TO 25,000 SHARES OF COMMON STOCK
THIS WARRANT SHALL NOT BE EXERCISABLE
BEFORE THE EFFECTIVE DATE OR AFTER THE EXPIRATION DATE
JetFax, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that, for good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged by the Corporation, Larry Crandell (the "Holder"),
is entitled, subject to the terms and conditions set forth below, to purchase
from the Corporation up to 25,000 fully paid and nonassessable shares (the
"Shares") of the Common Stock, par value $.01 per share, of the Corporation
("Common Stock"), at a purchase price of $1.75 per Share (the "Purchase Price")
at any time or times on or after the Effective Date (as defined below) and on or
prior to the Expiration Date (as defined below). This Warrant shall expire and
be of no further force or effect at the earlier of the time when it has been
exercised with respect to all Shares which the Holder is entitled to purchase
hereunder or 5:00 p.m., California time, on the Expiration Date. Such number of
Shares are subject to adjustment, as hereinafter provided. Such number shall be
reduced at such time or times as this Warrant is exercised in part by the number
of Shares as to which this Warrant is then exercised.
1. Exercise.
--------
1.1 Manner of Exercise. The Holder of this Warrant may exercise his
------------------
or her rights hereunder at any time after the Effective Date and before the
Expiration Date by written notice to the Corporation as set forth herein. This
Warrant may be exercised as a whole
<PAGE>
at any time, or in part from time to time, by the Holder by delivering this
Warrant, for cancellation if it is exercised as a whole or for endorsement if it
is exercised in part, together with a Subscription in the form appearing at the
end hereof properly completed and duly executed by or on behalf of the Holder
and such other information and investment representations as may be reasonably
requested by the Corporation for the purpose of complying with applicable
securities laws, to the Corporation at its office in Menlo Park, California (or
at the office of the agency maintained for such purpose or at such other office
or agency of the Corporation as it may designate by notice in writing to the
Holder at the address thereof appearing on the books of the Corporation),
accompanied by payment by certified or official bank check payable to the order
of the Corporation, in an aggregate amount equal to the Purchase Price times the
number of Shares as to which this Warrant is then being exercised. In the event
of any exercise of this Warrant that is partial, the Corporation shall endorse
this Warrant as having been exercised to that extent and return this Warrant to
the Holder for the balance. Anything in this Warrant to the contrary
notwithstanding, this Warrant may not be exercised to any extent after 5:00
p.m., California time, on the Expiration Date or after it has been exercised in
the aggregate for the number of Shares that the Holder is entitled to purchase
hereunder, and unless this Warrant is being exercised with respect to all Shares
subject to this Warrant, this Warrant may be exercised only with respect to
whole Shares.
1.2 Effective Date. For purposes hereof, the "Effective Date" shall
--------------
be the effective date of the first registered public offering (the "IPO")
sufficient to trigger automatic conversion of the Corporation's Series F
Preferred Stock (under the terms of the Corporation's Certificate of
Designations, Preferences and Rights of Series F Preferred Stock), if and only
if such date occurs on or prior to July 31, 1998.
2. Delivery of Stock Certificates on Exercise. The Corporation will, or
------------------------------------------
will direct its transfer agent to, issue, as soon as practicable after any
exercise of this Warrant, and in any event within thirty days thereafter, at the
Corporation's expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the Holder may direct
(on payment by the Holder of any applicable transfer taxes and compliance with
all restrictions on transferability set forth herein), a certificate or
certificates for the number of fully paid and nonassessable Shares as to which
this Warrant is so exercised, plus, in lieu of any fractional shares to which
the Holder would otherwise be entitled, cash equal to such fraction or fractions
multiplied by the Purchase Price as then adjusted.
3. Anti-Dilution Adjustments.
-------------------------
3.1. Stock Dividends, Splits, Etc. The number of Shares purchasable
----------------------------
on exercise of this Warrant shall be subject to adjustment from time to time in
the event that the Corporation shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock on any of its outstanding Common Stock,
(b) subdivide its outstanding shares of Common Stock into a greater number of
shares, (c) combine its outstanding shares of Common Stock into a smaller number
of shares or (d) issue by reclassification of its Common Stock any shares of
capital stock
2
<PAGE>
of the Corporation (other than a reclassification resulting from a merger or
consolidation covered in Section 3.2). In any such case, the total number of
Shares issuable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive at the same aggregate
Purchase Price (as set forth in Section 3.3) the number of shares of stock or
other securities of the Corporation or otherwise to which the Holder would have
owned or would have been entitled to receive immediately following the
occurrence of any of the events described above had this Warrant been exercised
in full immediately prior to the occurrence (or applicable record date) of such
event. An adjustment made pursuant to this Section 3.1 shall, in the case of a
stock dividend or distribution, be made as of the record date therefor and, in
the case of a subdivision, combination or a reclassification, be made as of the
effective date thereof. In any such case, appropriate adjustments shall be made
in the application of the provisions hereof with respect to the rights of the
Holder after a recapitalization to the end that the provisions hereof shall be
applicable after that event as nearly equivalent as may be practicable.
3.2. Reorganization, Recapitalization, Consolidation, Merger or Sale
---------------------------------------------------------------
of Assets. In the event of any reorganization or recapitalization of the
- ---------
Corporation (other than as provided in Section 3.1) or in the event that the
Corporation consolidates with or merges into another corporation in a
transaction in which the Corporation is not the resulting corporation or
transfers all or substantially all of its assets to another entity, then and in
each such event, the Holder, on exercise of this Warrant as provided herein, at
any time after the consummation of such reorganization, recapitalization,
consolidation, merger or transfer, shall be entitled to receive the stock or
other securities or property to which the Holder would have been entitled on
such consummation if the Holder had exercised this Warrant immediately prior
thereto. In such case, the terms of this Warrant shall survive the consummation
of any such reorganization, recapitalization, consolidation, merger or transfer
and shall be applicable to the shares of stock or other securities or property
receivable on the exercise of this Warrant after such consummation.
3.3. Adjustment of Purchase Price. On each adjustment of the number
----------------------------
of Shares or other securities issuable upon exercise of this Warrant pursuant to
this Section 3, the Purchase Price shall thereafter be the number obtained by
dividing (a) the product of the number of Shares issuable on full exercise of
this Warrant immediately prior to such adjustment by the Purchase Price in
effect immediately prior to such adjustment by (b) the number of Shares or other
securities issuable upon full exercise of this Warrant after such adjustment.
3.4. Rounding. All calculations under this Section 3 shall be made
--------
to the nearest cent or to the nearest one-hundredth of a Share, as the case may
be, but in no event shall the Corporation be obligated to issue any fractional
share on any exercise of this Warrant.
4. Expiration Date. This Warrant shall expire and shall be of no further
---------------
force or effect at the earlier of the following times (the "Expiration Date")
(a) the time when the Warrant has been exercised with respect to all Shares
which the Holder is or may be entitled to purchase hereunder, (b) August 1,
1998, if the effective date of the IPO has not occurred by that time, or (c)
5:00 p.m. California time on the fifth anniversary of the Effective Date.
3
<PAGE>
5. Adjustment to Number of Shares Purchasable. The number of Shares
------------------------------------------
purchasable on exercise of this Warrant shall be subject to adjustment in
accordance with the provisions of this Section 5. In the event that (a) the
effective date of the IPO occurs after April 30, 1997, and (b) the amount
payable by the Corporation to Crandell Group, Inc. ("CGI") pursuant to Section
9(b) of the Amendment Agreement (the "Amendment Agreement") dated as of December
16, 1996, by and between the Corporation and CGI is reduced as provided in
Section 11 of the Amendment Agreement to $0.00 (the point at which such amount
is reduced to $0.00 shall hereinafter be referred to as the "Reduction Point"),
then, the number of Shares purchasable on exercise of this Warrant shall be
determined by the following formula:
Number of Shares purchasable = 25,000 - .25 x A
-------
on exercise of this Warrant B
Where "A" equals the amounts due to CGI under Sections 3.1(a), (b) and (c)
of the Asset Purchase Agreement (as defined below) by and between the
Corporation and CGI, as amended, (with respect to Sections 3.1(b) and (c), as
"Earned", even though not yet payable based on receipt) from and after the
Reduction Point and prior to the termination thereof pursuant to Section 9(a) of
the Amendment Agreement; and
Where "B" equals the price per share of the Corporation's Common Stock sold
at the IPO minus $1.75.
Nothing in this Section 5 shall result in any adjustment of the Purchase Price.
6. Further Assurances. The Corporation will not, by amendment of its
------------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid, directly or
indirectly, the performance of any of the terms of this Warrant, but will at all
times in good faith take all necessary action to carry out all such terms.
Without limiting the generality of the foregoing, the Corporation (a) will not
create any par value, or increase the par value, of any shares of stock
receivable on exercise of this Warrant above the amount payable therefor on such
exercise, (b) will take all such action as may be necessary or appropriate so
that the Corporation may validly and legally issue fully paid and nonassessable
shares of stock on the exercise of this Warrant, and (c) will not transfer all
or substantially all of its assets to any person, or consolidate with or merge
into any person or permit any person to consolidate with or merge into the
Corporation (if the Corporation is not the surviving person), unless such person
shall be bound by all of the terms of this Warrant. This Warrant shall be
binding on the successors and assigns of the Corporation.
7. Notices of Record Dates, Etc.
----------------------------
(a) If the Corporation shall fix a record date of the holders of
Common Stock (or other stock or securities at the time deliverable on
exercise of this
4
<PAGE>
Warrant) for the purpose of entitling or enabling them to receive any
dividend (other than a stock dividend) or other distribution, or to receive
any right to subscribe for or purchase any shares of any class of any other
securities, or to receive any other right,
(b) in the event of any reorganization or recapitalization of the
Corporation, any reclassification of the capital stock of the Corporation,
any consolidation or merger of the Corporation with or into another
corporation or any transfer of all or substantially all of the assets of the
Corporation to another entity,
(c) in the event of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation or
(d) if the Corporation has filed a registration statement under the
Securities Act of 1933, as amended, with the Securities and Exchange
Commission for an offering of the Corporation's capital stock,
then, in any such event, the Corporation will mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which a record is to be taken for the purpose of voting on or
approving such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up and
the date on which such event is to take place and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable on exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable on such reorganization,
recapitalization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up or (iii) the date on which the
Corporation's registration statement was filed and the class of securities
proposed to be registered. Such notice shall be mailed at least twenty-one
days prior to the record date therein specified or within twenty-one days after
filing the registration statement, as the case may be.
8. Replacement of Warrant. On receipt of evidence reasonably
----------------------
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, on
delivery of a bond or other indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Corporation covenants that it will issue a new
Warrant, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Warrant.
9. Covenant to Reserve Common Stock. The Corporation shall at all times
--------------------------------
reserve and keep available out of its authorized but unissued Common Stock the
full number of shares of Common Stock deliverable upon exercise of this Warrant
and shall, at its own expense, take all such actions and attain all such permits
and orders as may be necessary to enable the
5
<PAGE>
Corporation lawfully to issue such Common Stock upon exercise of this Warrant.
10. Issuance Taxes. On exercise of this Warrant, the Corporation shall
--------------
pay any and all issuance taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock on such exercise. The Corporation shall not,
however, be required to pay, and the Holder shall pay, any tax that may be
payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that of the Holder, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax, where it is
established to the satisfaction of the Corporation, that such tax has been paid.
11. Ownership of Warrant. Until this Warrant is transferred on the books
--------------------
of the Corporation, the Corporation may treat the person in whose name this
Warrant is registered on the books of the Corporation as the absolute owner
hereof for all purposes, notwithstanding any notice to the contrary.
12. Survival of Covenants, Representations and Warranties. All
-----------------------------------------------------
agreements, covenants, representations and warranties herein shall survive the
execution and delivery of this Warrant and any investigation at any time made on
behalf of any party and the exercise, sale and purchase of this Warrant and the
Common Stock issuable on exercise hereof.
13. Voting Rights. This Warrant shall not entitle the Holder, as such, to
-------------
any voting rights or other rights as a stockholder of the Corporation or to any
other rights except the rights stated herein.
14. Entire Agreement. This Warrant contains the entire agreement of the
----------------
parties and supersedes all prior or contemporaneous written or oral
negotiations, correspondence, understandings and agreements between the parties,
regarding the subject matter hereof.
15. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Warrant shall bind and inure to the benefit of the Holder and the Corporation
and their respective successors and assigns.
16. Notices. All demands, notices and other communications to be given
-------
hereunder shall be in writing and shall be deemed duly given and received when
transmitted by facsimile transmission with receipt acknowledged by the
addressee, when delivered personally or three days after being mailed by first
class mail, postage prepaid, properly addressed, if to the Corporation, at 1376
Willow Road, Menlo Park, California 94025, facsimile number (415) 326-6003 or,
if to the Holder, at the Holder's address set forth below (or at any other
address or facsimile number designated by notice by either party to the other
party):
Larry Crandell
125 E. Victoria Street, Suite A
6
<PAGE>
Santa Barbara, CA 93101
Fax: 805-962-5650
17. Amendments; Waivers; Termination; Governing Law, Headings. This
---------------------------------------------------------
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be governed by and construed and interpreted in accordance with the laws of the
State of California. The headings in this Warrant are for convenience of
reference only and shall not affect the construction or interpretation of any
provision hereof.
18. Saturdays, Sundays, Holidays, etc.. If the last or appointed day for
----------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or legal holiday.
19. Assignability. This Warrant may not be assigned or transferred other
-------------
than in compliance with federal and state securities laws and subject to the
transfer restrictions described in the legend on the first page hereof.
20. Asset Purchase Agreement. This Warrant is issued pursuant to that
------------------------
certain Asset Purchase Agreement dated as of July 31, 1996, as amended, by and
between the Corporation and CGI (the "Asset Purchase Agreement"), which
agreement is hereby incorporated by reference and made a part of this instrument
and is hereby referred to for a description of the additional rights,
limitations of rights and obligations of the Corporation and Holder not
otherwise set forth herein.
21. Registration Rights -- Optional Registrations.
---------------------------------------------
21.1 If at any time or times after the date first written
above, the Corporation shall determine to register any of its securities (for
itself or for any other securities holder of the Corporation) under the
Securities Act of 1933, as amended (the "Act"), or any successor legislation
(other than a registration relating to stock option plans, employee benefit
plans or a Rule 145 transaction), and in connection therewith the Corporation
may lawfully register its Common Stock and in connection therewith the Effective
Date shall occur, the Corporation will promptly give written notice thereof to
the Holder and will use its best efforts to include in such registration and to
effect the registration under the Act of all Common Stock issued upon exercise
hereof (the "Registrable Securities") which the Holder may request in writing
delivered to the Corporation within five (5) days after receipt by the Holder of
the notice given by the Corporation; provided, however, if the managing
-------- -------
underwriter or underwriters for the Corporation advise the Corporation in
writing that including all or part of the Registrable Securities in such
offering will adversely affect the marketing of the proposed offering, then, in
connection with any such underwritten offering by the Corporation of any of its
securities, such registration shall be limited to the number of shares of
Registrable Securities as is determined by
7
<PAGE>
such managing underwriter or underwriters, including the exclusion of all
Registrable Securities from such registration if so determined.
21.2 Notwithstanding the foregoing, the Corporation shall not be
obligated to take any action pursuant to this Section 21 in any particular
jurisdiction in which the Corporation would be required to execute a general
consent to service of process in effecting such registration, unless the
Corporation is already subject to service in such jurisdiction and except as may
be required by the Act. The Corporation shall have the right to select the
managing underwriter or underwriters for any underwritten public offering made
pursuant to a registration under this Section 21. In the event that a
registration under this Section 21 is for a registered public offering involving
an underwriting, the right of the Holder to registration pursuant to this
Section 21 shall be conditioned upon the Holder's participation in the
underwriting arrangements. The Holder shall enter into an underwriting
agreement, in the form approved by the Corporation, with the managing
underwriter(s) selected for such underwriting by the Corporation.
21.3 The Holder shall, if requested by the managing underwriter or
underwriters of any proposed firm underwritten public offering of securities by
the Corporation, agree not to sell any Registrable Securities or any other
securities of the Corporation owned by such Holder in any transaction other than
pursuant to such underwritten public offering for a period of up to 180 days
beginning on the effective date of the applicable registration statement. The
Holder shall upon request execute a separate written agreement confirming and
agreeing as to the foregoing.
21.4 In connection with any registration of Registrable Securities
pursuant to this Section 21, the Holder agrees to supply to the Corporation such
information as the Corporation shall reasonably request. It shall be a
condition precedent to the obligation of the Corporation to include in any
registration statement any Registrable Securities then held by the Holder that
the Corporation shall have received an undertaking reasonably satisfactory to it
and its counsel from the Holder, to indemnify and hold harmless the Corporation,
each director of the Corporation, each officer of the Corporation who shall sign
such registration statement and any person who controls the Corporation within
the meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with information furnished to the
Corporation through an instrument duly executed by the Holder specifically for
use in the preparation of such registration statement, preliminary prospectus or
final prospectus or such amendment or supplement thereto. In the event of any
registration of Registrable Securities pursuant to this Section 21, the
Corporation will hold harmless the Holder of such securities against any losses,
claims, damages or liabilities to which such Holder may become subject under the
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 registration
statement, or any preliminary prospectus or final prospectus or amendment or
supplement thereto on the effective date thereof, 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 Corporation
- -------- -------
8
<PAGE>
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, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Corporation through an instrument duly executed by
such Holder specifically for use in the preparation thereof.
Dated as of December 16, 1996
JETFAX, INC.
By:/s/ Edward R. Prince, III
--------------------------
Edward R. Prince, III
President
9
<PAGE>
ENDORSEMENTS
------------
Number
Number of of Shares
Shares as Remaining
Exercise to which Available Signature of Authorized
Date Exercised for Exercise Officer of the Corporation
-------- --------- ------------ --------------------------
<PAGE>
SUBSCRIPTION
(To be completed and signed only on
an exercise of the Warrant.)
To JetFax, Inc.:
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________ shares of the Common Stock of JetFax, Inc. of
those to which such Holder is entitled thereunder, and herewith makes payment of
$__________ therefor by certified or official bank check. The undersigned
hereby requests that the certificate(s) for such shares be issued in the name(s)
and delivered to the address(es) as follows:
_________________________________________
_________________________________________
_________________________________________
_________________________________________
Dated: __________________ __________________________________
__________________________, Holder
By ___________________________
Its ________________________
<PAGE>
[Execution Copy]
WARRANT AMENDMENT
THIS WARRANT AMENDMENT is made as of February 13, 1997, by and between
JetFax, Inc., a Delaware corporation with its principal place of business at
1376 Willow Road, Menlo Park, CA 94025 (the "Corporation"), and Larry Crandell
(the "Holder").
WHEREAS, the Holder is the holder of that certain Common Stock Purchase
Warrant (the "Warrant") of the Corporation dated December 16, 1996 for the
purchase of up to 25,000 shares of the Common Stock of the Corporation; and
WHEREAS, the Corporation and the Holder desire to amend the Warrant as set
forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Warrant.
2. Section 1 of the Warrant is hereby amended by adding the following new
Section 1.3 at the end thereof:
"1.3 Net Exercise.
------------
(a) In the event all (or the remaining balance) of the purchase
rights represented by this Warrant are exercised by the Holder pursuant to
Section 1.1 above, in lieu of payment of an aggregate amount equal to the
Purchase Price times the number of Shares as to which this Warrant is then
being exercised as provided in Section 1.1 the Holder may elect to receive
a number of Shares to which the Holder is entitled computed using the
following formula:
X=Y(A-B)
-----
A
where: X= the number of Shares of Common Stock to be issued to the
Holder,
<PAGE>
Y= the number of Shares of Common Stock purchasable under
this Warrant,
A= the Fair Market Value (as defined below) of one Share
of Common Stock to which the Holder is entitled, and
B= the Purchase Price.
(b) Determination of Fair Market Value. As used herein, the term
----------------------------------
"Fair Market Value" of a Share of Common Stock to which the Holder is
entitled as of a particular date (the "Determination Date") shall mean:
(i) if the Common Stock to which the Holder is entitled
is traded on an exchange or are quoted on the National Association of
Securities Dealers, Inc. automated quotation ("NASDAQ") National Market
System, the average of the closing or last sale price, respectively, of
such stock as reported for the ten (10) trading days immediately
preceding the Determination Date;
(ii) if the Common Stock to which the Holder is entitled
is not traded on an exchange or on the NASDAQ National Market System but
is traded in the over-the-counter market, then the average-of the mean of
the closing bid and asked prices for a share of such stock reported for
the ten (10) trading days immediately preceding the Determination Date;
and
(iii) if the Common Stock to which the Holder is entitled
is not publicly traded, then as determined in good faith by the Company's
Board of Directors as being the highest price per share which the Company
could reasonably obtain from a willing buyer (who is not an employee or
director) for authorized but unissued shares of Common Stock to which the
Holder is entitled.
(c) Limits on Exercise of Net Exercise Right. The rights under
----------------------------------------
this Section 1.3 may only be exercised if the value of A minus B (where "A"
and "B" are as defined in Section 1.3(a) above) is a positive number."
3. The term "Warrant" as used in the Warrant shall for all purposes refer
to the Warrant as amended by this Warrant Amendment.
-2-
<PAGE>
4. Except to the extent expressly amended by the terms of this Warrant
Amendment, all the terms and conditions of the Warrant remain in full force and
effect.
5. This Warrant Amendment may be executed in any number of duplicate
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
[balance of this page intentionally left blank]
-3-
<PAGE>
[Warrant Amendment]
IN WITNESS WHEREOF, the parties have duly signed this Warrant
Amendment as of the day and year first written above.
JETFAX, INC. LARRY CRANDELL
By: /s/Edward R. Prince III By: /s/Larry Crandell
----------------------- -----------------
Edward R. Prince III
President
-4-
<PAGE>
EXHIBIT 10.26
[Execution Copy]
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 31, 1996, by and between JetFax, Inc., a
Delaware corporation with its principal place of business at 1376 Willow Road,
Menlo Park, CA 94025 ("Buyer"), and Crandell Group, Inc., a California
corporation with its principal place of business at 125 E. Victoria Street,
Suite A, Santa Barbara, CA 93101 ("Seller").
WHEREAS, Buyer is engaged in the development, marketing, sale and license
of fax products and technologies;
WHEREAS, Seller is engaged in the development, marketing, sale, license and
maintenance of PCL emulation software, portable electronic document software,
stand alone and network software and document management software; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, all of Seller's right, title and interest in and to certain of the
tangible and intangible assets of Seller utilized by Seller in its business,
subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) "Assets" shall have the meaning assigned to it in Section 2.1.
(b) "Assumed Contracts" shall have the meaning assigned to it in
Section 5.4(b).
<PAGE>
(c) "Benefit Plans" shall have the meaning assigned to it in Section
5.10(b).
(d) "Closing" shall have the meaning assigned to it in Section 4.1.
(e) "Closing Date" shall have the meaning assigned to it in Section
4.1.
(f) "Contracts" shall have the meaning assigned to it in Section
5.4(a).
(g) "Customer Lists" shall mean all of Seller's lists (whether in
written form or on data bases) of all of the customers to which Seller has
licensed any software, including the Proprietary Software, and all of the
customers to which Seller is currently providing and/or has provided
maintenance, training, consulting and/or educational services during the five
(5) year period prior to the date hereof and all of Seller's lists (whether in
written form or on data bases) of persons or entities who, to the knowledge of
Seller, are prospects for such licensing and/or services.
(h) "Documentation" shall mean all of the manuals, transparencies,
guidebooks, templates, reports, scripts, guidelines, charts, plans, visual aids,
articles, bibliographies, student notes, marketing materials, brochures, user
documentation and other materials which are currently utilized by Seller, or
have been utilized by Seller during the five (5) year period prior to the date
hereof, in providing training, consulting and/or educational services, including
all such materials utilized by Seller with regard to its Proprietary Software
and including all of the documentation specified on Schedule 5.18 hereto.
-------------
(i) "Employees" shall have the meaning assigned to it in Section
5.10(a).
(j) "Employment Agreement" shall have the meaning assigned to it in
Section 8.1(a).
(k) "Encumbrances" shall have the meaning assigned to it in Section
2.1.
(l) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
-2-
<PAGE>
(m) "Financial Statements" shall have the meaning assigned to it in
Section 5.1.
(n) "Former Employees" shall have the meaning assigned to it in
Section 5.10(a).
(o) "Intellectual Property" shall have the meaning assigned to it in
Section 5.9.
(p) "Litigation" shall have the meaning assigned to it in Section
5.7.
(q) "Promissory Note" shall have the meaning assigned to it in
Section 3.2.
(r) "Proprietary Software" shall mean all of Seller's software, in
both object code and source code form, including all present, prior (during the
five (5) year period prior to the date hereof) and future releases thereof,
enhancements thereto and derivatives thereof, all intellectual property related
thereto and all moral rights therein, including Seller's software products known
as "LaserFAX", "RichImage" (including the version of RichImage that is in
process of being modified to be Buyer's "JetSuite" product and all modifications
thereto) and "FaxMac" and including all of the software and intellectual
property specified on Schedule 1.1 hereto.
------------
(s) "Software Sales" shall mean any and all revenues received by
Buyer after the Closing Date from Proprietary Software, or portions thereof,
included in the Assets and software developed or integrated by Michael Crandell
(and his software staff, regardless of their geographic location) as part of his
employment with Seller (the "Subject Software"), including royalties, license
fees, nonrecurring engineering charges, contract work, consulting fees and
delivery bonus payments, less any product media costs, external manufacturing
costs and supplies, shipping costs, costs of documentation materials and ongoing
per copy third party license fees (such as for bundling of OCR software) and
less any discounts, refunds, credits and allowances given in connection with
such revenues. Notwithstanding the foregoing, in the event that the Subject
Software known as "JetSuite Lite" or JetSuite Pro" is licensed to a customer
bundled with other products of Buyer under a single price, the amount of
revenues to be attributed to such Subject Software and included (upon receipt
thereof by Buyer) within Software Sales shall equal $5.00 per unit of JetSuite
Lite
-3-
<PAGE>
and $32.00 per unit of JetSuite Pro (or such other per unit amounts,
respectively, as are agreed to in an agreement between Buyer and Oki and as may
be mutually agreed by Buyer and Seller); provided, however, that in the event
-------- -------
that other Subject Software is so bundled, or in the event that bundled
transactions involving "JetSuite Lite" or JetSuite Pro" involve commercial or
other business considerations requiring an adjustment of such per unit
calculation, the amount of revenues to be attributed thereto and included (upon
receipt thereof by Buyer) within Software Sales hereunder shall be adjusted to a
value or values as shall be mutually agreed by the parties hereto; provided,
--------
further, that in the event that JetSuite Lite or JetSuite Pro is licensed to any
- -------
unit of Hewlett-Packard Company bundled with other products of Buyer under a
single price, the amount of revenues to be attributed thereto and included (upon
receipt thereof by Buyer) within Software Sales shall equal $3.00 per unit of
JetSuite Lite and $10.00 per unit of JetSuite Pro; and, provided, further, that
-------- -------
in the event that any Subject Software is bundled with other products of Buyer
under a single price and some or all of such price is paid to Buyer in the form
of nonrecurring engineering charges, an amount equal to twenty-five percent
(25%) of such nonrecurring engineering charges received by Buyer shall be
included (upon receipt thereof by Buyer) within Software Sales. Notwithstanding
anything to the contrary stated herein, Buyer may freely bundle any Subject
Software with Buyer's past, present or future products licensed, sold or
otherwise distributed under Buyer's label, and in such event or events no
revenues shall be attributed to such Subject Software hereunder or otherwise
included within Software Sales. Software Sales shall include amounts due from
Buyer to Seller under contracts pre-existing as of the date of this Agreement
for Buyer's license of Sellers's LaserFAX software, and no payments shall be
required from Buyer to Seller under such contracts other than as provided in
this Agreement. Subject Software shall not include any prior, present or future
firmware.
1.2 Certain other words and phrases are defined or described elsewhere in
this Agreement and/or the Schedules and Exhibits hereto.
1.3 Wherever used in this Agreement (a) the words "include" or "including"
shall be construed as incorporating, also, "but not limited to" or "without
limitation", (b) the word "day" means a calendar day unless otherwise specified,
(c) the word "party" means each and every person or entity who is a party to
this Agreement, (d) the word "law" (or "laws") means any statute, ordinance,
-4-
<PAGE>
resolution, regulation, code, rule, order, decree, judgment, writ, injunction,
mandate or other legally binding requirements of a government entity and (e) the
word "notice" shall mean notice in writing (whether or not specifically stated)
and shall include notices, consents, approvals and any other written
communication contemplated under this Agreement.
1.4 Unless specified to the contrary, references to Sections, Schedules
and/or Exhibits mean the particular Section, Schedule or Exhibit in or to this
Agreement. References to this Agreement shall include this Agreement as varied
or modified from time to time by the parties. Unless the context otherwise
requires, words in the singular number include the plural and vice versa. All
Schedules and Exhibits hereto are hereby incorporated herein and made a part
hereof.
ARTICLE II
PURCHASE AND SALE OF ASSETS AND RELATED TRANSACTIONS
2.1 Purchase and Sale of Assets. Upon the terms and conditions herein set
---------------------------
forth, Seller hereby agrees to sell, convey, transfer, assign, grant and deliver
to Buyer, and Buyer agrees to purchase from Seller, at the Closing, all of
Seller's right, title and interest in and to all of the tangible and intangible
assets and rights of Seller identified on Schedule 2.1 hereto (collectively, the
------------
"Assets"), wherever such are located, free and clear of all liabilities,
pledges, security interests, mortgages, liens, conditional sales agreements,
restrictions, claims, defenses, set-offs, equities, encumbrances or charges
(collectively, "Encumbrances"), and whether in the possession of Seller or any
of its suppliers, consultants, distributors, agents or other service contractors
or any other person or entity. All other tangible and intangible assets and
rights of Seller shall be retained by Seller.
2.2 Excluded Assets. Without limitation to the foregoing, the parties
---------------
hereby agree that those assets identified in Schedule
--------
2.2 hereto shall be retained by Seller and shall be excluded from the Assets to
- ---
be sold, transferred, conveyed and assigned to Buyer pursuant to this Agreement.
2.3 Assumption of Liabilities. Except as hereinafter expressly provided,
-------------------------
Buyer shall assume no liabilities or obligations relating to the Assets or
Seller's business, it being
-5-
<PAGE>
expressly acknowledged and agreed by the parties that all such liabilities and
obligations, whether now existing or arising in the future, fixed or contingent,
known or unknown, shall be and remain the liabilities and obligations of Seller.
Notwithstanding the foregoing, Buyer agrees to assume from and after the Closing
the specific liabilities and obligations of Seller identified on Schedule 2.3
------------
hereto and in the Assumed Contracts (as hereinafter defined). Seller hereby
covenants to pay or otherwise discharge, or to cause to be paid or discharged,
in full in a due and timely manner all liabilities and obligations relating to
the Assets, the Assumed Contracts or Seller's business prior to Closing.
ARTICLE III
CONSIDERATION
3.1 Subject to the terms and conditions of this Agreement, from and after
the Closing and in consideration for the sale, transfer, assignment and delivery
of the Assets to Buyer, Buyer, at the time and in the manner herein set forth,
shall pay to Seller:
(a) A total of Five Hundred Thousand Dollars ($500,000.00) in two
installments of Two Hundred Fifty Thousand Dollars ($250,000.00) each, the first
such installment on the Closing Date and the second such installment on the date
that is twelve (12) months from the Closing Date;
(b) An amount equal to twenty-five percent (25%) of Software Sales
received by Buyer during the period commencing on the Closing Date and ending on
the date that is twelve (12) months from the Closing Date; and
(c) An amount equal to thirty-three (33%) of Software Sales received
by Buyer during the period commencing on the date that is twelve (12) months
from the Closing Date and ending on the date that is twenty-four (24) months
from the Closing Date.
3.2 The obligation to pay the second installment referred to in Section
3.1(a) shall be evidenced by a non-interest-bearing promissory note in the form
attached hereto as Exhibit A (the "Promissory Note"). All payments pursuant to
---------
Sections 3.1(b) and (c) shall be made to Seller, in arrears, monthly within
thirty (30) days after the end of each month by cash, check or wire transfer to
an account designated by Seller or by such other means as the parties may agree.
-6-
<PAGE>
3.3 Within thirty (30) days after the Closing Date, Buyer shall reimburse
Seller for the special costs specified on Schedule 3.3.
------------
3.4 In the event that at any time the employment of Michael Crandell by
the Buyer is terminated voluntarily by Michael Crandell, then, notwithstanding
any other provision hereof, Buyer's payment obligations under Sections 3.1(b)
and (c) shall immediately cease and Buyer shall have no further payment
obligation whatsoever to Seller under such Sections other than for amounts
accrued but unpaid as of the date of such termination.
3.5 Allocation of Purchase Price. The parties agree that the
----------------------------
consideration for the sale of the Assets, consisting of the purchase price to be
paid in accordance with Section 3.1, shall be allocated among the Assets as
follows:
Assumed Contracts and Proprietary Software:
LaserFAX $200,000 plus 25% of amounts per
Sections 3.1(b) and (c)
RichImage and FaxMac $100,000 plus 75% of amounts per
Sections 3.1(b) and (c)
Non-compete $100,000
Documentation $ 65,000
Intellectual Property $ 20,000
Computers, workstations, printers, $ 15,000
fax machines, plotters, copiers,
phone system, miscellaneous equipment,
furniture, miscellaneous office
equipment and fixtures
Seller and Buyer acknowledge that such allocation of the purchase price shall be
used by them for all purposes, including but not
-7-
<PAGE>
limited to all tax and financial reporting purposes, and they shall take no
position inconsistent therewith.
3.6 Right of Off-Set. The parties agree that, notwithstanding any other
----------------
provision hereof, Buyer may, without penalty, set-off against and deduct from
any payment obligations under this Section 3 any and all amounts Seller may owe
Buyer, including any such amounts owed pursuant to Section 10.3.
ARTICLE IV
THE CLOSING
4.1 Place and Time of Closing. Subject to the conditions set forth in
-------------------------
this Agreement, the closing of the purchase and sale of the Assets hereunder
(the "Closing") shall take place on July 31, 1996 (the "Closing Date") at 10:00
in the morning at the offices of General Counsel Associates LLP, 1891 Landings
Drive, Mountain View, California 94043, or at such other time, date or place as
shall have been agreed by the parties hereto.
4.2 Delivery by Seller. Seller shall deliver to Buyer at the Closing the
------------------
following:
(a) a Bill of Sale and Assignment in the form attached hereto as
Exhibit B, together with such other bills of sale, assignments and other
- ---------
instruments of transfer in form and substance satisfactory to Buyer as Buyer
shall deem necessary or appropriate to vest and confirm in Buyer good and
marketable title to the Assets and to effectively assign and transfer to Buyer
the Assumed Contracts;
(b) other instruments of transfer in form attached hereto as Exhibit
-------
C, or otherwise in form and substance satisfactory to Buyer, to vest and confirm
- -
in Buyer good and marketable title to any and all patents, trademarks and
copyrights, and applications therefor, included in the Assets;
(c) a certificate, dated the Closing Date, of the president of Seller
to the effect that (i) each of the representations and warranties of Seller made
herein are true and correct in all material respects on the Closing Date as
though such representations and warranties were made on and as of such date, and
(ii) Seller has performed and complied with the covenants,
-8-
<PAGE>
conditions and other obligations under this Agreement which are to be complied
with by it on or prior to the Closing Date;
(d) a copy, certified as of the Closing Date by the Secretary of
Seller, of the resolutions of Seller's shareholders and board of directors
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby and authorizing Michael Crandell to execute and
deliver this Agreement on behalf of Seller;
(e) all of the Documentation;
(f) all of the Customer Lists (in either written or machine readable
form as Buyer may request);
(g) the source code for all of the Proprietary Software (in the form
of master tapes or disks) and all documentation related to the Proprietary
Software;
(h) evidence, in form and substance satisfactory to Buyer, of the
Receivables (as defined in Schedule 2.1) and of the proceeds of the Receivables,
------------
in whatever form, received by Seller as of the Closing Date;
(i) all other documents, files, records and other tangible personal
property constituting the Assets;
(j) an opinion of Howell Moore & Gough LLP, counsel to Seller, in the
form attached hereto as Exhibit D;
---------
(k) evidence of release of any and all Encumbrances with respect to
the Assets in form and substance satisfactory to Buyer;
(l) evidence of termination and dissolution of Seller's Benefit Plans
and satisfaction of all obligations thereunder in form and substance
satisfactory to Buyer; and
(m) a Clearance Certificate regarding California sales, use, etc.
taxes.
4.3 Delivery by Buyer. Buyer shall deliver to Seller at the Closing the
-----------------
following:
(a) a certificate, dated the Closing Date, of an officer of Buyer to
the effect that (i) each of the representations and
-9-
<PAGE>
warranties of Buyer made herein are true and correct in all material respects on
the Closing Date as though such representations and warranties were made on and
as of such date, and (ii) Buyer has performed and complied in all material
respects with the covenants, conditions and other obligations under this
Agreement which are to be complied with by it on or prior to the Closing Date;
(b) a copy, certified as of the Closing Date by an officer of Buyer,
of the resolutions of Buyer's board of directors approving the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby;
(c) the amount of Two Hundred Fifty Thousand Dollars ($250,000.00) by
cash, check or wire transfer in satisfaction of the obligation to pay the first
installment referred to in Section 3.1(a);
(d) the Promissory Note; and
(e) a security agreement, in substantially the form attached hereto
as Exhibit G.
---------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
5.1 Financial Statements. Attached hereto as Schedule 5.1 are copies of
-------------------- ------------
the following financial statements (collectively, the "Financial Statements"):
(a) Unaudited Balance Sheet of Seller as of December 31, 1995;
(b) Unaudited Statement of Income of Seller for the twelve month
period ended December 31, 1995;
(c) Unaudited Balance Sheet of Seller as of March 31, 1996; and
(d) Unaudited Statement of Income of Seller for the three month
period ended March 31, 1996.
-10-
<PAGE>
The Financial Statements do not contain any untrue statement of material
fact, have been prepared from, and are consistent with, the books and records of
Seller, present fairly the financial position and results of operations of
Seller at the dates and for the periods to which they relate, have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods indicated and show all liabilities, absolute or
contingent, of Seller required to be recorded thereon in accordance with
generally accepted accounting principles as at the respective dates thereof.
Except (i) to the extent reflected or reserved against in the Financial
Statements or (ii) for liabilities incurred since March 31, 1996, in a manner
consistent with the normal business practices of Seller, properly reflected in
the books and records of Seller and disclosed in writing to Buyer, Seller did
not have at March 31, 1996, and does not now have, any material liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise.
Since March 31, 1996, Seller has not paid, loaned, contributed, assigned or
otherwise transferred any funds or other assets of Seller to or for the benefit
of any other entity controlling, controlled by or under common control with
Seller, nor has Seller declared, paid, or set apart any funds for the payment of
any dividend or other distribution with respect to its shares of stock of any
class. Seller has not, since March 31, 1996, transferred, or otherwise taken
any action with respect to, the assets of Seller except in the normal course of
business.
5.2 Organization and Good Standing. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
California and is qualified to do business and in good standing in all
jurisdictions where the nature of its business or the property owned or leased
by it requires such qualification.
5.3 Authority; Execution. Seller has all requisite corporate power and
--------------------
authority to own, lease and operate the Assets, to enter into and perform the
Assumed Contracts and to conduct its business as currently conducted, and to
execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement and each of the
instruments of transfer, conveyance and assignment delivered by Seller to Buyer
hereunder, have been duly and validly authorized by all necessary corporate
action on the part of Seller, and this Agreement and such instruments are the
valid and binding obligations of Seller,
-11-
<PAGE>
enforceable against Seller in accordance with their respective terms.
5.4 Contracts. (a) Schedule 5.4(a) to this Agreement contains a complete
--------- ---------------
and correct list (and, in the case of oral contracts or arrangements, a complete
and correct description) of all contracts, agreements, understandings or
arrangements of Seller having an annual value of One Thousand Dollars
($1,000.00) or more, whether written or oral, relating to, or which are
necessary for the conduct of, Seller's business, as the same is carried out on
the date hereof (collectively, the "Contracts"). Except as set forth on
Schedule 5.4(a), all such Contracts are in full force and effect and neither
- ---------------
Seller nor, to the knowledge of Seller, any other party thereto is in default
with respect of any of the material terms or provisions thereof, and no event
has occurred which with notice or lapse of time would constitute a default by
Seller or, to the best of Seller's knowledge, any other party thereto. Except
as set forth on Schedule 5.4(a), there are no material disputes or disagreements
---------------
pending or threatened between Seller and any other party under any of the
Contracts, nor, to the knowledge of Seller, is there any basis for any such
material dispute or disagreement.
(b) Schedule 5.4(b) to this Agreement identifies those of the
---------------
Contracts listed or described in Schedule 5.4(a) hereto (and any additional
---------------
contracts) with respect to which Buyer has agreed to assume the liabilities and
obligations of Seller from and after the Closing (the "Assumed Contracts");
provided, however, that, with respect to any oral Contract listed in Schedule
--------
5.4(b), only those liabilities and obligations expressly described in Schedule
- ------ --------
5.4(a) shall be assumed by Buyer. Except as set forth on Schedule 5.4(b), no
- ------ ---------------
consent of, or notice to, any third party is required in order to assign and
transfer any such Assumed Contract to Buyer.
5.5 Breach of Statute or Contract. Neither the execution and delivery of
-----------------------------
this Agreement, the consummation of the transactions contemplated hereby nor the
compliance with or fulfillment of the terms and conditions hereof will:
(a) violate or conflict with any provision of the Articles of
Incorporation or By-Laws of Seller;
(b) violate or conflict with, result in the breach or termination of
or otherwise give any other contracting party the right to terminate, or
constitute a default (or an event which,
-12-
<PAGE>
with the lapse of time, or the giving of notice, or both, will constitute a
default) under, any contract or other instrument to which Seller is a party or
by which Seller is bound, or result in the creation of any Encumbrance upon any
of the Assets pursuant to the terms of any such contract or instrument; or
(c) violate or conflict with any law of any court or governmental body
of any jurisdiction.
Seller is not a party to, subject to or bound by any agreement or any
judgment, order, writ, injunction or decree of any court or governmental body
that prevents the making of, or the consummation of, the transactions
contemplated by, this Agreement.
5.6 Title to and Condition of the Assets. (a) Except as disclosed in
------------------------------------
Schedule 5.6(a), Seller is the sole and exclusive owner of the Assets free and
- ---------------
clear of any and all Encumbrances and has complete and unrestricted power and
unqualified right to sell, convey, assign, transfer and deliver to Buyer good
and marketable title to the Assets free and clear of any and all Encumbrances.
No person other than Seller has any present or contingent interest of any kind
in any of the Assets, and at the Closing Buyer shall become the sole and
exclusive owner of the Assets, free and clear of any and all Encumbrances.
Except as disclosed in Schedule 5.6(a), no third party has any right to the use
---------------
or possession of any of the Assets, nor does any third party have any right to
receive royalties, fees or other compensation (however characterized) in respect
of the Assets. The rights of any third parties disclosed in Schedule 5.6(a)
---------------
shall not impair any of the rights of Buyer under this Agreement. Subject to
being filed at appropriate locations, the instruments of conveyance, assignment
and transfer to be executed and delivered to Buyer pursuant hereto at the
Closing will effectively vest in Buyer good and marketable title to the Assets
free and clear of all Encumbrances.
(b) All of the non-software tangible personal property constituting
the Assets (i) is in good operating condition and repair, subject only to
ordinary wear and tear, and is fit for its intended purposes and (ii) except as
specified in Schedule 5.6(b) hereto, is physically located in or about the
---------------
premises of Seller at 125 E. Victoria Street, Suite A, Santa Barbara, CA 93101.
5.7 No Claims or Litigation. Except as disclosed in Schedule 5.7, no
----------------------- ------------
litigation, claim, administrative or arbitral proceeding or governmental
investigation (collectively "Litigation") is pending
-13-
<PAGE>
or, to the knowledge of Seller, threatened against Seller involving the Assets,
the Assumed Contracts, Seller's business or the transactions contemplated by
this Agreement. There is no judgment, order, injunction, decree or award
outstanding (whether rendered by a court, administrative agency or arbitral
tribunal) against Seller or by which Seller is bound which relates to or could
affect Seller's business, the Assets or the Assumed Contracts.
5.8 Absence of Changes or Events. Since March 31, 1996, Seller's business
----------------------------
has been carried on in the ordinary course in a manner consistent with prior
practice. Except as disclosed in Schedule 5.8, Seller has not, since March 31,
------------
1996:
(a) incurred any material obligation or liability (whether absolute,
accrued, contingent or otherwise) relating to or which could affect the Assets,
the Assumed Contracts or Seller's business, other than in the ordinary course of
business;
(b) mortgaged, pledged or subjected to lien, charge or other
encumbrance, or (other than licenses in the ordinary course) granted to third
parties any rights to, any of the Assets;
(c) sold or (other than licenses in the ordinary course) transferred
any of the Assets or Assumed Contracts, waived any rights of a material nature
or, other than in the ordinary course, canceled any debts or claims;
(d) granted any general or specific increase in the rates of salary
or other compensation payable or to become payable, or granted any bonus, to any
employee or agent, including by means of any Benefit Plan or similar plan,
contract, commitment or arrangement;
(e) experienced any material adverse change in its financial
condition, assets, liabilities, business or prospects;
(f) made any material change in any method of accounting or any
business practice; or
(g) suffered any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the Assets, the Assumed
Contracts or Seller's business.
5.9 Intellectual Property Rights. Schedule 5.9 correctly sets forth all
---------------------------- ------------
of the patents, trademarks, trade names, service
-14-
<PAGE>
marks, copyrights, registrations of and applications for registration of any of
the foregoing, inventions, trade secrets, technology, know how, processes,
designs, techniques, documentation, computer programs and all other
intellectual property or proprietary rights owned or licensed by Seller,
registered in the name of Seller, used by Seller at any time during the past
five (5) years in its business or which are necessary to the conduct of its
business (collectively, "Intellectual Property"), all of which are valid and
subsisting. All of the applications listed on Schedule 5.9 are still pending in
------------
good standing and have not been abandoned. Seller is the sole and exclusive
owner of all right, title and interest in and to, or, as specified on Schedule
--------
5.9, has good and valid licenses or other rights to use, all of the Intellectual
- ---
Property, none of which conflicts with, violates or is infringing upon any
proprietary or contractual right of any third party. Schedule 5.9 identifies the
------------
owners of the Intellectual Property. Seller has taken all reasonable steps
necessary or appropriate to protect and perfect Seller's right, title and
interest in the Intellectual Property. Schedule 5.9 identifies any Intellectual
------------
Property as to which Seller has any obligation to pay royalties, fees or other
compensation (however characterized) which are unpaid as of, or which may become
due after, the Closing Date and identifies the expiration date, if any, of the
Intellectual Property and any geographic limits thereon. There are no licenses
or commitments outstanding or effective concerning the Intellectual Property
(whether granted by Seller, to Seller or otherwise) except as listed on Schedule
--------
5.9. Seller has entered into valid and binding written nondisclosure agreements
- ---
with all third parties who may have had access to confidential information of
Seller and with respect to which Seller has a reasonable concern of disclosure.
Seller has entered into valid and binding written agreements providing for the
transfer of intellectual property rights with any parties (including employees
of Seller) who have provided any Intellectual Property to Seller. All of
Seller's right, title and interest in, to and under the Intellectual Property is
freely transferable and is free and clear of any Encumbrances, options,
distribution rights and restrictions except to the extent expressly set forth on
Schedule 5.9. There are no pending or threatened claims, actions, suits,
- ------------
proceedings, judgments, decrees or orders affecting or relating to the
Intellectual Property, Seller's right, title and interest therein or the
validity, use, transfer or potential transfer of Seller's right, title and
interest therein, or alleging that any of the Intellectual Property conflict
with, violate or infringe the proprietary or contractual rights of any third
party, and, to Seller's best knowledge, there are no existing
-15-
<PAGE>
grounds on which any such claim might be made or such action, suit or proceeding
might be commenced. As of the Closing Date, each of Seller's employees and
consultants will have been given notice that the Intellectual Property are being
transferred to Buyer and are not to be used or disclosed except as authorized by
Buyer.
5.10 Employees; Employee Benefit Plans. (a) Set forth on Schedule 5.10
--------------------------------- -------------
is a complete and correct list of (i) the employees of Seller employed in
connection with its business (the "Employees"), indicating salary and other
compensation data and date of employment and indicating those Employees who are,
as of the date hereof, on disability, sick leave, layoff or leave of absence;
(ii) each defined benefit and defined contribution plan which is maintained or
contributed to by Seller for the Employees, or to which Seller is required to
contribute, with respect to the Employees; and (iii) all employment policies and
arrangements, all employment and consulting agreements to the extent not
otherwise disclosed on a Schedule to this Agreement, all agreements with respect
to leased or temporary employees and all executive compensation plans, incentive
compensation plans or arrangements, bonus plans, deferred compensation
agreements, excess benefit plans, vacation plans, death benefit plans, sickness
or disability plans, severance pay plans, educational assistance plans, employee
stock option, stock ownership or stock purchase plans, group life, health and
accident insurance and other plans, agreements, arrangements or commitments,
whether or not legally binding, whether written or oral, and whether express or
implied, of Seller which benefit the Employees or former Employees of Seller
("Former Employees"), or their dependents, survivors or beneficiaries. Except
as provided in Schedule 5.10 hereof, all Employees and Former Employees will be
-------------
fully paid through the Closing for services rendered and for ordinary expenses
incurred through the Closing under their respective employment agreements, if
any, or otherwise, and no Employee is indebted directly or indirectly to Seller.
(b) Except as set forth on Schedule 5.10, there is no "employee
-------------
benefit plan" within the meaning of Section 3(3) of ERISA, and (to the extent
not otherwise included as an "employee benefit plan") no stock ownership, non-
cash compensation or other similar plan, program or arrangement maintained by or
for Seller under which Seller has any present or future obligation or liability
(other than to make current wage or salary payments) with respect to Employees
or Former Employees or their dependents, survivors or beneficiaries (all of
which, together with the plans,
-16-
<PAGE>
policies and arrangements set forth on Schedule 5.10, are hereafter referred to
-------------
as the "Benefit Plans"). Seller has no present or future liability to Former
Employees or to their dependents, survivors or beneficiaries in connection with
or arising out of any Benefit Plan, compensation arrangement or practice which
Seller maintained, adopted or to which Seller contributed prior to the Closing,
and Seller has not maintained, adopted or contributed to any Benefit Plan that
provides benefits or payments to Former Employees or their dependents, survivors
or beneficiaries, except as indicated in Schedule 5.10.
-------------
(c) With respect to the Employees, Seller has complied in all
material respects with Title VII of the Civil Rights Act of 1964, as amended,
the Fair Labor Standards Act, as amended, the Immigration Reform and Control Act
of 1986, and all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, the withholding and payment of taxes from
compensation of employees, discriminatory practice with respect to employment
and discharge or otherwise relating to the conduct of employers with respect to
employees or potential employees.
5.11 Ability to Conduct Business. There is no agreement, arrangement or
---------------------------
understanding with any person, or any judgment, order, writ, injunction or
decree of any court or governmental body of any jurisdiction, that could prevent
in any material manner the use by Buyer of the Assets or Assumed Contracts from
and after the Closing Date. Seller has all federal, state, local and foreign
licenses, permits or other authorizations of governmental authorities used or
required in connection with its business or related to the Assets or Assumed
Contracts and is in compliance therewith and with all applicable laws.
5.12 Sales Representatives, Distributors, Consultants and Agents.
-----------------------------------------------------------
Schedule 5.12 hereto sets forth a complete and correct list of the names and
- -------------
addresses of each sales representative, distributor, consultant or agent
currently engaged by Seller who is not an Employee, the commission rates or
other payment schedule applicable with respect to each such person or entity,
the territory assigned to each such person or entity (with an indication of
whether such territory is exclusive or non-exclusive and any other material
limitations relating thereto), whether any such person or entity receives use of
office facilities or an automobile at Seller's expense, and the amount of
commissions or other payment earned by each such person or entity for the one
year period ended December 31, 1995. Schedule 5.12 also sets forth a
-------------
-17-
<PAGE>
list of all agreements between Seller and any such person or entity, complete
and correct copies of which agreements have heretofore been delivered to Buyer.
5.13 Tax Returns and Payments. All tax returns and reports of Seller
-------------------------
required to be filed on or before the date hereof have been duly and timely
filed on or before such date. All taxes, assessments, fees and other
governmental charges upon Seller and upon the Assets which have become due and
payable through and including the date hereof have been paid in a timely manner.
Seller will pay when due any and all taxes (including sales taxes, real and
personal property taxes, withholding taxes, employment and payroll taxes),
assessments, fees and other governmental charges arising with respect to periods
beginning on or before the date hereof. As of the date hereof, there is no tax
audit pending against Seller, there are no tax liens on any of the Assets, and
there is no basis for the assertion of any such tax liens.
5.14 Approvals and Consents. Except as set forth on Schedule 5.14, no
----------------------- -------------
licenses, consents, authorizations or approvals of any federal, state, local or
foreign governmental or regulatory body or other third party are required with
respect to the transactions contemplated by this Agreement, including the
transfer of the Assets and Assumed Contracts to Buyer contemplated hereunder.
5.15 Software. The Proprietary Software does not contain any material
--------
defects, shall function properly and in conformity with the descriptions and
specifications provided to Buyer by Seller and does not conflict with, violate
or infringe upon any proprietary or other rights of any third party. Except for
the Proprietary Software, all computer software used by Seller in the conduct of
its business is commercially available on an over-the-counter basis or is
available generally in the public domain and has been acquired by Seller through
normal business channels.
5.16 Environmental and Safety Laws. Seller is not in violation of any
-----------------------------
applicable law relating to the environment or occupational health and safety,
and no material expenditures are or will be required in connection with its
business in order to comply with any such law.
5.17 Customer Lists. Attached hereto as Schedule 5.17 is a complete and
-------------- -------------
correct list and description of all Customer Lists. All of the Customer Lists,
all of which have been delivered by Seller to Buyer prior to or at the Closing,
are complete and
-18-
<PAGE>
accurate and include all of the customers to which Seller has licensed any
software, including the Proprietary Software, and all of the customers to which
Seller is currently providing and/or has provided maintenance, training,
consulting and/or educational services during the five (5) year period prior to
the date hereof and all of Seller's lists of prospects for such licensing and/or
services. Seller has taken all measures necessary or appropriate to protect the
confidentiality of all Customer Lists, including requiring each of Seller's
employees and consultants to enter into a confidentiality agreement covering the
Customer Lists. Seller has the right to use, and to transfer to Buyer for use by
Buyer, all data contained in the Customer Lists free and clear of all
Encumbrances, and Seller's use does not, and Buyer's use will not, infringe or
conflict with any proprietary, privacy or other right of any person or entity.
5.18 Documentation. Attached hereto as Schedule 5.18 is a complete and
------------- -------------
correct list of all Documentation, all of which have been delivered by Seller to
Buyer prior to or at the Closing and are complete and accurate.
5.19 Disclosures. No representation or warranty of Seller contained in
-----------
this Agreement or any Schedules hereto, nor any information or certificate
delivered or to be delivered by Seller to Buyer in connection with the
transactions contemplated by this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements herein or therein not misleading. All
information required to be disclosed by Seller under this Agreement and all
other material information concerning its business, the Assets and the Assumed
Contracts has been disclosed to Buyer. There is no fact known to Seller which
materially adversely affects, or which may materially adversely affect, its
business, the Assets or the Assumed Contracts which has not been disclosed in
this Agreement, any Schedules hereto or any certificates or documents delivered
or to be delivered by Seller under this Agreement.
5.20 Agent's Fees. Seller has retained no finder or broker in connection
------------
with this Agreement or the transactions contemplated by this Agreement.
5.21 Reliance. The foregoing representations and warranties are made by
--------
Seller with the knowledge and expectation that Buyer is placing complete
reliance thereon in entering into, and performing
-19-
<PAGE>
its obligations under, this Agreement, and the same shall not be affected in any
respect whatsoever by any investigation heretofore conducted by or on behalf of
Buyer, whether in contemplation of or pursuant to this Agreement or otherwise.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
6.1 Organization and Good Standing of Buyer. Buyer is a corporation duly
---------------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
6.2 Powers; Execution. Buyer has all requisite corporate power and
-----------------
authority to execute, deliver and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement by Buyer have been or
will prior to the Closing be duly and validly authorized by all necessary
corporate action on the part of Buyer, and this Agreement is or will prior to
the Closing be the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms.
6.3 Litigation. No Litigation is pending or, to the knowledge of Buyer,
----------
threatened against Buyer which challenges the validity of, or seeks damages or
equitable relief on the basis of, this Agreement or which involves Buyer's
business and in which an unfavorable outcome, ruling or finding in any such
matter or for all such matters taken as a whole might have a material adverse
effect on the ability of Buyer to fulfill its obligations under the terms of
this Agreement.
6.4 Agent's Fees. Buyer has retained no finder or broker in connection
------------
with this Agreement or the transactions contemplated by this Agreement.
6.5 Access to Data. Buyer has had an opportunity to discuss Seller's
--------------
business, management and financial affairs with Seller's management and has had
the opportunity to review Seller's facilities.
6.6 Financial Statements. The unaudited financial statements of Buyer as
--------------------
of March 31, 1996, and the audited financial statements
-20-
<PAGE>
of Buyer as of March 31, 1995, all of which have been delivered by Buyer to
Seller prior to the Closing, (a) are in accordance with the books and records of
Buyer, (b) present fairly the financial position and results of operations and
(as to the audited financial statements only) changes in financial position of
Buyer at the dates and for the periods to which they relate and (c) were
prepared in accordance with generally accepted accounting principles in all
material respects applied on a consistent basis (other than, with respect to the
unaudited statements, as to footnote presentation and year-end adjustments).
6.7 Breach of Statute or Contract. Neither the execution and delivery of
-----------------------------
this Agreement, the consummation of the transactions contemplated hereby nor the
compliance with or fulfillment of the terms and conditions hereof will:
(a) violate or conflict with any provision of the Articles of
Incorporation or By-Laws of Buyer;
(b) violate or conflict with, result in the breach or termination of
or otherwise give any other contracting party the right to terminate, or
constitute a default (or an event which, with the lapse of time, or the giving
of notice, or both, will constitute a default) under, any contract or other
instrument to which Buyer is a party or by which Buyer; or
(c) violate or conflict with any law of any court or governmental body
of any jurisdiction.
ARTICLE VII
CONDUCT OF BUSINESS PENDING CLOSING
7.1 Conduct of Business by Seller. Seller covenants and agrees with Buyer
-----------------------------
that, between the date of this Agreement and the Closing Date:
(a) Seller will conduct its business diligently, only in the ordinary
course and substantially in the same manner as heretofore;
(b) Without the prior written approval of Buyer, no increase in the
compensation payable or to become payable by Seller
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to any Employee or any agent or consultant of Seller will be announced or
instituted;
(c) No contract or commitment, or series of related contracts or
commitments, will be entered into by or on behalf of Seller relating to the
Assets or Seller's business without the prior written approval of Buyer, unless
such contract or commitment, or series of related contracts or commitments,
involves an aggregate expenditure or liability of less than Fifty Thousand
Dollars ($50,000.00);
(d) No contract or commitment, or series of related contracts or
commitments, will be entered into by or on behalf of Seller relating to the
Assumed Contracts without the prior written approval of Buyer;
(e) Seller will use its best efforts to preserve intact the Assets,
the Assumed Contracts and Seller's existing relationships with its suppliers,
customers and Employees and others having business relationships with Seller,
provided that Seller shall not be authorized (without the prior written consent
of Buyer) to make any commitment on behalf of Buyer;
(f) Seller will not create or permit to become effective any
Encumbrance upon the Assets without Buyer's prior written approval;
(g) Seller will maintain insurance with reputable insurance companies
on the Assets and its business, providing coverage at least equal to the
coverage carried on the date hereof;
(h) Seller shall not make any material change in the accounting
procedures and practices or credit criteria utilized in connection with Seller
from those in effect at March 31, 1996;
(i) Seller shall promptly advise Buyer in writing of the commencement
or threat against Seller of any Litigation, whether or not covered by insurance,
arising out of, relating to or otherwise affecting the Assets, the Assumed
Contracts or Seller;
(j) Seller shall obtain and deliver to Buyer all consents,
authorizations and approvals (including all those set forth on Schedule 5.4(b)
---------------
and Schedule 5.14 hereto), shall make all registrations and filings and shall
-------------
give all notices, necessary or
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appropriate for the execution, delivery and performance of this Agreement and
the transactions contemplated herein;
(k) Seller shall promptly remit to Buyer any mail or other
communications, including any oral or written inquiries, relating to the Assets
or Assumed Contracts which are received by Seller, including all inquiries,
orders and requests for proposals for products included within the Assets and/or
maintenance, training, consulting and/or other services with respect thereto;
(l) Seller shall immediately notify Buyer of the occurrence of any
event that has a material adverse effect, or might reasonably be expected to
have a materially adverse effect, on or to the Assets, the Assumed Contracts or
Seller's business; and
(m) Seller shall use its best efforts to fulfill or cause the
fulfillment, as soon as practicable, of all the conditions set forth in Section
11.1 and of all of Seller's obligations set forth in Section 4.2.
7.2 Access to Books and Records.
---------------------------
(a) From the date of this Agreement until the Closing Date, Seller
shall cooperate with Buyer in its investigation of Seller, the Assets and the
Assumed Contracts. Without limiting the generality of the foregoing, Seller
shall allow during normal business hours the employees, attorneys, accountants
and other representatives of Buyer free and full access to the books and records
of Seller (including the right to make extracts therefrom or copies thereof),
Seller's contracts, Customer Lists, title documents, Documentation, leases,
insurance policies, documents with respect to intellectual property rights,
software source code (subject to appropriate confidentiality protections),
accounts, financial statements, working papers and all other operating and
technical data of Seller. Notwithstanding the foregoing, Buyer shall consult
with Seller in connection with the manner of Seller's carrying out its
investigation, with a view to minimizing disruption to Seller during the period
between the date hereof and the Closing Date.
(b) Seller shall also furnish to Buyer or its authorized
representatives such additional financial, tax and operating and technical data
as, in the sole discretion of Buyer, are required
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for Buyer to conduct the investigation referred to in Section 7.2(a). In the
event compliance with this Section 7.2(b) requires the payment by Seller of more
than One Thousand Dollars ($1,000.00) to its outside accountants or attorneys,
Buyer shall consult with Seller, in connection with the manner of Seller's
carrying out its investigation, with a view to minimizing such expenses.
ARTICLE VIII
MISCELLANEOUS COVENANTS
8.1 Employees.
---------
(a) Upon the Closing, Buyer shall offer employment to Michael
Crandell on substantially the terms and conditions set forth in Exhibit E hereto
---------
(the "Employment Agreement"). In connection with such employment, Buyer shall
issue to Michael Crandell options to acquire a total of 187,500 shares of
Buyer's common stock under Buyer's then current employee stock option plan, such
options to vest over a period of four years (one year cliff and then pro-rata),
at an exercise price of fair market value as set by Buyer's Board of Directors
(currently estimated to be approximately $0.30 per share at the time of
Closing).
(b) Upon the Closing, Buyer shall offer employment to Larry Crandell
on substantially the terms and conditions set forth in Exhibit F hereto. In
---------
connection with such employment, Buyer shall issue to Larry Crandell options to
acquire a total of 62,500 shares of Buyer's common stock under Buyer's then
current employee stock option plan, such options to vest over a period of two
years (one year cliff and then pro-rata), at an exercise price of fair market
value as set by Buyer's Board of Directors (currently estimated to be
approximately $0.30 per share at the time of Closing).
(c) Upon the Closing, Buyer shall offer employment to those
individuals set forth on Schedule 8.1(c) at the initial salary rates as set
---------------
forth on Schedule 8.1(c). In connection with such employment, Buyer shall issue
---------------
to such employees options to acquire that number of shares of Buyer's common
stock under Buyer's then current employee stock option plan as is set forth on
Schedule 8.1(c), such options to vest over a period of four years (one year
- ---------------
cliff and then pro-rata), at an exercise price of fair market value
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as set by Buyer's Board of Directors (currently estimated to be approximately
$0.30 per share at the time of Closing).
8.2 Tax Returns and Payments. Seller shall prepare and file all federal,
------------------------
state, local and foreign returns for all taxes (including installment payments
for taxes, interest, penalties, assessments or other deficiencies, governmental
charges and duties, if any) due or claimed to be due on or before the Closing
Date by any governmental authority with respect to Seller and shall promptly pay
all such taxes when due. Seller shall be responsible for, and shall pay promptly
when due, any sales, transfer, excise, use, documentary stamps/stamp duties or
other taxes which may be imposed in any jurisdiction in connection with or
arising from any of the transactions contemplated in this Agreement, including
the transfer of any of the Assets to Buyer. Seller shall prepare and file all
appropriate sales tax returns and other documents due in any jurisdiction in
connection with the sale and transfer of the Assets to Buyer and pay all amounts
due thereunder. Buyer shall not bear any of such taxes or the costs associated
therewith.
8.3 Assignment of Contracts, Rights, Etc. Seller shall obtain, prior to
------------------------------------
the Closing, all consents, authorizations or approvals which may be necessary or
required for the consummation of the transactions contemplated hereunder or as a
condition to the assignment of any Contract to Buyer hereunder. Without
limitation to the foregoing, Seller shall obtain and deliver to Buyer, prior to
the Closing, all consents set forth on Schedule 5.4(b) and Schedule 5.14 hereto.
--------------- -------------
If any such consent is not obtained by the Closing, without limitation to any
right or remedy of Buyer, Seller shall continue to use its best efforts to
cooperate with Buyer in any reasonable arrangements designed to provide for
Buyer the benefits thereunder, including enforcement for the benefit of Buyer of
any and all rights of Seller against such third party arising out of the
cancellation by such third party or otherwise.
8.4 Further Assurances; Bulk Transfers.
----------------------------------
(a) Seller shall, at any time and from time to time after the
Closing, upon the request of Buyer but without further consideration, do,
execute, acknowledge, deliver and file, or shall cause to be done, executed,
acknowledged, delivered and filed, all such further acts, deeds, transfers,
conveyances, assignments or assurances as may be reasonably required by Buyer
for transferring,
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conveying, assigning and reducing to Buyer's possession and use, the Assets and
the Assumed Contracts.
(b) Buyer hereby waives the bulk transfer provisions of the Uniform
Commercial Code in connection with the transactions contemplated by this
Agreement. Seller shall at all times indemnify Buyer in connection with such
bulk transfer provisions as provided in Section 10.3 hereof.
8.5 Mail and Communications. Seller shall promptly remit to Buyer any
-----------------------
mail or other communications, including any oral or written inquiries, relating
to the Assets or Assumed Contracts which are received by Seller from and after
the Closing, including all inquiries, orders and requests for proposals for
products included within the Assets and/or maintenance, training, consulting
and/or other services with respect thereto;
8.6 Names. From and after the Closing, Seller shall not utilize or employ
-----
in any manner, directly or indirectly, any of the names "LaserFAX", "RichImage",
"FaxMac", "JetSuite" or any similar name, without the prior written
authorization of Buyer.
8.7 Encumbrances. Prior to the Closing, Seller shall obtain the release
------------
of any and all Encumbrances with respect to the Assets in form and substance
satisfactory to Buyer.
8.8 Officer and Shareholder Loans. Prior to the Closing, Seller shall pay
-----------------------------
in full any and all loans between Seller and any of Seller's shareholders or
officers.
8.9 Benefit Plans. Prior to the Closing, Seller shall terminate and
-------------
dissolve Seller's Benefit Plans and satisfy all obligations thereunder.
8.10 Buyer's Accounts; Terms. During such time that Seller is entitled to
-----------------------
payments under Section 3 hereof:
(a) Buyer shall keep accurate books of account and records with
respect to those transactions in which Software Sales are generated, and
simultaneously with the payment of any payments pursuant to Sections 3.1(b) and
(c) Buyer shall deliver to Seller a statement which shall describe in reasonable
detail the manner in which the amount of such payment was determined;
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(b) Seller shall have the right, exercisable by written notice to
Buyer, not more than quarterly in any fiscal year of Buyer and at Seller's own
expense, upon reasonable advance notice and during normal business hours, to
have independent accountants (satisfactory to Seller and Buyer) review the books
and records of Buyer relating to those transactions in which Software Sales are
generated. If Seller's accountants dispute the accuracy of any of the books and
records, Seller shall promptly notify Buyer. Seller shall bear the expense of
any such review unless such review reveals an aggregate underpayment by Buyer to
Seller of more than five percent (5%) of amounts owed in any calendar quarter,
in which event the expense of such review shall be born by Buyer. All
information obtained or learned by Seller's accountants in the course of, or in
connection with, any review conducted hereunder shall be kept strictly
confidential and shall not be disclosed to any third party; and
(c) In any transactions that will generate Software Sales, Buyer shall
use all reasonable efforts to negotiate financial and payment terms that are
consistent with the ordinary course of business of Buyer for similar prior
transactions.
8.11 Board Visitation Rights. Seller agrees that, from and after the
-----------------------
Closing and until the earlier to occur of (a) the date that is twenty-four (24)
months from the Closing Date or (b) the date of the closing of the initial
public offering of the capital stock of Seller, Seller shall furnish to Michael
Crandell timely notice of, and permit Michael Crandell (or Larry Crandell as
Michael's representative) to attend as a non-voting observer, all meetings of
the Board of Directors of Seller.
8.12 Default License. From and after the Closing, and until the date that
---------------
is twenty-seven (27) months from the Closing Date, (a) in the event of any
material breach by Buyer of any of the material covenants for the payment of
money set forth in this Agreement to be performed by Buyer, which breach Buyer
fails to cure within sixty (60) days following written notice from Seller
specifying such breach, or (b) in the event a petition for relief under any
bankruptcy law is filed by or against Buyer, or a receiver is appointed for all
or a substantial portion of Buyer's assets, and such petition or appointment is
not dismissed or vacated within sixty (60) days, then, upon written notice to
Buyer, Seller shall be deemed to have been granted by Buyer, and shall have, a
perpetual, fully paid, royalty free, non-exclusive,
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transferable, license, with right to sublicense, to do any and all of the
following (1) use, modify, localize, prepare derivative works of, include in
other product material, copy and reproduce, make and have made, any software
source code included in the Subject Software and (2) distribute copies of the
Subject Software, whether separately or as part of other product material,
worldwide by sale or other transfer of ownership or by rental, license, lease or
lending, and to publish, publicly display and publicly perform the Subject
Software.
8.13 Prior LaserFAX Release.
----------------------
(a) Seller hereby represents and warrants to Buyer that none of the
Proprietary Software, the Intellectual Property or use by Buyer, and/or any
transferee or licensee of Buyer, of the Proprietary Software or Intellectual
Property will conflict with, violate or infringe upon any proprietary or other
rights of Seller or any third party in, to or in connection with the prior
release designated 3.x of the software product known as "LaserFAX" (the "Prior
Release").
(b) In the event of any conflict, violation or infringement as
referred to in Section 8.13(a), or any claim thereof, then, without any further
action required, Buyer shall be deemed to have been granted by Seller, and shall
have, a perpetual, fully paid, royalty free, non-exclusive, transferable,
license, with right to sublicense, to do any and all of the following (1) use,
modify, localize, prepare derivative works of, include in other product
material, copy and reproduce, make and have made, the Prior Release, in source
code and/or object code form, and (2) distribute copies of the Prior Release,
whether separately or as part of other product material, worldwide by sale or
other transfer of ownership or by rental, license, lease or lending, and to
publish, publicly display and publicly perform the Prior Release.
(c) As an inducement to Buyer to acquire the Assets and in order to
ensure Buyer the full benefit of the transfer of the Assets pursuant hereto,
Seller agrees that Seller will not sell, license or otherwise transfer the Prior
Release or any right therein to any business or enterprise which develops,
markets, sells or otherwise deals in products or services which are directly
competitive with products or services developed, marketed or sold by Buyer.
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8.14 Receivables Proceeds. Seller agrees that within thirty (30) days
--------------------
after the Closing Date, Seller shall pay to Buyer (by cash, check or wire
transfer) all of the proceeds of the Receivables (as defined in Schedule 2.1),
------------
in whatever form, received by Seller, and thereafter shall promptly pay to Buyer
any such proceeds that are thereafter received by Seller. Seller shall promptly
remit to Buyer any mail or other communications, including any oral or written
inquiries, relating to the Receivables which are received by Seller from and
after the Closing.
ARTICLE IX
PROTECTIVE COVENANTS
9.1 Non-Compete. As an inducement to Buyer to acquire the Assets and in
-----------
order to ensure Buyer the full benefit of the transfer of the Assets pursuant
hereto, to preserve and protect the value thereof and to create a valuable
independent asset of Buyer to enhance the earnings of Buyer in future years,
Seller agrees that, for a period of five (5) years following the Closing Date,
Seller will not participate or engage, either alone or in association with
others, directly or indirectly (including through any direct or indirect
ownership interest in any entity other than Buyer), whether as proprietor,
owner, partner, officer, director, manager, agent, consultant, employee or
otherwise, in any business or enterprise which develops, markets, sells or
otherwise deals in products or services which are directly or indirectly
competitive with products or services developed, marketed or sold by Buyer,
other than as an owner of less than one percent (1%) of the outstanding shares
of stock of any corporation or less than five percent (5%) of the outstanding
shares of a corporation the shares of which are publicly traded on a national
stock exchange or in a national over-the-counter market. From and after the
Closing, and until the date that is twenty-seven (27) months from the Closing
Date, (a) in the event of any material breach by Buyer of any of the material
covenants for the payment of money set forth in this Agreement to be performed
by Buyer, which breach Buyer fails to cure within sixty (60) days following
written notice from Seller specifying such breach, or (b) in the event a
petition for relief under any bankruptcy law is filed by or against Buyer, or a
receiver is appointed for all or a substantial portion of Buyer's assets, and
such petition or appointment is not dismissed or vacated within sixty (60) days,
then the provisions of this Section 9.1 shall terminate.
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9.2 Confidentiality. As a further inducement to Buyer to acquire the
---------------
Assets, Seller agrees that, for a period of five (5) years following the Closing
Date, Seller will not, directly or indirectly use or disclose any confidential
information relating to or used in Buyer's business. For purposes hereof,
"confidential information" shall be deemed to include trade secrets,
confidential or secret documents or plans, supplier lists, the Customer Lists,
mailing lists, the Documentation, the Proprietary Software and all documentation
related thereto, information relating to existing and future products and
services marketed or used by Buyer, information relating to the general business
operations of Buyer and other confidential or secret information.
9.3 Non-Solicitation. As a further inducement to Buyer to acquire the
----------------
Assets, Seller agrees that, for a period of five (5) years following the Closing
Date, Seller will not, directly or indirectly employ or engage, or offer to
employ or engage, any employee of Buyer (other than secretarial and clerical
personnel) or other person engaged by Buyer in connection with (other than
incidentally) Buyer's business. From and after the Closing, and until the date
that is twenty-seven (27) months from the Closing Date, (a) in the event of any
material breach by Buyer of any of the material covenants for the payment of
money set forth in this Agreement to be performed by Buyer, which breach Buyer
fails to cure within sixty (60) days following written notice from Seller
specifying such breach, or (b) in the event a petition for relief under any
bankruptcy law is filed by or against Buyer, or a receiver is appointed for all
or a substantial portion of Buyer's assets, and such petition or appointment is
not dismissed or vacated within sixty (60) days, then, notwithstanding the
provisions of this Section 9.3, Seller may employ or engage, or offer to employ
or engage, any of the employees listed on Schedule 8.1(c).
---------------
9.4 Construction. If any of the foregoing provisions shall for any reason
------------
be held to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed by limiting and reducing it so as to
be enforceable to the extent compatible with applicable laws that shall then
apply.
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ARTICLE X
TERMINATION; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Termination Prior to Closing. This Agreement may be terminated by
----------------------------
either Buyer or Seller, by written notice to the other, if the Closing shall not
have occurred on or before the date that is ninety (90) days following the date
of this Agreement.
10.2 Survival. All representations, warranties, covenants, agreements and
--------
indemnities contained in or made pursuant to this Agreement (or any Schedule,
Exhibit, certificate, document or statement delivered pursuant hereto) shall be
continuing and shall survive the Closing and any investigation conducted by
either party or any information which either party may have from time to time
for the periods specified in Section 10.5 hereof.
10.3 Indemnification of Buyer. Seller shall indemnify and hold harmless
------------------------
Buyer against and in respect of the following:
(a) all liabilities and obligations of, or claims against, Seller not
expressly assumed by Buyer, including any and all such liabilities, obligations
or claims arising under, or stemming from conduct under, the Assumed Contracts
prior to the Closing;
(b) any and all loss, liability, damage or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of Seller under this Agreement or from any
misrepresentation in or omission from any Schedule, Exhibit, certificate or
other instrument furnished or to be furnished to Buyer under this Agreement;
(c) any and all claims for taxes made against Buyer or taxes paid by
Buyer arising directly or indirectly from or in connection with Seller's
operation of its business or Seller's ownership, possession or use of the
Assets, or otherwise arising from any liability of Seller (whether or not
contested or disputed by Seller) for any taxes;
(d) any and all liabilities or obligations arising directly or
indirectly from or in connection with (i) Seller's Benefit Plans, (ii) any and
all loans between Seller and any of
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Seller's shareholders or officers and/or (iii) any and all credit or other loan
facilities of Seller and any security agreement in connection therewith;
(e) any and all liabilities or obligations arising directly or
indirectly from or in connection with any and all intellectual property
infringement indemnities (and any similar indemnities) entered into or given by
Seller, whether in the Assumed Contracts or otherwise;
(f) any and all loss, liability, damage or deficiency to Buyer
arising from Seller's ownership or operation of the Assets or Assumed contracts
prior to the Closing Date;
(g) any and all loss, liability, damage or deficiency to Buyer
arising from any non-compliance with any bulk transfer, fraudulent conveyance or
other law for the protection of creditors of Seller or of Seller's business,
including Article 6 of the Uniform Commercial Code as in effect in California,
unless such loss, liability, damage or deficiency arises solely out of Buyer's
failure to pay or otherwise satisfy, when due, any of the obligations delegated
to Buyer under the Assumed Contracts;
(h) any and all claims for any sales, transfer, excise, use,
documentary stamps/stamp duties or other taxes made against Buyer or paid by
Buyer which may be imposed in any jurisdiction in connection with or arising
from any of the transactions contemplated in this Agreement, including the
transfer of any of the Assets to Buyer;
(i) all actions, suits, proceedings, claims, demands, assessments,
judgments, reasonable legal fees, costs and expenses incident to any of the
foregoing or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
Buyer shall not be entitled to indemnification hereunder unless it shall
have given timely notice to Seller of the assertion of any claim or demand or
the institution of any action, suit or proceeding and provided Seller with an
opportunity to conduct, or to participate in, the defense or settlement thereof.
10.4 Indemnification of Seller. Buyer shall indemnify and hold harmless
-------------------------
Seller against and in respect of the following:
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(a) any and all loss, liability, damage or deficiency to Seller
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of Buyer under this Agreement or from any
misrepresentation in or omission from any Schedule, Exhibit, certificate or
other instrument furnished or to be furnished to Seller under this Agreement;
(b) all actions, suits, proceedings, claims, demands, assessments,
judgments, reasonable legal fees, costs and expenses incident to any of the
foregoing or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity;
(c) any and all loss, liability, damage or deficiency to Seller
arising from Buyer's ownership or operation of the Assets or Assumed contracts
after the Closing Date.
Seller shall not be entitled to indemnification hereunder unless it shall
have given timely notice to Buyer of the assertion of any claim or demand or the
institution of any action, suit or proceeding and provided Buyer with an
opportunity to conduct, or to participate in, the defense or settlement thereof.
10.5 Duration. The provisions of Sections 10.3 and 10.4 shall terminate
--------
on the following dates:
(a) in the case of claims for indemnification for any liability for
United States, California or other applicable taxes, the date of expiration of
the statute of limitations, including extensions thereof, relating to claims for
such taxes owed by Seller for the years or periods ending on or before the
Closing Date;
(b) in the case of claims for indemnification for all other claims
under Sections 10.3 or 10.4, five (5) years from the Closing Date.
ARTICLE XI
CONDITIONS TO CLOSING
11.1 Conditions to Buyer's Obligation to Close. The obligation of Buyer
-----------------------------------------
to close hereunder, purchase the Assets and pay the purchase price therefor
shall be subject to the satisfaction or
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waiver by Buyer of the following conditions at or prior to the Closing:
(a) Seller shall have delivered to Buyer each of the documents and
instruments specified in Section 4.2 hereof;
(b) There shall be no action, suit, investigation or proceeding
pending or threatened before or by any court or governmental or regulatory
authority against Seller, Buyer or any of their respective affiliates, officers
or directors seeking to restrain, prevent or change the transactions
contemplated hereby, questioning the validity or legality of any of such
transactions or seeking damages in connection with any such transactions;
(c) Since the date of execution of this Agreement, no material
adverse change shall have occurred in or to the Assets, the Assumed Contracts or
Seller's business;
(d) All necessary or appropriate consents, authorizations and
approvals of third parties to the transfer to Buyer of any of the Assets or
Assumed Contracts, including all those set forth on Schedule 5.4(b) and Schedule
--------------- --------
5.14 hereto, shall have been obtained and delivered to Buyer and all necessary
- ----
or appropriate governmental consents, authorizations and approvals of any
applicable governmental agency or authority, including all
those set forth on Schedule 5.4(b) and Schedule 5.14 hereto, shall have been
--------------- -------------
obtained and delivered to Buyer;
(e) Michael Crandell shall have entered into an employment agreement
with Buyer on substantially the terms and conditions set forth in Exhibit E and
---------
otherwise in form and substance satisfactory to Buyer and shall have entered
into confidentiality, proprietary inventions and non-compete agreements with
Buyer in form and substance satisfactory to Buyer;
(f) Larry Crandell shall have entered into an employment agreement
with Buyer on substantially the terms and conditions set forth in Exhibit F and
---------
otherwise in form and substance satisfactory to Buyer and shall have entered
into confidentiality, proprietary inventions and non-compete agreements with
Buyer in form and substance satisfactory to Buyer;
(g) The individuals specified on Schedule 8.1(c) shall have agreed to
---------------
be employed by Buyer on the terms set forth in
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Section 8.1(c) and on Schedule 8.1(c) and shall have entered into
---------------
confidentiality, proprietary inventions and non-compete agreements with Buyer in
form and substance satisfactory to Buyer; and
(h) Seller shall be in compliance in all material respects with all
terms, covenants and conditions of this Agreement.
11.2 Conditions to Seller's Obligation to Close. The obligation of Seller
-------------------------------------------
to close hereunder shall be subject to the satisfaction or waiver by Seller of
the following conditions at or prior to the Closing:
(a) Buyer shall have delivered to Seller each of the documents and
instruments specified in Section 4.3 hereof;
(b) There shall be no action, suit, investigation or proceeding
pending or threatened before or by any court or governmental or regulatory
authority against Seller, Buyer or any of their respective affiliates, officers
or directors seeking to restrain, prevent or change the transactions
contemplated hereby, questioning the validity or legality of any of such
transactions or seeking damages in connection with any such transactions; and
(c) Buyer shall be in compliance in all material respects with all
terms, covenants and conditions of this Agreement.
ARTICLE XII
GENERAL
12.1 Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof.
12.2 Notices. All notices, requests or other communications required or
-------
permitted hereunder shall be given in writing by hand delivery, by commercial
overnight courier or by registered or certified mail, return receipt requested,
postage prepaid, to the party to receive the same at its respective address set
forth
-35-
<PAGE>
below, or at such other address as may from time to time be designated by
such party in accordance with this Section 12.2:
If to Seller, to:
Crandell Group, Inc.
125 E. Victoria Street, Suite A
Santa Barbara, CA 93101
Attention: Michael Crandell
with a copy to:
Weldon U. Howell, Jr., Esq.
Howell Moore & Gough LLP
812 Presidio Avenue
Santa Barbara, CA 93101
If to Buyer, to:
JetFax, Inc.
1376 Willow Road
Menlo Park, CA 94025
Attention: Edward R. Prince, III
with a copy to:
Clifford S. Robbins, Esq.
General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
All such notices and communications hereunder shall be deemed given
when received if delivered personally, by courier or by mail, as evidenced by
the acknowledgment of receipt issued with respect thereto by the applicable
postal authorities or the signed acknowledgment of receipt of the person to whom
such notice or communication shall have been addressed.
12.3 Expenses; Finder's Fees. The parties shall each bear their own
-----------------------
expenses in connection with the negotiation, execution and delivery of this
Agreement and the performance of their respective obligations hereunder. Seller
agrees to indemnify and hold Buyer harmless, and Buyer agrees to indemnify and
hold Seller harmless, against and in respect of any liability to any broker,
-36-
<PAGE>
finder or agent for any brokerage fees, finder's fees or commissions (and
related expenses, including expenses of defending against such liability or
asserted liability) payable or alleged to be payable in respect of services
rendered to or at the instance of the indemnifying party with respect to this
Agreement or the transactions contemplated by this Agreement.
12.4 Successors and Assigns. This Agreement and the provisions thereof
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
12.5 Governing Law. The validity, construction, operation and effect of
-------------
any and all of the terms and provisions of this Agreement shall be determined
and enforced in accordance with the laws of the State of California without
giving effect to principles of conflicts of law thereunder. Each of the parties
(a) hereby irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be brought
exclusively in any federal or state court in the County of San Mateo, State of
California, (b) by execution and delivery of this Agreement irrevocably submits
to and accepts, with respect to any such action or proceeding for such party and
in respect of such party's properties and assets, generally and unconditionally,
the jurisdiction of the aforesaid courts, and irrevocably waives any and all
rights such party may have to object to such jurisdiction under the laws of the
State of California or the Constitution of the United States or otherwise, and
(c) irrevocably consents that service of process upon such party in any such
action or proceeding shall be valid and effective against it if made in the
manner provided in Section 12.2 hereof for delivery of notices hereunder.
12.6 Modification. This Agreement may be amended or modified only by an
------------
instrument of equal formality signed by the parties.
12.7 Waiver. Any failure of any party hereto to comply with any of the
------
obligations or agreements set forth in this Agreement or to fulfill any
condition set forth may be waived only by written instrument signed by the other
party. No failure by any party to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver of such right, nor shall any single or
partial exercise of any right hereunder by any party preclude any other or
future exercise of that right or any other right hereunder by that party.
-37-
<PAGE>
12.8 Assignment. No party hereto may assign this Agreement without the
----------
prior written consent of the other party; provided, however, that Buyer may,
without Seller's consent, assign this Agreement and its rights and obligations
hereunder to any successor in interest to Buyer in connection with any sale or
transfer of all or substantially all of its assets or upon any merger,
consolidation or dissolution. Any impermissible attempted assignment of this
Agreement shall be void as to the other party to this Agreement.
12.9 No Third Party Beneficiaries. Neither this Agreement nor any
----------------------------
provision hereof, nor any document or instrument executed or delivered pursuant
hereto, shall be deemed to create any right in favor of or impose any obligation
upon any person or entity other than Buyer and Seller and their respective
successors and assigns.
12.10 Publicity. Prior to the Closing, Seller shall not issue any press
---------
release or written public announcement concerning the transactions contemplated
by this Agreement without the prior written approval of Buyer. This provision
shall not apply, however, to any announcement or written statement required to
be made by law or by the regulations of any federal, state or foreign
governmental agency; provided, however, that in the event Seller is required to
make such announcement, Seller shall, whenever practicable, consult with Buyer
concerning the timing and content of such announcement before such announcement
is made.
12.11 Independent Contractor. The relationship of Buyer and Seller shall
----------------------
be that of independent contractors, and nothing contained in this Agreement
shall constitute the parties as partners, joint venturers, employer and
employee, or otherwise as agents or participants in a joint undertaking.
Neither party shall create or assume any obligations on behalf of the other
party.
12.12 Severability. If any provision of this Agreement shall be held
------------
invalid, unenforceable or illegal, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and such provisions shall be enforced to the fullest extent possible in
accordance with the mutual intent of the parties hereto.
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<PAGE>
12.13 Captions and Paragraph Headings. Captions and paragraph headings
-------------------------------
used herein are for convenience only and are not a part of this Agreement and
shall not be used in construing it.
12.14 Counterparts. This Agreement may be executed in any number of
------------
duplicate counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
12.15 Survival. The provisions of Article IX (other than as expressly
--------
provided therein) and Sections 10.3, 10.4 and 10.5 shall survive the termination
of this Agreement or any part hereof for any reason.
[balance of this page intentionally left blank]
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<PAGE>
[Asset Purchase Agreement]
IN WITNESS WHEREOF, the parties have duly signed this Agreement as of
the day and year first written above.
JETFAX, INC. CRANDELL GROUP, INC.
By: /s/ Allen K. Jones By: /s/Michael Crandell
-------------------- ----------------------
Allen K. Jones Michael Crandell
Vice President and CFO President
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<PAGE>
SCHEDULES AND EXHIBITS LIST
Schedule 1.1 - Proprietary Software
Schedule 2.1 - Assets
Schedule 2.2 - Excluded Assets
Schedule 2.3 - Assumed Liabilities
Schedule 3.3 - Special Reimbursable Costs
Schedule 5.1 - Financial Statements
Schedule 5.4(a) - Contracts
Schedule 5.4(b) - Assumed Contracts
Schedule 5.6(a) - Encumbrances
Schedule 5.6(b) - Location of Property
Schedule 5.7 - Litigation
Schedule 5.8 - Changes or Events
Schedule 5.9 - Intellectual Property Rights
Schedule 5.10 - Employee Matters; Benefit Plans
Schedule 5.12 - Sales Reps, Distributors, Consultants and Agents
Schedule 5.14 - Approvals and Consents
Schedule 5.17 - Customer Lists
Schedule 5.18 - Documentation
Schedule 8.1(c) - Employees
Exhibit A - Promissory Note
Exhibit B - Bill of Sale and Assignment
Exhibit C - Other Instruments of Transfer, Including
Patent, Trademark and Copyright Assignments
Exhibit D - Opinion of Seller's Counsel
Exhibit E - Employment Agreement of Michael Crandell
Exhibit F - Employment Agreement of Larry Crandell
Exhibit G - Security Agreement
<PAGE>
[Execution Copy]
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT is made as of December 16, 1996, by and between
JetFax, Inc., a Delaware corporation with its principal place of business at
1376 Willow Road, Menlo Park, CA 94025 ("JetFax" or "Buyer"), and Crandell
Group, Inc., a California corporation with its principal place of business at
125 E. Victoria Street, Suite A, Santa Barbara, CA 93101 ("Crandell" or
"Seller").
WHEREAS, JetFax and Crandell are parties to an Asset Purchase Agreement
dated as of July 31, 1996 (the "Asset Purchase Agreement");
WHEREAS, Michael Crandell and Larry Crandell are the sole shareholders of
Crandell; and
WHEREAS, JetFax and Crandell desire to amend the Asset Purchase Agreement
pursuant to Section 12.6 thereof and as set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Asset Purchase Agreement.
2. The second sentence of Section 1.1(s) of the Asset Purchase Agreement
is hereby amended by deleting the text of the second proviso therein in its
entirety and substituting the following:
"provided, further, that in the event that JetSuite Lite or JetSuite Pro is
-------- -------
licensed to any unit of Hewlett-Packard Company bundled with other products
of Buyer under a single price, twenty-five percent (25%) of the revenues
(whether in the form of nonrecurring engineering charges, advance
royalties, royalties or otherwise) attributed thereto shall be included
(when Earned by Buyer) within Software Sales;"
3. Section 1.1(s) of the Asset Purchase Agreement is hereby amended by
replacing the term "received by Buyer" each place it occurs therein with the
term "Earned by Buyer".
<PAGE>
4. Section 1.1(s) of the Asset Purchase Agreement is hereby amended by
replacing the term "upon receipt thereof by Buyer" each place it occurs therein
with the term "when Earned by Buyer".
5. Section 1.1 of the Asset Purchase Agreement is hereby amended by adding
the following new Section "(t)" at the end thereof:
"(t) "Earned" shall mean, with respect to any nonrecurring
engineering charges, advance royalties or similar amounts not tied to per
unit shipments, the date when customer milestones are met triggering
customer payment obligations to Buyer and, with respect to per unit license
fees, royalties or similar amounts, the date of product shipment by Buyer."
6. Sections 3.1(b) and 3.1(c) of the Asset Purchase Agreement are hereby
amended by replacing the term "received by Buyer" each place it occurs therein
with the term "Earned by Buyer".
7. Section 3.2 of the Asset Purchase Agreement is hereby amended by adding
the following new sentence at the end thereof:
"Notwithstanding anything to the contrary set forth herein (and
notwithstanding the inclusion of any amounts in Software Sales when such
amounts are Earned by Buyer), all payments pursuant to Sections 3.1(b) and
(c) shall be payable to Seller only upon actual receipt by Buyer of payment
of the underlying amounts otherwise included in Software Sales as
"Earned"."
8. The provisions of Section 3.1(c) of the Asset Purchase Agreement shall
be extended, beyond the date that is twenty-four (24) months from the Closing
Date, only with respect to Software Sales that are attributed to revenues Earned
by Buyer from Hewlett-Packard Company (as described in the second proviso of the
second sentence of Section 1.1(s) of the Asset Purchase Agreement), by one month
for each calendar month (or part thereof) that the first commercial sale of the
product currently under development by Buyer for Hewlett-Packard Company is
delayed beyond December 31, 1997; provided, however, that in no event shall the
-------- -------
provisions of Section 3.1(c) of the Asset Purchase Agreement be extended as
provided herein for more than eight months.
9. In the event of the occurrence, at any time prior to July 31, 1998, of
the effective date of the first registered public offering of JetFax's stock
(the "IPO Date") sufficient to trigger automatic conversion of the Series F
Preferred Stock (under the
-2-
<PAGE>
terms of the Certificate of Designations, Preferences and Rights of Series F
Preferred Stock of Buyer), then:
(a) Buyer's obligation to make any payments pursuant to any of
Sections 3.1(a), (b) and (c) of the Asset Purchase Agreement shall terminate
effective as of the end of the month prior to the month in which the IPO Date
occurs (the "Termination Date"); provided that Buyer shall continue to be
--------
obligated to make payments pursuant to Section 3.2 with respect to amounts
included in Software Sales as "Earned" pursuant to Sections 3.1(b) and (c)
prior to the Termination Date upon actual receipt by Buyer of payment of the
underlying amounts so included; and
(b) Buyer shall pay to Seller the amount of One Million Two Hundred
Fifty Thousand Dollars ($1,250,000.00) (as such amount may be adjusted as
provided below) within sixty days after the end of the month in which the IPO
Date occurs.
10. Upon execution and delivery hereof, Buyer shall deliver to each of
Michael Crandell and Larry Crandell a warrant (each a "Warrant" and collectively
the "Warrants") in the form set forth on Exhibit A attached hereto. The Warrant
---------
to Michael Crandell shall be exercisable (at an exercise price of $1.75 per
share) for a total of 75,000 shares of Buyer's common stock (as such amount may
be adjusted as provided in the Warrant) in the event, and only in the event, of
the occurrence of the IPO Date at any time prior to July 31, 1998. The Warrant
to Larry Crandell shall be exercisable (at an exercise price of $1.75 per share)
for a total of 25,000 shares of Buyer's common stock (as such amount may be
adjusted as provided in the Warrant) in the event, and only in the event, of the
occurrence of the IPO Date at any time prior to July 31, 1998.
11. In the event the IPO Date occurs after April 30, 1997, then the amount
payable by Buyer to Seller pursuant to Section 9(b) above shall be reduced by
the amounts due to Seller under Sections 3.1(a), (b) and (c) of the Asset
Purchase Agreement (with respect to Sections 3.1(b) and (c), as Earned, even
though not yet payable based on receipt) from and after April 30, 1997 and prior
to the termination thereof pursuant to Section 9(a) above. In the event the
amount payable by Buyer to Seller pursuant to Section 9(b) above is reduced as
provided herein to $0.00, the number of shares exercisable under the Warrants
shall be reduced as provided in the Warrants.
-3-
<PAGE>
12. The term "Agreement" as used in the Asset Purchase Agreement shall for
all purposes refer to the Asset Purchase as amended by this Amendment Agreement.
13. Except to the extent expressly amended by the terms of this Amendment
Agreement, all the terms and conditions of the Asset Purchase Agreement remain
in full force and effect.
14. This Amendment Agreement may be executed in any number of duplicate
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
[balance of this page intentionally left blank]
-4-
<PAGE>
[Amendment Agreement]
IN WITNESS WHEREOF, the parties have duly signed this Amendment
Agreement as of the day and year first written above.
JETFAX, INC. CRANDELL GROUP, INC.
By: /s/ Edward R. Prince III By: /s/ Michael Crandell
------------------------ -----------------------
Edward R. Prince III Michael Crandell
President President
-5-
<PAGE>
EXHIBIT 10.28
DATE: March 29, 1996
NEITHER THIS OPTION NOR THE SHARES OF COMMON STOCK ISSUABLE ON EXERCISE OF
THIS OPTION (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE
SECURITIES LAW, AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN 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 THE CORPORATION AND CONCURRED IN BY
THE CORPORATION'S COUNSEL TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
JETFAX, INC.
COMMON STOCK PURCHASE OPTION
TO PURCHASE UP TO 260,265 SHARES OF COMMON STOCK
VOID AFTER March 29, 2004
JetFax, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that, for good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged by the Corporation, Steven J. Carnevale (the
"Holder"), is entitled, subject to the terms and conditions set forth below, to
purchase from the Corporation up to 260,265 fully paid and nonassessable shares
(the "Shares") of the Common Stock, par value $.01 per share, of the Corporation
("Common Stock"), at a purchase price of $1.72 per Share (the "Purchase Price")
at any time or times on or prior to the Expiration Date (as defined below).
This Option shall expire and be of no further force or effect at the earlier of
the time when it has been exercised with respect to all Shares which the Holder
is entitled to purchase hereunder or 5:00 p.m., California time, on the
Expiration Date. Such number of Shares and the Purchase Price are subject to
adjustment, as hereinafter provided. Such number shall be reduced at such time
or times as this Option is exercised in part by the number of Shares as to which
this Option is then exercised.
1. Manner of Exercise.
------------------
1.1 The Holder of this Option may exercise his or her rights
hereunder at any time by written notice to the Corporation as set forth herein.
This Option may be exercised as a whole at any time, or in part from time to
time, by the Holder by delivering this Option, for cancellation if it is
exercised as a whole or for endorsement if it is exercised in part, together
with a Subscription in the form appearing at the end hereof properly completed
and duly executed by
<PAGE>
or on behalf of the Holder and such other information and investment
representations as may be reasonably requested by the Corporation for the
purpose of complying with applicable securities laws, to the Corporation at its
office in Menlo Park, California (or at the office of the agency maintained for
such purpose or at such other office or agency of the Corporation as it may
designate by notice in writing to the Holder at the address thereof appearing on
the books of the Company), accompanied by payment by certified or official bank
check payable to the order of the Corporation, in an aggregate amount equal to
the Purchase Price as then adjusted times the number of Shares as to which this
Option is then being exercised. In the event of any exercise of this Option
that is partial, the Corporation shall endorse this Option as having been
exercised to that extent and return this Option to the Holder for the balance.
Anything in this Option to the contrary notwithstanding, this Option may not be
exercised to any extent after 5:00 p.m., California time, on the Expiration Date
or after it has been exercised in the aggregate for the number of Shares that
the Holder is entitled to purchase hereunder, and unless this Option is being
exercised with respect to all Shares subject to this Option, this Option may be
exercised only with respect to whole Shares.
1.2 Net Exercise.
------------
(a) In the event all (or the remaining balance) of the
purchase rights represented by this Option are exercised by the Holder pursuant
to Section 1.1 above, in lieu of payment of an aggregate amount equal to the
Purchase Price times the number of Shares as to which this Option is then being
exercised as provided in Section 1.1 the Holder may elect to receive a number of
Shares to which the Holder is entitled computed using the following formula:
X=Y(A-B)
---
A
where: X = the number of Shares of Common Stock to be issued
to the Holder,
Y = the number of Shares of Common Stock purchasable
under this Option,
A = the Fair Market Value (as defined below) of one
Share of Common Stock to which the Holder is
entitled, and
B = the Purchase Price.
(b) Determination of Fair Market Value. As used
----------------------------------
herein, "Fair Market Value" of a Share of Common Stock to which the Holder is
entitled as of a particular date (the "Determination Date") shall mean:
(i) if the Common Stock to which the Holder is
entitled
2
<PAGE>
is traded on an exchange or are quoted on the National Association of Securities
Dealers, Inc. automated quotation ("NASDAQ") National Market System, the average
of the closing or last sale price, respectively, of such stock as reported for
the ten (10) trading days immediately preceding the Determination Date;
(ii) if the Common Stock to which the Holder is
entitled is not traded on an exchange or on the NASDAQ National Market System
but is traded in the over-the-counter market, then the average-of the mean of
the closing bid and asked prices for a share of such stock reported for the ten
(10) trading days immediately preceding the Determination Date; and
(iii) if the Common Stock to which the Holder is
entitled is not publicly traded, then as determined in good faith by the
Company's Board of Directors as being the highest price per share which the
Company could reasonably obtain from a willing buyer (who is not an employee or
director) for authorized but unissued shares of Common Stock to which the Holder
is entitled.
(c) Limits on Exercise of Net Exercise Right. The rights
----------------------------------------
under this Section 1.2 may only be exercised if the value of A minus B (where
"A" and "B" are as defined in Section 1.2(a) above) is a positive number.
2. Delivery of Stock Certificates on Exercise. The Corporation
------------------------------------------
will, or will direct its transfer agent to, issue, as soon as practicable after
any exercise of this Option, and in any event within thirty days thereafter, at
the Corporation's expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the Holder may direct
(on payment by the Holder of any applicable transfer taxes and compliance with
all restrictions on transferability set forth herein), a certificate or
certificates for the number of fully paid and nonassessable Shares as to which
this Option is so exercised, plus, in lieu of any fractional shares to which the
Holder would otherwise be entitled, cash equal to such fraction or fractions
multiplied by the Purchase Price as then adjusted.
3. Anti-Dilution Adjustments.
-------------------------
3.1 Stock Dividends, Splits, Etc. The number of Shares
----------------------------
purchasable on exercise of this Option shall be subject to adjustment from time
to time in the event that the Corporation shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock on any of its outstanding Common Stock,
(b) subdivide its outstanding shares of Common Stock into a greater number of
shares, (c) combine its outstanding shares of Common Stock into a smaller number
of shares or (d) issue by reclassification of its Common Stock any shares of
capital stock of the Corporation (other than a reclassification resulting from a
merger or consolidation covered in Section 3.2). In any such case, the total
number of Shares issuable upon exercise of this Option immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive at the same
aggregate Purchase Price (as set forth in Section 3.3) the number of shares of
stock or other
3
<PAGE>
securities of the Corporation or otherwise to which the Holder would have owned
or would have been entitled to receive immediately following the occurrence of
any of the events described above had this Option been exercised in full
immediately prior to the occurrence (or applicable record date) of such event.
An adjustment made pursuant to this Section 3.1 shall, in the case of a stock
dividend or distribution, be made as of the record date therefor and, in the
case of a subdivision, combination or a reclassification, be made as of the
effective date thereof. In any such case, appropriate adjustments shall be made
in the application of the provisions hereof with respect to the rights of the
Holder after a recapitalization to the end that the provisions hereof shall be
applicable after that event as nearly equivalent as may be practicable.
3.2 Reorganization, Recapitalization, Consolidation, Merger or
----------------------------------------------------------
Sale of Assets. In the event of any reorganization or recapitalization of the
- --------------
Corporation (other than as provided in Section 3.1) or in the event that the
Corporation consolidates with or merges into another corporation in a
transaction in which the Corporation is not the resulting corporation or
transfers all or substantially all of its assets to another entity, then and in
each such event, the Holder, on exercise of this Option as provided herein, at
any time after the consummation of such reorganization, recapitalization,
consolidation, merger or transfer, shall be entitled to receive the stock or
other securities or property to which the Holder would have been entitled on
such consummation if the Holder had exercised this Option immediately prior
thereto. In such case, the terms of this Option shall survive the consummation
of any such reorganization, recapitalization, consolidation, merger or transfer
and shall be applicable to the shares of stock or other securities or property
receivable on the exercise of this Option after such consummation.
3.3 Adjustment of Purchase Price. On each adjustment of the
----------------------------
number of Shares or other securities issuable upon exercise of this Option
pursuant to this Section 3, the Purchase Price shall thereafter be the number
obtained by dividing (a) the product of the number of Shares issuable on full
exercise of this Option immediately prior to such adjustment by the Purchase
Price in effect immediately prior to such adjustment by (b) the number of Shares
or other securities issuable upon full exercise of this Option after such
adjustment.
3.4 Rounding. All calculations under this Section 3 shall be
--------
made to the nearest cent or to the nearest one-hundredth of a Share, as the case
may be, but in no event shall the Corporation be obligated to issue any
fractional share on any exercise of this Option.
4. Expiration Date. This Option shall expire and shall be of no
---------------
further force or effect at the earlier of the following times (the "Expiration
Date") (a) the time when the Option has been exercised with respect to all
Shares which the Holder is or may be entitled to purchase hereunder or (b) 5:00
p.m., California time, on the eighth anniversary of the date of this Option.
5. Further Assurances. The Corporation will not, by amendment of
------------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution,
issuance or sale of securities or any other voluntary action, avoid or seek to
avoid, directly or indirectly, the performance of any of the terms of this
Option,
4
<PAGE>
but will at all times in good faith take all necessary action to carry out all
such terms. Without limiting the generality of the foregoing, the Corporation
(a) will not create any par value, or increase the par value, of any shares of
stock receivable on exercise of this Option above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
so that the Corporation may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Option, and (c) will not
transfer all or substantially all of its assets to any person, or consolidate
with or merge into any person or permit any person to consolidate with or merge
into the Corporation (if the Corporation is not the surviving person), unless
such person shall be bound by all of the terms of this Option. This Option shall
be binding on the successors and assigns of the Corporation.
6. Notices of Record Dates, Etc.
----------------------------
(a) If the Corporation shall fix a record date of the holders of
Common Stock (or other stock or securities at the time deliverable on exercise
of this Option) for the purpose of entitling or enabling them to receive any
dividend (other than a stock dividend) or other distribution, or to receive any
right to subscribe for or purchase any shares of any class of any other
securities, or to receive any other right,
(b) in the event of any reorganization or recapitalization of
the Corporation, any reclassification of the capital stock of the Corporation,
any consolidation or merger of the Corporation with or into another corporation
or any transfer of all or substantially all of the assets of the Corporation to
another entity or
(c) in the event of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation,
then, in any such event, the Corporation will mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution or right or (ii)
the date on which a record is to be taken for the purpose of voting on or
approving such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up and
the date on which such event is to take place and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable on exercise of this Option) shall be entitled
to exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable on such reorganization,
recapitalization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least
twenty-one days prior to the record date therein specified.
7. Replacement of Option. On receipt of evidence reasonably
---------------------
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Option and, in the case of any such loss, theft or destruction, on delivery
of a bond or other indemnity reasonably satisfactory
5
<PAGE>
to the Corporation, or, in the case of any such mutilation, on surrender and
cancellation of this Option, the Corporation covenants that it will issue a new
Option, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Option.
8. Covenant to Reserve Common Stock. The Corporation shall at all
--------------------------------
times reserve and keep available out of its authorized but unissued Common Stock
the full number of shares of Common Stock deliverable upon exercise of this
Option and shall, at its own expense, take all such actions and attain all such
permits and orders as may be necessary to enable the Corporation lawfully to
issue such Common Stock upon exercise of this Option.
9. Issuance Taxes. On exercise of this Option, the Corporation
--------------
shall pay any and all issuance taxes that may be payable in respect of any
issuance or delivery of shares of Common Stock on such exercise. The
Corporation shall not, however, be required to pay, and the Holder shall pay,
any tax that may be payable in respect of any transfer involved in the issuance
and delivery of shares of Common Stock in a name other than that of the Holder,
and no such issuance or delivery shall be made unless and until the person
requesting such issuance has paid to the Corporation the amount of any such tax,
where it is established to the satisfaction of the Corporation, that such tax
has been paid.
10. Ownership of Option. Until this Option is transferred on the
-------------------
books of the Corporation, the Corporation may treat the person in whose name
this Option is registered on the books of the Corporation as the absolute owner
hereof for all purposes, notwithstanding any notice to the contrary.
11. Survival of Covenants, Representations and Warranties. All
-----------------------------------------------------
agreements, covenants, representations and warranties herein shall survive the
execution and delivery of this Option and any investigation at any time made on
behalf of any party and the exercise, sale and purchase of this Option and the
Common Stock issuable on exercise hereof.
12. Voting Rights. This Option shall not entitle the Holder, as
-------------
such, to any voting rights or other rights as a stockholder of the Corporation
or to any other rights except the rights stated herein.
13. Entire Agreement. This Option contains the entire agreement of
----------------
the parties and supersedes all prior or contemporaneous written or oral
negotiations, correspondence, understandings and agreements between the parties,
regarding the subject matter hereof.
14. Successors and Assigns. Except as otherwise provided herein,
----------------------
this Option shall bind and inure to the benefit of the Holder and the
Corporation and their respective successors and assigns.
15. Notices. All demands, notices and other communications to be
-------
given hereunder shall be in writing and shall be deemed duly given and received
when transmitted by
6
<PAGE>
facsimile transmission with receipt acknowledged by the addressee, when
delivered personally or three days after being mailed by first class mail,
postage prepaid, properly addressed, if to the Corporation, at 1376 Willow Road,
Menlo Park, California 94025, facsimile number (415) 326-6003 or, if to the
Holder, at the address of the Holder on the Corporation's books, or at any other
address or facsimile number designated by notice by either party to the other
party.
16. Amendments; Waivers; Termination; Governing Law, Headings. This
---------------------------------------------------------
Option and any term hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which enforcement of
such change, waiver, discharge or termination is sought. This Option shall be
governed by and construed and interpreted in accordance with the laws of the
State of California. The headings in this Option are for convenience of
reference only and shall not affect the construction or interpretation of any
provision hereof.
17. Saturdays, Sundays, Holidays, etc. If the last or appointed day
----------------------------------
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or legal holiday.
18. Assignability. This Option may not be assigned or transferred
-------------
other than in compliance with federal and state securities laws and subject to
the transfer restrictions described in the legend on the first page hereof.
19. Lock-Up. The Holder hereby agrees, in connection with any
-------
proposed firm underwritten public offering of securities by the Corporation, not
to sell any Common Stock issued upon exercise hereof or any other securities of
the Corporation owned by such Holder in any transaction other than pursuant to
such underwritten public offering for a period of 180 days beginning on the
effective date of the applicable registration statement. The Holder shall, upon
request of the Corporation or the managing underwriter or underwriters of any
such underwritten public offering, execute a separate written agreement
confirming and agreeing as to the foregoing.
Dated as of March 29, 1996
JETFAX, INC.
By:________________________________
Edward R. Prince, III
President
7
<PAGE>
ENDORSEMENTS
------------
Number
Number of of Shares
Shares as Remaining
Exercise to which Available Signature of Authorized
Date Exercised for Exercise Officer of the Corporation
-------- --------- ------------ --------------------------
<PAGE>
SUBSCRIPTION
(To be completed and signed only on
an exercise of the Option.)
To JetFax, Inc.:
The undersigned, the Holder of the within Option, hereby irrevocably
elects to exercise the purchase right represented by such Option for, and to
purchase thereunder, ____________ shares of the Common Stock of JetFax, Inc. of
those to which such Holder is entitled thereunder, and herewith makes payment of
$__________ therefor by certified or official bank check. The undersigned
hereby requests that the certificate(s) for such shares be issued in the name(s)
and delivered to the address(es) as follows:
- -----------------------------------------
- -----------------------------------------
- -----------------------------------------
Dated: __________________ __________________________________
__________________________, Holder
By ___________________________
Its _______________________
<PAGE>
EXHIBIT 10.29
DATE: March 29, 1996
NEITHER THIS OPTION NOR THE SHARES OF COMMON STOCK ISSUABLE ON EXERCISE OF
THIS OPTION (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE
SECURITIES LAW, AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN 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 THE CORPORATION AND CONCURRED IN BY
THE CORPORATION'S COUNSEL TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
JETFAX, INC.
COMMON STOCK PURCHASE OPTION
TO PURCHASE UP TO 33,472 SHARES OF COMMON STOCK
VOID AFTER March 29, 2004
JetFax, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that, for good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged by the Corporation, Thomas B. Akin (the "Holder"),
is entitled, subject to the terms and conditions set forth below, to purchase
from the Corporation up to 33,472 fully paid and nonassessable shares (the
"Shares") of the Common Stock, par value $.01 per share, of the Corporation
("Common Stock"), at a purchase price of $1.72 per Share (the "Purchase Price")
at any time or times on or prior to the Expiration Date (as defined below).
This Option shall expire and be of no further force or effect at the earlier of
the time when it has been exercised with respect to all Shares which the Holder
is entitled to purchase hereunder or 5:00 p.m., California time, on the
Expiration Date. Such number of Shares and the Purchase Price are subject to
adjustment, as hereinafter provided. Such number shall be reduced at such time
or times as this Option is exercised in part by the number of Shares as to which
this Option is then exercised.
1. Manner of Exercise.
------------------
1.1. The Holder of this Option may exercise his or her rights
hereunder at any time by written notice to the Corporation as set forth herein.
This Option may be exercised as a whole at any time, or in part from time to
time, by the Holder by delivering this Option, for cancellation if it is
exercised as a whole or for endorsement if it is exercised in part, together
with a Subscription in the form appearing at the end hereof properly completed
and duly executed by or on behalf of the Holder and such other information and
investment representations as may be
<PAGE>
reasonably requested by the Corporation for the purpose of complying with
applicable securities laws, to the Corporation at its office in Menlo Park,
California (or at the office of the agency maintained for such purpose or at
such other office or agency of the Corporation as it may designate by notice
in writing to the Holder at the address thereof appearing on the books of the
Company), accompanied by payment by certified or official bank check payable
to the order of the Corporation, in an aggregate amount equal to the Purchase
Price as then adjusted times the number of Shares as to which this Option is
then being exercised. In the event of any exercise of this Option that is
partial, the Corporation shall endorse this Option as having been exercised to
that extent and return this Option to the Holder for the balance. Anything in
this Option to the contrary notwithstanding, this Option may not be exercised
to any extent after 5:00 p.m., California time, on the Expiration Date or
after it has been exercised in the aggregate for the number of Shares that the
Holder is entitled to purchase hereunder, and unless this Option is being
exercised with respect to all Shares subject to this Option, this Option may
be exercised only with respect to whole Shares.
1.2 Net Exercise.
------------
(a) In the event all (or the remaining balance) of the purchase
rights represented by this Option are exercised by the Holder pursuant to
Section 1.1 above, in lieu of payment of an aggregate amount equal to the
Purchase Price times the number of Shares as to which this Option is then being
exercised as provided in Section 1.1 the Holder may elect to receive a number of
Shares to which the Holder is entitled computed using the following formula:
X=Y(A-B)
-----
A
where: X = the number of Shares of Common Stock to be issued to
the Holder,
Y = the number of Shares of Common Stock purchasable under
this Option,
A = the Fair Market Value (as defined below) of one Share of
Common Stock to which the Holder is entitled, and
B = the Purchase Price.
(b) Determination of Fair Market Value. As used herein, the term
----------------------------------
"Fair Market Value" of a Share of Common Stock to which the Holder is entitled
as of a particular date (the "Determination Date") shall mean:
(i) if the Common Stock to which the Holder is entitled is
traded on an exchange or are quoted on the National Association of Securities
Dealers, Inc.
2
<PAGE>
automated quotation ("NASDAQ") National Market System, the average of the
closing or last sale price, respectively, of such stock as reported for the
ten (10) trading days immediately preceding the Determination Date;
(ii) if the Common Stock to which the Holder is entitled is not
traded on an exchange or on the NASDAQ National Market System but is traded in
the over-the-counter market, then the average-of the mean of the closing bid and
asked prices for a share of such stock reported for the ten (10) trading days
immediately preceding the Determination Date; and
(iii) if the Common Stock to which the Holder is entitled is not
publicly traded, then as determined in good faith by the Company's Board of
Directors as being the highest price per share which the Company could
reasonably obtain from a willing buyer (who is not an employee or director) for
authorized but unissued shares of Common Stock to which the Holder is entitled.
(c) Limits on Exercise of Net Exercise Right. The rights under this
----------------------------------------
Section 1.2 may only be exercised if the value of A minus B (where "A" and "B"
are as defined in Section 1.2(a) above) is a positive number.
2. Delivery of Stock Certificates on Exercise. The Corporation will, or
------------------------------------------
will direct its transfer agent to, issue, as soon as practicable after any
exercise of this Option, and in any event within thirty days thereafter, at the
Corporation's expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the Holder may direct
(on payment by the Holder of any applicable transfer taxes and compliance with
all restrictions on transferability set forth herein), a certificate or
certificates for the number of fully paid and nonassessable Shares as to which
this Option is so exercised, plus, in lieu of any fractional shares to which the
Holder would otherwise be entitled, cash equal to such fraction or fractions
multiplied by the Purchase Price as then adjusted.
3. Anti-Dilution Adjustments.
-------------------------
3.1. Stock Dividends, Splits, Etc. The number of Shares purchasable
----------------------------
on exercise of this Option shall be subject to adjustment from time to time in
the event that the Corporation shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock on any of its outstanding Common
Stock, (b) subdivide its outstanding shares of Common Stock into a greater
number of shares, (c) combine its outstanding shares of Common Stock into a
smaller number of shares or (d) issue by reclassification of its Common Stock
any shares of capital stock of the Corporation (other than a reclassification
resulting from a merger or consolidation covered in Section 3.2). In any such
case, the total number of Shares issuable upon exercise of this Option
immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive at the same aggregate Purchase Price (as set forth in
Section 3.3) the number of shares of stock or other securities of the
Corporation or otherwise to which the Holder would have owned or would have
3
<PAGE>
been entitled to receive immediately following the occurrence of any of the
events described above had this Option been exercised in full immediately
prior to the occurrence (or applicable record date) of such event. An
adjustment made pursuant to this Section 3.1 shall, in the case of a stock
dividend or distribution, be made as of the record date therefor and, in the
case of a subdivision, combination or a reclassification, be made as of the
effective date thereof. In any such case, appropriate adjustments shall be
made in the application of the provisions hereof with respect to the rights of
the Holder after a recapitalization to the end that the provisions hereof
shall be applicable after that event as nearly equivalent as may be
practicable.
3.2. Reorganization, Recapitalization, Consolidation, Merger or Sale of
------------------------------------------------------------------
Assets. In the event of any reorganization or recapitalization of the
- ------
Corporation (other than as provided in Section 3.1) or in the event that the
Corporation consolidates with or merges into another corporation in a
transaction in which the Corporation is not the resulting corporation or
transfers all or substantially all of its assets to another entity, then and in
each such event, the Holder, on exercise of this Option as provided herein, at
any time after the consummation of such reorganization, recapitalization,
consolidation, merger or transfer, shall be entitled to receive the stock or
other securities or property to which the Holder would have been entitled on
such consummation if the Holder had exercised this Option immediately prior
thereto. In such case, the terms of this Option shall survive the consummation
of any such reorganization, recapitalization, consolidation, merger or transfer
and shall be applicable to the shares of stock or other securities or property
receivable on the exercise of this Option after such consummation.
3.3. Adjustment of Purchase Price. On each adjustment of the number of
----------------------------
Shares or other securities issuable upon exercise of this Option pursuant to
this Section 3, the Purchase Price shall thereafter be the number obtained by
dividing (a) the product of the number of Shares issuable on full exercise of
this Option immediately prior to such adjustment by the Purchase Price in effect
immediately prior to such adjustment by (b) the number of Shares or other
securities issuable upon full exercise of this Option after such adjustment.
3.4. Rounding. All calculations under this Section 3 shall be made to
--------
the nearest cent or to the nearest one-hundredth of a Share, as the case may
be, but in no event shall the Corporation be obligated to issue any fractional
share on any exercise of this Option.
4. Expiration Date. This Option shall expire and shall be of no further
---------------
force or effect at the earlier of the following times (the "Expiration Date")
(a) the time when the Option has been exercised with respect to all Shares which
the Holder is or may be entitled to purchase hereunder or (b) 5:00 p.m.,
California time, on the eighth anniversary of the date of this Option.
5. Further Assurances. The Corporation will not, by amendment of its
------------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid, directly or
indirectly, the performance of any of the terms of this Option, but will at all
times in good faith take all necessary action to carry out all such terms.
Without
4
<PAGE>
limiting the generality of the foregoing, the Corporation (a) will not create
any par value, or increase the par value, of any shares of stock receivable on
exercise of this Option above the amount payable therefor on such exercise,
(b) will take all such action as may be necessary or appropriate so that the
Corporation may validly and legally issue fully paid and nonassessable shares
of stock on the exercise of this Option, and (c) will not transfer all or
substantially all of its assets to any person, or consolidate with or merge
into any person or permit any person to consolidate with or merge into the
Corporation (if the Corporation is not the surviving person), unless such
person shall be bound by all of the terms of this Option. This Option shall be
binding on the successors and assigns of the Corporation.
6. Notices of Record Dates, Etc.
----------------------------
(a) If the Corporation shall fix a record date of the holders of
Common Stock (or other stock or securities at the time deliverable on exercise
of this Option) for the purpose of entitling or enabling them to receive any
dividend (other than a stock dividend) or other distribution, or to receive any
right to subscribe for or purchase any shares of any class of any other
securities, or to receive any other right,
(b) in the event of any reorganization or recapitalization of the
Corporation, any reclassification of the capital stock of the Corporation, any
consolidation or merger of the Corporation with or into another corporation or
any transfer of all or substantially all of the assets of the Corporation to
another entity or
(c) in the event of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation,
then, in any such event, the Corporation will mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution or right or (ii)
the date on which a record is to be taken for the purpose of voting on or
approving such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up and
the date on which such event is to take place and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable on exercise of this Option) shall be entitled
to exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable on such reorganization,
recapitalization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least
twenty-one days prior to the record date therein specified.
7. Replacement of Option. On receipt of evidence reasonably satisfactory
---------------------
to the Corporation of the loss, theft, destruction or mutilation of this Option
and, in the case of any such loss, theft or destruction, on delivery of a bond
or other indemnity reasonably satisfactory to the Corporation, or, in the case
of any such mutilation, on surrender and cancellation of this
5
<PAGE>
Option, the Corporation covenants that it will issue a new Option, of like
tenor, in lieu of such lost, stolen, destroyed or mutilated Option.
8. Covenant to Reserve Common Stock. The Corporation shall at all times
--------------------------------
reserve and keep available out of its authorized but unissued Common Stock the
full number of shares of Common Stock deliverable upon exercise of this Option
and shall, at its own expense, take all such actions and attain all such permits
and orders as may be necessary to enable the Corporation lawfully to issue such
Common Stock upon exercise of this Option.
9. Issuance Taxes. On exercise of this Option, the Corporation shall pay
--------------
any and all issuance taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock on such exercise. The Corporation shall not,
however, be required to pay, and the Holder shall pay, any tax that may be
payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that of the Holder, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax, where it is
established to the satisfaction of the Corporation, that such tax has been paid.
10. Ownership of Option. Until this Option is transferred on the books of
-------------------
the Corporation, the Corporation may treat the person in whose name this Option
is registered on the books of the Corporation as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
11. Survival of Covenants, Representations and Warranties. All
-----------------------------------------------------
agreements, covenants, representations and warranties herein shall survive the
execution and delivery of this Option and any investigation at any time made on
behalf of any party and the exercise, sale and purchase of this Option and the
Common Stock issuable on exercise hereof.
12. Voting Rights. This Option shall not entitle the Holder, as such, to
-------------
any voting rights or other rights as a stockholder of the Corporation or to any
other rights except the rights stated herein.
13. Entire Agreement. This Option contains the entire agreement of the
----------------
parties and supersedes all prior or contemporaneous written or oral
negotiations, correspondence, understandings and agreements between the parties,
regarding the subject matter hereof.
14. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Option shall bind and inure to the benefit of the Holder and the Corporation and
their respective successors and assigns.
15. Notices. All demands, notices and other communications to be given
-------
hereunder shall be in writing and shall be deemed duly given and received when
transmitted by facsimile transmission with receipt acknowledged by the
addressee, when delivered personally or
6
<PAGE>
three days after being mailed by first class mail, postage prepaid, properly
addressed, if to the Corporation, at 1376 Willow Road, Menlo Park, California
94025, facsimile number (415) 326-6003 or, if to the Holder, at the address of
the Holder on the Corporation's books, or at any other address or facsimile
number designated by notice by either party to the other party.
16. Amendments; Waivers; Termination; Governing Law, Headings. This
---------------------------------------------------------
Option and any term hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which enforcement of
such change, waiver, discharge or termination is sought. This Option shall be
governed by and construed and interpreted in accordance with the laws of the
State of California. The headings in this Option are for convenience of
reference only and shall not affect the construction or interpretation of any
provision hereof.
17. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
---------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or legal holiday.
18. Assignability. This Option may not be assigned or transferred other
-------------
than in compliance with federal and state securities laws and subject to the
transfer restrictions described in the legend on the first page hereof.
19. Lock-Up. The Holder hereby agrees, in connection with any proposed
-------
firm underwritten public offering of securities by the Corporation, not to sell
any Common Stock issued upon exercise hereof or any other securities of the
Corporation owned by such Holder in any transaction other than pursuant to such
underwritten public offering for a period of 180 days beginning on the effective
date of the applicable registration statement. The Holder shall, upon request
of the Corporation or the managing underwriter or underwriters of any such
underwritten public offering, execute a separate written agreement confirming
and agreeing as to the foregoing.
Dated as of March 29, 1996
JETFAX, INC.
By: /s/Edward R. Prince III
-----------------------
Edward R. Prince, III
President
7
<PAGE>
ENDORSEMENTS
------------
Number
Number of of Shares
Shares as Remaining
Exercise to which Available Signature of Authorized
Date Exercised for Exercise Officer of the Corporation
-------- --------- ------------ --------------------------
<PAGE>
SUBSCRIPTION
(To be completed and signed only on
an exercise of the Option.)
To JetFax, Inc.:
The undersigned, the Holder of the within Option, hereby irrevocably elects
to exercise the purchase right represented by such Option for, and to purchase
thereunder, ____________ shares of the Common Stock of JetFax, Inc. of those to
which such Holder is entitled thereunder, and herewith makes payment of
$__________ therefor by certified or official bank check. The undersigned
hereby requests that the certificate(s) for such shares be issued in the name(s)
and delivered to the address(es) as follows:
_________________________________________
_________________________________________
_________________________________________
Dated: __________________ __________________________________
__________________________, Holder
By ___________________________
Its _______________________
<PAGE>
EXHIBIT 10.30
PROMISSORY NOTE
- ---------------
PRINCIPAL AMOUNT $50,140 DATED: March 1, 1992
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the order of
Lon B. Radin ("Payee") at 1191 Payne Drive, Los Altos, CA 94022, or at such
place as the Payee may designate in writing, the principal amount of Fifty
Thousand One Hundred and Forty Dollars ($50,140) in lawful money of the United
States Of America, in local funds, with interest on the unpaid balance accruing
from the date hereof to the date of payment. Principal amount and accrued
interest shall be due and payable on a date one year (365 days) from the date
hereof ("Maturity Date"). Interest accruing shall be at the rate of Six and One
Half Percent (6.5%) per annum or at the prime lending rate set by Silicon Valley
Bank, whichever is greater, but in no event in excess of the maximum legal rate.
It is understood the term, "Payee", as used herein includes any successor
thereto.
The Maker and all endorsers, sureties and guarantors, jointly and severally,
waive all presentments, demands for performance, notices of nonperformance,
protests, notices of protest and notices of dishonor.
This Promissory Note is subject to the all the terms and conditions set forth in
the Subordination Agreement, dated July 24, 1990 (attached exhibit 1), between
Mr. Radin ("Payee") and Silicon Valley Bank.
This note is made in accordance with and shall be construed under the laws of
the State of California.
The maker agrees to pay all costs of collection of any amounts due hereunder
when incurred, including, without limitation, reasonable attorney's fees and
expenses.
EXECUTED as of the date first above written.
MAKER: JetFax, Inc., A Delaware Corporation
978 Hamilton Court
Menlo Park, CA 94025
BY: /s/ EDWARD R. PRINCE III
-----------------------------------
Edward R. Prince III, President
<PAGE>
EXHIBIT 10.37
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is dated as of July 31, 1996 by and between JetFax, Inc., a
Delaware corporation with its principal place of business at 1376 Willow Road,
Menlo Park, CA 94025 (the "Company"), and Michael Crandell, an individual
residing at 135 Santa Isabel Lane, Santa Barbara, CA 93108 ("Employee").
WHEREAS, the Company is engaged in the development, marketing, sale and
license of fax products and technologies;
WHEREAS, Employee has substantial experience and reputation in the business
of developing, marketing and maintaining software, systems and processes for
sale, license and use in connection with fax products and technologies;
WHEREAS, the Company wishes to retain the services of Employee and Employee
wishes to accept employment with the Company, all on the terms and conditions
herein set forth;
WHEREAS, Employee is the president and principal shareholder of Crandell
Group, Inc. ("CGI"), a California corporation; and
WHEREAS, the Company and CGI have entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement") made as of July 31, 1996, under which the
Company is purchasing certain of the assets of CGI;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the Company
and Employee hereby agree as follows:
1. Employment.
----------
(a) Duties. The Company hereby employs Employee to render full-time,
------
exclusive services to the Company during the Term (as defined in Section 1(b))
as Vice President, Software of the
<PAGE>
Company. During the Term, Employee shall devote substantially his full time,
attention and energies to the operations and affairs of the Company and to the
promotion of its interests. The primary responsibilities of Employee as Vice
President, Software of the Company shall be to set policies for, determine
architectural design of and manage development, implementation and customer
support of the Company's personal computer software technology. As part of these
responsibilities, Employee shall participate as an active member in related
software quality assurance projects, assist in preparing marketing materials,
make presentations, perform competitive analyses, develop quality assurance
strategic plans and participate in the Company's lead generation programs.
Notwithstanding the foregoing, the precise duties, responsibilities and services
of Employee under this Agreement may be extended or curtailed from time to time
at the direction of the Company (in consultation with Employee) in a manner not
inconsistent with Employee's status and position hereunder and qualifications.
Employee hereby accepts such employment by the Company and agrees to undertake
and assume the responsibilities set forth above and such other comparable duties
as the Company may direct from time to time.
(b) Term. The initial term of this Agreement and of Employee's employment
----
hereunder shall commence as of the date hereof, and, unless sooner terminated
pursuant to the provisions of Section 4, shall terminate at the close of
business on the date that is two years from the date hereof. (The initial term
of this Agreement and additional terms, if any, agreed to between the parties,
collectively the "Term".)
2. Compensation.
------------
(a) Salary. In consideration of the services performed by Employee
------
hereunder, the Company shall pay Employee during the first year of the Term an
annual salary at a rate of One Hundred Ten Thousand US Dollars (US$110,000.00)
per year, subject to review and increase, if any, by the parties as of the date
that is one year from the date of this Agreement. Employee shall be paid on a
twice monthly basis, in accordance with the Company's standard payroll
procedures.
(b) Options.
-------
-2-
<PAGE>
(i) Issuance. In further consideration of the services performed by
--------
Employee hereunder, upon execution of this Agreement, the Company shall offer
Employee an option to acquire One Hundred Eighty-Seven Thousand Five Hundred
(187,500) shares of the Company's common stock, such option to vest pro-rata
(with a one year cliff) over a period of four (4) years following the date
hereof, at an exercise price of fair market value as set by the Company's Board
of Directors. Such stock option shall be subject to typical terms and
conditions applicable to options issued under the Company's employee stock
option plan, including a limit on duration and restrictions on transferability.
(ii) Anti-Dilution. In the event that after the date of this Agreement
-------------
the Company issues additional shares of its capital stock at a price below
US$2.75 per share in such a manner as to trigger the anti-dilution provisions
contained in the Certificate of Designations of the Company's Series F Preferred
Stock, as the same may be amended, the Company shall issue to Employee
additional options to acquire shares of the Company's common stock under the
Company's employee stock option plan so as to increase the total number of
shares subject to Employee's then vested options by an amount equivalent (on a
pro-rata basis) to the increase in the number of shares of common stock into
which the Company's Series F Preferred Stock would then be convertible. This
Section 2(b)(ii) and the right to additional options hereunder shall terminate
upon the termination of the anti-dilution provisions contained in the
Certificate of Designations of the Company's Series F Preferred Stock (whether
by conversion of all of the Series F Preferred Stock or otherwise).
3. Expenses and Benefits.
---------------------
(a) Business Expenses. The Company shall pay directly, or reimburse
-----------------
Employee for, all reasonable, pre-approved travel and other business expenses
incurred by Employee in connection with the performance of his duties hereunder
upon presentation by Employee of expense statements or vouchers or such other
supporting information as the Company may request from time to time, provided
that such business expenses shall not exceed the aggregate amount budgeted
therefor.
(b) Employee Benefits. In addition to the benefits described herein,
-----------------
Employee shall be entitled to participate in the
-3-
<PAGE>
employee benefit plans, if any, maintained by the Company for the benefit of its
management level employees.
4. Termination.
-----------
(a) By the Company For Cause. The Company may at any time at its option,
------------------------
exercised by notice to Employee, terminate Employee's employment for "Cause".
For the purposes of this Agreement, the term Cause shall mean:
(i) any material breach or default by Employee of any term or condition
of this Agreement or substantial failure of Employee to perform his duties and
responsibilities hereunder, including repeated refusals by Employee to comply
with any policies of the Company or any lawful directives of the Company, which
breach, default or failure to perform is not cured within five (5) business days
after written notice thereof;
(ii) any material breach or default by Employee of any term or
condition of the Proprietary Information and Inventions Agreement (as defined
below), which breach or default is not cured within five (5) business days after
written notice thereof;
(iii) any material breach or default by CGI of any term or condition of
the Asset Purchase Agreement, which breach or default is not cured within ten
(10) business days after written notice thereof;
(iv) willful misconduct or gross negligence by Employee in the
performance of his duties and responsibilities hereunder; or
(v) any conviction of Employee of a felony under the laws of the United
States or any State thereof.
(b) Death or Disability. Employee's employment hereunder shall terminate
-------------------
automatically upon Employee's death or permanent disability. The term
"disability" as used in this Section 4(b) shall mean the inability, because of
injury or sickness, to perform the substantial and material duties and
responsibilities of Employee's employment hereunder, while under the regular
care of a licensed physician, and while not gainfully employed in any occupation
reasonably consistent with Employee's
-4-
<PAGE>
education, training and experience. Employee will be considered permanently
disabled in the event he is unable to perform the substantial and material
duties and responsibilities of Employee's employment hereunder for a period of
120 days during any calendar year of the Term.
(c) Asset Purchase Agreement. In the event any of the following occurs
------------------------
such as to trigger the provisions of Section 8.12 of the Asset Purchase
Agreement and/or the termination of the provisions of Section 9.1 of the Asset
Purchase Agreement (a "Triggering Event"), then the Company may at any time
thereupon or thereafter, at its option, exercised by notice to Employee,
terminate Employee's employment hereunder:
(i) any material breach by the Company of any of the material covenants
for the payment of money set forth in the Asset Purchase Agreement to be
performed by the Company, which breach the Company fails to cure within sixty
(60) days following written notice from CGI specifying such breach, or
(ii) a petition for relief under any bankruptcy law is filed by or
against the Company, or a receiver is appointed for all or a substantial portion
of the Company's assets, and such petition or appointment is not dismissed or
vacated within sixty (60) days.
(d) Consequences of Termination. Upon expiration of this Agreement, or in
---------------------------
the event Employee's employment is terminated for any reason, the Company shall
pay to Employee any compensation, as provided in Section 2, which has accrued
but which remains unpaid as of the date of such expiration or termination. Upon
expiration of this Agreement, or in the event Employee's employment is
terminated for any reason other than for material default of the Company
hereunder, the Company shall have no further obligations or liabilities to
Employee whatsoever under this Employment Agreement.
5. Covenants; Representation.
-------------------------
(a) Non-Competition. As an inducement to the Company to acquire certain of
---------------
the assets of CGI pursuant to the Asset Purchase Agreement and in order to
ensure the Company of the full benefit of the transfer of such assets pursuant
thereto, to preserve and protect the value thereof and to create a valuable
independent
-5-
<PAGE>
asset of the Company to enhance the earnings of the Company in future years,
Employee agrees that, for a period of five (5) years from the date of this
Agreement:
(i) Employee will not participate or engage, either alone or in
association with others, directly or indirectly (including through any direct or
indirect ownership interest in any entity other than the Company), whether as
proprietor, owner, partner, officer, director, manager, agent, consultant,
employee or otherwise, in any business or enterprise which develops, markets,
sells or otherwise deals in products or services which are directly or
indirectly competitive with products or services developed, marketed or sold by
the Company, other than as an owner of less than one percent (1%) of the
outstanding shares of stock of any corporation or less than five percent (5%) of
the outstanding shares of a corporation the shares of which are publicly traded
on a national stock exchange or in a national over-the-counter market; and
(ii) Employee will not solicit, interfere with, hire, offer to hire,
persuade or induce any person who is or was an officer, employee, customer,
supplier or agent of the Company or any of its subsidiaries or affiliates to
discontinue his relationship with the Company or any of its subsidiaries or
affiliates or accept employment by or enter contractual relations for
compensation with any other entity or person, or approach any such employee of
the Company or any of its subsidiaries or affiliates for any such purpose or
authorize or knowingly approve the taking of any such actions by any other
individual or entity.
(b) Return of Materials. Upon expiration of this Agreement or the
-------------------
termination of Employees's employment hereunder, Employee agrees that he will
(i) leave with the Company all records, drawings, notebooks and other documents
and materials pertaining to the Company's confidential information, whether
prepared by Employee or others, and (ii) leave with the Company any equipment,
tools or other devices owned by the Company then in Employee's possession.
(c) Equitable Remedies. Employee acknowledges (i) that any breach or
------------------
attempted breach by Employee of any of the provisions of Section 5 or Section 6
could result in irreparable injury to the Company for which there would be no
adequate remedy at law; (ii)
-6-
<PAGE>
that if Employee should breach or attempt to breach such conditions, the Company
may seek through due process of law to enjoin Employee from further breaches or
attempted breaches of such provisions, or to compel compliance with such
provisions by specific performance, in addition to any other remedies available
to the Company in equity or at law; and (iii) that if a court of competent
jurisdiction determines that Employee has breached or attempted to breach any of
such provisions, Employee shall consent to the granting in such proceeding of an
injunction restraining Employee from further breaches of, or compelling
compliance by specific performance with, such provisions.
(d) Representation and Warranty of Employee. Employee represents and
---------------------------------------
warrants to the Company that Employee is under no contractual or other
restriction or obligation which is inconsistent with his execution of this
Agreement, the performance of his duties hereunder or any of the rights of the
Company hereunder.
(e) Scope; Limitations. If any of the terms of this Section 5 shall for
------------------
any reason be held to be excessively broad as to time, duration, geographical
scope, activity or subject, it shall be construed by limiting and reducing it so
as to be enforceable to the extent compatible with applicable laws that shall
then apply. Upon the occurrence of a Triggering Event, the provisions of
Section 5(a)(i) shall terminate and, notwithstanding the provisions of Section
5(a)(ii), Employee may solicit, hire or offer to hire any of the employees
listed on Schedule 8.1(c) to the Asset Purchase Agreement.
---------------
6. Proprietary Information and Inventions. Immediately upon execution of
--------------------------------------
this Agreement, Employee shall execute and deliver to the Company a Proprietary
Information and Inventions Agreement in the form attached hereto as Exhibit A
---------
(the "Proprietary Information and Inventions Agreement").
7. Miscellaneous.
-------------
(a) Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof.
-7-
<PAGE>
(b) Notices. All notices, requests or other communications required or
-------
permitted hereunder shall be given in writing by hand delivery, by commercial
overnight courier or by registered or certified mail, return receipt requested,
postage prepaid, to the party to receive the same at its respective address set
forth below, or at such other address as may from time to time be designated by
such party in accordance with this Section 7(b):
If to Employee, to: With a copy to:
Michael Crandell Weldon U. Howell, Jr., Esq.
135 Santa Isabel Lane Howell Moore & Gough LLP
Santa Barbara, CA 93108 812 Presidio Avenue
Santa Barbara, CA 93101
If to the Company, to: With a copy to:
JetFax, Inc. Clifford S. Robbins, Esq.
1376 Willow Road General Counsel Associates LLP
Menlo Park, CA 94025 1891 Landings Drive
Attn.: Edward R. Prince, III Mountain View, CA 94043
All such notices and communications hereunder shall be deemed given
when received if delivered personally, by courier or by mail, as evidenced by
the acknowledgment of receipt issued with respect thereto by the applicable
postal authorities or the signed acknowledgment of receipt of the person to whom
such notice or communication shall have been addressed.
(c) Expenses. The parties shall each bear their own expenses in
--------
connection with the negotiation, execution and delivery of this Agreement and
the performance of their respective obligations hereunder.
(d) Survival; Successors and Assigns. The provisions of Sections
--------------------------------
4(d), 5, 6 and 7 of this Agreement shall survive the expiration or termination
of this Agreement or the termination of Employee's employment hereunder for any
reason. This Agreement and the provisions thereof shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
-8-
<PAGE>
(e) Governing Law. The validity, construction, operation and effect
-------------
of any and all of the terms and provisions of this Agreement shall be determined
and enforced in accordance with the laws of the State of California without
giving effect to principles of conflicts of law thereunder. Each of the parties
(a) hereby irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be brought
exclusively in any federal or state court in the county in the State of
California in which, if the defendant is an individual, the defendant is
resident, or, if the defendant is a corporation, the defendant's headquarters
are located, (b) by execution and delivery of this Agreement irrevocably submits
to and accepts, with respect to any such action or proceeding for such party and
in respect of such party's properties and assets, generally and unconditionally,
the jurisdiction of the aforesaid courts, and irrevocably waives any and all
rights such party may have to object to such jurisdiction under the laws of the
State of California or the Constitution of the United States or otherwise, and
(c) irrevocably consents that service of process upon such party in any such
action or proceeding shall be valid and effective against it if made in the
manner provided in Section 7(b) hereof for delivery of notices hereunder.
(f) Modification. This Agreement may be amended or modified only upon
------------
the mutual written consent of both of the parties hereto.
(g) Waiver. Any failure of any party hereto to comply with any of the
------
obligations or agreements set forth in this Agreement or to fulfill any
condition set forth may be waived only by written instrument signed by the other
party. No failure by any party to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver of such right, nor shall any single or
partial exercise of any right hereunder by any party preclude any other or
future exercise of that right or any other right hereunder by that party.
(h) Assignment. No party hereto may assign this Agreement without the
----------
prior written consent of the other party; provided, however, that the Company
-------- -------
may, without Employee's consent, assign this Agreement and its rights and
obligations hereunder to any successor in interest to the Company in connection
-9-
<PAGE>
with any sale or transfer of all or substantially all of its assets or upon any
merger, consolidation or dissolution.
(i) Severability. If any provision of this Agreement shall be held
------------
invalid, unenforceable or illegal, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and such provisions shall be enforced to the fullest extent possible in
accordance with the mutual intent of the parties hereto.
(j) Counterparts. This Agreement may be executed in any number of
------------
duplicate counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
[balance of this page intentionally left blank]
-10-
<PAGE>
[Employment Agreement]
IN WITNESS WHEREOF, the parties have duly signed this Agreement as of
the day and year first written above.
JETFAX, INC. MICHAEL CRANDELL
By: /s/Allen K. Jones /s/Michael Crandell
----------------- -------------------
Allen K. Jones
Vice President and CFO
-11-
<PAGE>
EXHIBIT A
(to Employment Agreement)
PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
[attach]
-12-
<PAGE>
EXHIBIT 10.38
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT, dated as of July 31, 1996, is entered into by
JetFax, Inc., a Delaware corporation ("Buyer") and Crandell Group, Inc., a
-----
California corporation ("Seller").
------
RECITALS
--------
A. Pursuant to an Asset Purchase Agreement (the "Asset Purchase
--------------
Agreement") made as of July 31, 1996, by and between Buyer and Seller, Buyer has
agreed to purchase certain assets of Seller on terms which include the payment
of a deferred purchase price upon the terms and subject to the conditions set
forth therein.
B. Seller's obligation to close the transactions under the Asset Purchase
Agreement is subject, among other conditions, to receipt by Seller of this
Security Agreement duly executed by Buyer.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Buyer and Seller hereby agree as follows:
1. DEFINITIONS AND INTERPRETATION.
------------------------------
(a) Definitions. When used in this Security Agreement, the following terms
-----------
shall have the following respective meanings:
"Collateral" shall have the meaning given to that term in SECTION 2 hereof.
----------
"Obligations" shall mean all obligations, whether now existing or hereafter
-----------
arising, owed by Buyer to Seller pursuant to Section 3.1(a) of the Asset
Purchase Agreement and the first $500,000 payable by Buyer to Seller under
each of Sections 3.1(b) and (c) of the Asset Purchase Agreement.
<PAGE>
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
---
California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Asset Purchase Agreement shall have the respective meanings given
to those terms in the Asset Purchase Agreement, and all terms defined in the UCC
shall have the respective meanings given to those terms in the UCC.
(b) Headings; Plural Terms. Headings in this Security Agreement are for
----------------------
convenience of reference only and are not part of the substance hereof. All
terms defined in this Security Agreement in the singular form shall have
comparable meanings when used in the plural form and vice versa.
---- -----
(c) Governing Law. This Security Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California without
reference to conflicts of law rules (except to the extent governed by the UCC).
(d) Construction. This Security Agreement is the result of negotiations
------------
among, and has been reviewed by, Buyer, Seller and their respective counsel.
Accordingly, this Security Agreement shall be deemed to be the product of both
parties, and no ambiguity shall be construed in favor of or against Buyer or
Seller.
(e) Entire Agreement. This Security Agreement constitutes and contains the
----------------
entire agreement of Buyer and Seller and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof.
(f) Other Interpretive Provisions. References in this Security Agreement
-----------------------------
to "Recitals," "Sections," and "Attachments" are to recitals, sections, and
attachments herein and hereto unless otherwise indicated. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Security
Agreement shall refer to this Security Agreement as a whole and not to any
particular provision of this Security Agreement. The words "include" and
"including" and words of similar import when used in this Security Agreement
shall not be construed to be limiting or exclusive.
-2-
<PAGE>
2. GRANT OF SECURITY INTEREST. As security for the Obligations, Buyer hereby
--------------------------
grants to Seller a security interest in all right, title and interests of Buyer
in and to the property described in Attachment 1 (collectively and severally,
------------
the "Collateral").
----------
3. REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants to Seller
------------------------------
that (a) Buyer is the owner of the Collateral (or, in the case of after-acquired
Collateral, at the time Buyer acquires rights in the Collateral, will be the
owner thereof); (b) upon the filing of a UCC financing statement as described
herein, Seller will have (or in the case of after-acquired Collateral, at the
time Buyer acquires rights therein, will have) a first priority perfected
security interest in the Collateral to the extent the security interest therein
can be perfected by the filing with the California Secretary of State of a UCC
financing statement, except for (i) purchase money liens, (ii) mechanic's,
materialmen's or similar liens, (iii) tax liens (to the extent such taxes are
not yet due) and (iv) any lien to which Seller expressly agrees to be
subordinate, including any lien to any Lender (as defined in SECTION 5),
(collectively, "Permitted Liens"); and (c) Buyer's chief executive office is
---------------
located at the address set forth in SECTION 7(b).
4. COVENANTS. Buyer hereby agrees to perform all acts that may be reasonably
---------
requested by Seller to maintain, preserve, protect and perfect the Collateral,
the lien granted to Seller therein and the first priority of such lien (except
for Permitted Liens), to the extent such lien can be perfected by the filing
with the California Secretary of State of a UCC financing statement.
5. SUBORDINATION. Seller hereby agrees that its security interest granted
-------------
hereunder shall be subordinate to any security interest in the Collateral
hereafter granted by Buyer to any bank, savings bank, savings and loan, leasing
company, insurance company or factor (each a "Lender") in connection with any
term loan or line of credit extended to Buyer by such Lender. The terms of such
subordination are set forth on Attachment 2, which is incorporated herein by
------------
this reference (the "Subordination Terms"). Seller agrees to execute such other
-------------------
documents or instruments as shall be requested by Buyer or any Lender to
evidence or confirm such subordination, including any additional subordination
provisions requested by any Lender.
-3-
<PAGE>
6. DEFAULT AND REMEDIES. An "Event of Default" by Buyer shall be deemed to
--------------------
have occurred under this Security Agreement if Buyer fails to pay any of the
Obligations within 60 days after receiving notice from Seller that such amounts
are due. Upon the occurrence and during the continuance of an Event of Default,
Seller shall have the rights of a secured creditor under the UCC and all rights
granted by this Security Agreement and by law.
7. MISCELLANEOUS.
-------------
(a) Termination of Security Interest. Upon the earlier of (i) the payment
--------------------------------
in full of all Obligations, and (ii) the payment of an aggregate amount of
$1,250,000 under Sections 3.1(a), (b) and (c) of the Asset Purchase Agreement,
the security interest granted hereby shall automatically terminate and Seller
shall execute such documents as Buyer shall reasonably request, including UCC
termination statements, to evidence such termination.
(b) Notices. All notices, requests or other communications required or
-------
permitted hereunder shall be given in writing by hand delivery, by commercial
overnight courier or by registered or certified mail, return receipt requested,
postage prepaid, to the party to receive the same at its respective address set
forth below, or at such other address as may from time to time be designated by
such party in accordance with this Section.
If to Seller, to:
Crandell Group, Inc.
125 E. Victoria Street, Suite A
Santa Barbara, CA 93101
Attention: Michael Crandell
with a copy to:
Weldon U. Howell, Jr., Esq.
Howell Moore & Gough
812 Presidio Avenue
Santa Barbara, CA 93101
-4-
<PAGE>
If to Buyer, to:
JetFax, Inc.
1376 Willow Road
Menlo Park, CA 94025
Attention: Edward R. Prince, III
with a copy to:
Clifford S. Robbins, Esq.
General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
(c) Nonwaiver. No failure or delay on Seller's part in exercising any
---------
right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right.
(d) Amendments and Waivers. This Security Agreement may not be
----------------------
amended or modified, nor may any of its terms be waived, except by written
instruments signed by Buyer and Seller. Each waiver or consent under any
provision hereof shall be effective only in the specific instances for the
purpose for which given.
(e) Assignments. No party hereto may assign this Security Agreement
-----------
without the prior written consent of the other party; provided, however, that
Buyer may, without Seller's consent, assign this Security Agreement and its
rights and obligations hereunder to any successor in interest to Buyer in
connection with any sale or transfer of all or substantially all of its assets
or upon any merger, consolidation or dissolution. Any impermissible attempted
assignment of this Security Agreement shall be void as to the other party to
this Security Agreement.
(f) Cumulative Rights, etc. The rights, powers and remedies of Seller
----------------------
under this Security Agreement shall be in addition to all rights, powers and
remedies given to Seller by virtue of any applicable law, rule or regulation of
any governmental authority, the Asset Purchase Agreement, or any other
agreement, all of which rights, powers, and remedies shall be cumulative and may
be exercised successively or concurrently without impairing Seller's
-5-
<PAGE>
rights hereunder. Buyer waives any right to require Seller to proceed against
any person or to exhaust any Collateral or to pursue any remedy in Seller's
power.
(g) Partial Invalidity. If any time any provision of this Security
------------------
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability
of the remaining provisions of this Security Agreement nor the legality,
validity or enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby.
[balance of this page intentionally left blank]
-6-
<PAGE>
[Security Agreement]
IN WITNESS WHEREOF, the parties have duly signed this Security
Agreement as of the day and year first written above.
JETFAX, INC. CRANDELL GROUP, INC.
By: /s/ Allen K. Jones__ By: /s/ Michael Crandell
------------------ --------------------
Allen K. Jones Michael Crandell
Vice President and CFO President
-7-
<PAGE>
ATTACHMENT 1
TO SECURITY AGREEMENT
---------------------
All right, title and interest of Buyer now owned or hereafter acquired
in and to the following to the extent a security interest therein can be
perfected by the filing with the California Secretary of State of a UCC
financing statement:
(a) All equipment and fixtures (including, without limitation,
furniture, vehicles and other machinery and office equipment), together with all
additions and accessions thereto and replacements therefor (collectively, the
"Equipment");
---------
(b) All inventory (including, without limitation, (i) all raw
materials, work in process and finished goods and (ii) all such goods which are
returned to or repossessed by Buyer), together with all additions and accessions
thereto, replacements therefor, products thereof and documents therefor
(collectively, the "Inventory");
---------
(c) All accounts, chattel paper, contract rights and rights to the
payment of money (collectively, the "Receivables");
-----------
(d) All general intangibles, including, without limitation, (i)
customer and supplier lists and contracts, books and records, insurance
policies, tax refunds, contracts for the purchase of real or personal property;
(ii) all patents, copyrights, trademarks, tradenames and service marks, (iii)
all licenses to use, applications for, and other rights to, such patents,
copyrights, trademarks, tradenames and service marks, and (iv) all goodwill of
Buyer;
(e) All deposit accounts, money, certificated securities,
uncertificated securities, instruments and documents; and
(f) All proceeds of the foregoing (including, without limitation,
whatever is receivable or received when Collateral or proceeds is sold,
collected, exchanged, returned, substituted or otherwise disposed of, whether
such disposition is voluntary or involuntary, including rights to payment and
return premiums and
-8-
<PAGE>
insurance proceeds under insurance with respect to any Collateral, and all
rights to payment with respect to any cause of action affecting or relating to
the Collateral).
-9-
<PAGE>
ATTACHMENT 2
TO SECURITY AGREEMENT
---------------------
SUBORDINATION TERMS
1. Lien Priorities. Notwithstanding the date, manner or order of
---------------
perfection of the security interests and liens granted to any Lender and Seller
in the Collateral and notwithstanding any provision of the UCC or any applicable
law or decision, as between each Lender and Seller, each Lender shall have a
security interest or lien in the Collateral prior to Seller. The lien
priorities established hereunder are only as between each Lender and Seller.
The lien priorities established hereunder shall not be altered or otherwise
affected by (a) any modification, renewal or extension of the Asset Purchase
Agreement, any documents evidencing a Lender's loan or security interest (the
"Lender's Loan Documents") or any other obligation secured by the Collateral,
- ------------------------
(b) the perfection or nonperfection by such Lender of its security interests in
the Collateral, or (c) any action or inaction which Buyer, any Lender or Seller
may take or fail to take in respect of the Collateral. Each of Buyer, each
Lender and Seller agree that it shall not take any action which would have the
effect of directly or indirectly frustrating or impairing the intended operation
of these Subordination Terms.
2. Disposition and Proceeds of the Collateral. Seller hereby agrees
------------------------------------------
that until each Lender has received payment in full of the amounts secured by
the respective Lender's Loan Documents, such Lender shall be entitled to receive
all proceeds of the Collateral and, may dispose of, and exercise any other
rights with respect to, the Collateral, free of the subordinate interest of
Seller, provided that Seller shall retain any rights it may have as a junior
secured creditor with respect to the surplus, if any, arising from such
disposition or enforcement.
3. Seller To Not Proceed Against Collateral and to Provide Notices
---------------------------------------------------------------
of Prepayment, Default and Exercise of Remedies. Seller agrees (a) prior to the
- -----------------------------------------------
payment in full of all amounts secured by Lender's Loan Documents, unless
directed by all Lenders, to not commence or continue any action to foreclose
upon or otherwise enforce any of its rights under the Security Agreement with
respect to the Collateral; and (b) to notify each Lender in writing after the
occurrence of an event which, but for the giving of notice or
-10-
<PAGE>
the passage of time or both, would constitute an Event of Default under the
Security Agreement. The failure of Seller to provide any of the foregoing
notices to a Lender shall not affect the validity of any related notice
delivered to Buyer.
4. Lender Is a Third Party Beneficiary. Seller hereby agrees that
-----------------------------------
each Lender is a third party beneficiary of these Subordination Terms and shall
be entitled to enforce these terms directly against Seller.
-11-
<PAGE>
EXHIBIT 10.40
This LOAN AND SECURITY AGREEMENT is entered into as of August 23,1996, by
and between VENTURE LENDING, a division of Cupertino National Bank & Trust
("Bank") and JetFax, INC. ("Borrower").
RECITALS
--------
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions. As used in this Agreement, the following terms
-----------
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
---------
hereto.
<PAGE>
"Committed Line" means One Million Five Hundred Thousand Dollars
($1,500,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
--------
standards of eligibility may be fixed and revised from time to time by
Bank in Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts arising out of progress billings, or with respect to
which goods are placed on consignment, guaranteed sale, sale or return, sale on
approval, bill and hold, or other terms by reason of which the payment by the
account debtor may be conditional;
<PAGE>
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed thirty
percent (30%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(j) Accounts owing by a distributor, unless pre-approved by Bank
in writing;
(k) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(l) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
<PAGE>
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital, contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means February 22, 2000.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the ordinary
course of business.
<PAGE>
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
--------
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
published in the Western edition of The Wall Street Journal, or such other rate
-----------------------
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof
shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the date immediately preceding
the first anniversary of the date of this Agreement.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
<PAGE>
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
-----
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities. "Total Liabilities" means at
---
any date as of which the amount thereof shall be determined, all obligations
that should, in accordance with GAAP be classified as liabilities on the
consolidated balance sheet of Borrower, including in any event all Indebtedness,
but specifically excluding Subordinated Debt.
1.2 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Advances. Subject to and upon the terms and conditions of this
--------
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of the Committed Line or the Borrowing Base. For purposes
of this Agreement, "Borrowing Base" shall mean an amount equal to seventy-five
percent (75%) of Eligible Accounts. Subject to the terms and conditions of this
Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time prior to the Revolving Maturity Date.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
- ---------
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such reliance. Bank will
credit the amount of Advances made under this Section 2.1 to Borrower's deposit
account. To evidence the Advances, Borrower shall deliver to Bank a promissory
note in substantially the form of Exhibit C-1.
-----------
The Revolving Facility shall terminate on the Revolving Maturity Date, at
which time all Advances under this Section 2.1 shall be immediately due and
payable.
<PAGE>
2.1.1 Equipment Advances.
------------------
(a) At any time from the date hereof through February 13, 1997
(the "Equipment Availability Date"), Borrower may from time to time request
advances (each an "Equipment Advance" and, collectively, the "Equipment
Advances") from Bank in an aggregate principal amount of up to Two Hundred Fifty
Thousand Dollars ($250,000). The Equipment Advances shall be used to purchase
Equipment approved from time to time by Bank and shall not exceed one hundred
percent (100%) of the cost of such Equipment, excluding installation expense,
freight discounts, warranty charges and taxes. Not more than One Hundred Fifty
Thousand Dollars ($150,000) of Equipment Advances may finance the licensing or
acquisition of software.
(b) Interest shall accrue from the date of each Equipment
Advance at the rate specified in Section 2.3(a), and shall be payable monthly on
the twelfth day of each month for each month through February 13, 1997. The
Equipment Advance or Equipment Advances that are outstanding on February 13,
1997 will be payable monthly on the twelfth day of each month in thirty-six (36)
equal installments of principal, plus accrued interest, beginning on March
12,1997, and continuing through the Maturity Date, when the entire principal
amount and all unpaid interest shall be due and payable.
(c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission received no later than 3:00 p.m. California time one (1) Business
Day before the day on which the Equipment Advance is to be made. Such notice
shall be in substantially the form of Exhibit B. The notice shall be signed by a
---------
Responsible Officer and include a copy of the invoice for the Equipment
to be financed. To evidence the Equipment Advances, Borrower shall deliver to
Bank a promissory note in substantially the form of Exhibit C-2.
-----------
2.2 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations owed by Borrower to Bank pursuant to Section 2.1 of this Agreement
is greater than the lesser of (i) the Committed Line or (ii) the Borrowing Base,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates Payments, and Calculations.
-----------------------------------------
(a) Interest Rate. Except as set forth in Section 2.3(b), any
-------------
Advances shall bear interest, on the average Daily Balance, at a rate equal to
one (1.0) percentage point above the Prime Rate, and any Equipment Advances
shall bear interest at a rate equal to one and one-half (1.5) percentage points
above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and
------------
after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on
--------
the twenty second calendar day of each month during the term hereof. Bank shall,
at its option, charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts or against the Committed
Line, in which case those amounts shall thereafter accrue interest at the rate
then applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from
-----------
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
<PAGE>
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
------------------
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
----
(a) Facility Fee. A Facility Fee equal to Thirteen Thousand
------------
Seven Hundred Fifty Dollars ($13,750), which fee shall be due on the Closing
Date and shall be fully earned and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary
----------------------------------------
fees and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
-------------
incurred through the Closing Date, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation,
----------------
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and
<PAGE>
when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date
----
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Advances under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank
---------------------------------------
to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) a collateral assignment and patent mortgage;
(d) financing statements (Forms UCC-1);
(e) subordination agreements of certain persons;
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due specified in
Section 25 hereof; and
(h) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to
------------------------------------
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt
<PAGE>
repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents. Except
as set forth in the Schedule, such security interest constitutes a valid, first
priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in Collateral acquired
after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall from
---------------------------------------------
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
----------------------------------
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to
---------------------
the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
----------------------
of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except for "Hybrid Fax,
----------------------------------------
Inc.", Borrower has not done business under any name other than that specified
on the signature page hereof. The chief executive office of Borrower is located
at the address indicated in Section 10 hereof.
5.7 Litigation. There are no actions or proceedings pending by or
----------
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect or a material
adverse effect on Borrower's interest or Bank's security interest in the
Collateral. Borrower does not have knowledge of any such pending or threatened
actions or proceedings.
<PAGE>
5.8 No Material Adverse Change in Financial Statements. All
--------------------------------------------------
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
--------
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be
-----
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
------------
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained
-------------------
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.15 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
<PAGE>
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred twenty (120) days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) days upon becoming available,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and
all reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000) or more; and (e) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time.
Within thirty (30) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit D hereto, together with aged listings of
---------
accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit E hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense every six (6) months and at such times as Bank
deems appropriate after an Event of Default has occurred and is continuing.
6.4 Inventory, Returns. Borrower shall keep all Inventory in good
------------------
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
<PAGE>
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
-----
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
calendar month, a ratio of Quick Assets to Current Liabilities, excluding
deferred revenue, of at least 0.8 to 1.0.
6.9 Minimum Liquidity and Debt Service Coverage. Subject to the
-------------------------------------------
remainder of this Section, Borrower shall maintain, as of the last day of each
of Borrower's fiscal quarters, a minimum Liquidity of two (2) times the amount
of outstanding Equipment Advances. "Liquidity" means the sum of (i) cash and
cash-equivalents plus (ii) the Borrowing Base minus (iii) the aggregate
outstanding Advances as of the measurement date. Notwithstanding the foregoing,
from and after the time Borrower achieves a rolling 3-month Debt Service
Coverage for two consecutive fiscal quarters of at least 1.50 to 1.00, and for
so long as Borrower maintains as of the last day of each fiscal quarter
thereafter, a Debt Service Coverage of at least 1.50 to 1.00, Borrower shall not
be subject to the minimum required Liquidity set forth above. Debt Service
Coverage means, as measured quarterly as of the last day of each fiscal quarter
of Borrower, on a consolidated basis determined in accordance with GAAP, the
ratio of (a) an amount equal to the sum of (i) net income, plus (ii)
----
depreciation, amortization of intangible assets and other non-cash charges to
income to (b) an amount equal to the sum of all scheduled repayments for such
quarter (or month, as applicable) and mandatory prepayments of principal on
account of long-term debt.
6.10 Debt-Net Worth Ratio. Borrower shall maintain, as of the last
--------------------
day of each calendar month, a ratio of Total Liabilities, excluding deferred
revenue, less Subordinated Debt to Tangible Net
<PAGE>
Worth plus Subordinated Debt of not more than 2.0 to 1.0 through December 31,
1996, and not more than 1.5 to 1.0 thereafter.
6.11 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each calendar month, a Tangible Net Worth of not less than Three Million
Dollars ($3,000,000).
6.12 Profitability. Borrower may suffer a loss for the fiscal
-------------
quarter ending September 30, 1996, in an amount not to exceed Three Hundred
Thousand Dollars ($300,000). Borrower shall have a minimum net profit of One
Dollar ($1.00) for each fiscal quarter thereafter.
6.13 Registration of Intellectual Property Rights. Borrower shall
--------------------------------------------
register or cause to be registered (to the extent not already registered) with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, those intellectual property rights listed on Exhibits A,
B and C to the Collateral Assignment, Patent Mortgage and Security Agreement
delivered to Bank by Borrower in connection with this Agreement within ninety
(90) days of the date of this Agreement. Borrower shall register or cause to be
registered with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, those additional intellectual property
rights developed or acquired by Borrower from time to time in connection with
any product prior to the sale or licensing of such product to any third party,
including without limitation revisions or additions to the intellectual property
rights listed on such Exhibits A, B and C. Borrower shall execute and deliver
such additional instruments and documents from time to time as Bank shall
reasonably request to perfect Bank's security interest in such additional
intellectual property rights.
6.14 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Advances, Borrower will not do
any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
-----------------------
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
<PAGE>
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
------------
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
-------------
or payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
----------------------------
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof, at 100 Merchant Street, Cincinnati, Ohio, and at Borrower's office in
Portage, Michigan, and such other locations of which Borrower gives Bank prior
written notice and as to which Borrower signs and files a financing statement
where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
----------
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or
---------------
any interest on, any Advances when due and payable; or fails to pay any portion
of any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any
<PAGE>
officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Advances will be required to be made during such
cure period);
8.3 Material Adverse Change. If there occurs a material adverse
-----------------------
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within ten (10) days (provided
that no Advances will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other Agreements. If there is a default in any agreement to
----------------
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
---------
in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
------------------
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
<PAGE>
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
-----------------
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers,
<PAGE>
or employees) as Borrower's true and lawful attorney to: (a) send requests for
verification of Accounts or notify account debtors of Bank's security interest
in the Accounts; (b) endorse Borrower's name on any checks or other forms of
payment or security that may come into Bank's possession; (c) sign Borrower's
name on any invoice or bill of lading relating to any Account, drafts against
account debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to account debtors; (d) make, settle, and adjust all
claims under and decisions with respect to Borrower's policies of insurance; and
(e) settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; provided Bank may exercise such power of attorney to sign the name
of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. At any time from the date of this
-------------------
Agreement, Bank may notify any person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
-------------------------------
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
<PAGE>
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: JetFax, Inc.
1376 Willow Road
Menlo Park, CA 94025
Attn: Allen Jones
FAX: (415) 326-6003
If to Bank: Venture Lending
Three Palo Alto Square, Suite 150
Palo Alto, CA 94306
Attn: Craig Russell
FAX: (415) 843-6969
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
-----------------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this
<PAGE>
Agreement, or otherwise (including without limitation reasonable attorneys fees
and expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
---------------
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank
---------------
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
JETFAX, INC.
By: ___________________________________
Title: ________________________________
VENTURE LENDING, a division of
Cupertino National Bank & Trust
By: ___________________________________
Title: ________________________________
<PAGE>
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
<PAGE>
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ________________________
FAX#: __________________ TIME: ________________________
_______________________________________________________________________________
FROM: ___________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY: ___________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: ___________________________________________________
PHONE NUMBER: ___________________________________________________________
FROM ACCOUNT # ___________________ TO ACCOUNT # _____________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $_________________________________
PRINCIPAL PAYMENT (ONLY) $_________________________________
INTEREST PAYMENT (ONLY) $_________________________________
PRINCIPAL AND INTEREST (PAYMENT) $_________________________________
OTHER INSTRUCTIONS: _____________________________________________________
_________________________________________________________________________
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
_____________________________________________________________________________
BANK USE ONLY
TELEPHONE REQUEST:
- -----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
_______________________________ ______________________________
Authorized Requester Phone #
_______________________________ ______________________________
Received By (Bank) Phone #
__________________________________________
Authorized Signature (Bank)
________________________________________________________________________________
<PAGE>
EXHIBIT C-1
REVOLVING PROMISSORY NOTE
$1,500,000 Palo Alto, California
Date: August 23, 1996
JETFAX, INC., ("Borrower'), for value received, hereby promises to pay to
the order of VENTURE LENDING, a division of Cupertino National Bank & Trust
("Bank"), in lawful money of the United States of America, pursuant to that
certain Loan and Security Agreement dated as of August 23, 1996, by and between
Borrower and Bank (the "Loan Agreement"), (i) the principal amount of $1,500,000
or, if lesser, (ii) the principal amount of all Advances outstanding as of the
maturity date hereof.
This Note is one of the Notes referred to in the Loan Agreement. All terms
defined in the Loan Agreement shall have the same definitions when used herein,
unless otherwise defined herein.
Borrower further promises to pay interest on each Advance hereunder in like
funds on the principal amount hereof from time to time outstanding from the date
hereof until paid in full, at a rate or rates per annum and payable on the dates
determined pursuant to the Loan Agreement.
Payment on this Note shall be applied in the manner set forth in the Loan
Agreement The Loan Agreement contains provisions for acceleration of the
maturity of Advances hereunder upon the occurrence of certain stated events and
also provides for optional and mandatory prepayments of principal hereof prior
to any stated maturity upon the terms and conditions therein specified.
All Advances made by Bank to Borrower pursuant to the Loan Agreement shall
be recorded by Bank on the books and records of Bank. The failure of Bank to
record any Advance or any prepayment or payment made on account of the principal
balance hereof shall not limit or otherwise affect the obligation of Borrower
under this Note and under the Loan Agreement to pay the principal, interest and
other amounts due and payable under the Advances.
Any principal or interest payments on this Note not paid when due, whether
at stated maturity, by acceleration or otherwise, shall bear interest at the
Default Rate.
Upon the occurrence of a default hereunder or an Event of Default under the
Loan Agreement, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Bank, be immediately collectible by or on
behalf of Bank pursuant to the Loan Agreement and applicable law.
Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest of this Note, and shall pay all costs of
collection when incurred, including reasonable attorneys' fees, costs and
expenses. The right to plead any and all statutes of limitations as a defense to
any demand hereunder is hereby waived to the full extent permitted by law.
The amount of this Note is secured by the Collateral identified and
described as security therefor in the Loan Agreement.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of California, excluding conflict of laws principles
that would cause the application of the laws of any other jurisdiction.
The provisions of this Note shall inure to the benefit of and be binding
upon any successor to Borrower and shall extend to any holder hereof.
JETFAX, INC.
By: ______________________________________
Printed Name: ____________________________
Title: ___________________________________
<PAGE>
EXHIBIT C-2
EQUIPMENT PROMISSORY NOTE
$250,000 Palo Alto, California
Date: August 23, 1996
JETFAX, INC., a Delaware corporation ("Borrower"), for value received,
hereby promises to pay to the order of VENTURE LENDING, a division of Cupertino
National Bank & Trust ("Bank"), in lawful money of the United States of America,
pursuant to that certain Loan and Security Agreement dated as of August 23,
1996, by and between Borrower and Bank (the "Loan Agreement"), (i) the principal
amount of $250,000 or, if lesser, (ii) the principal amount of all Advances
outstanding as of the maturity date hereof.
This Note is one of the Notes referred to in the Loan Agreement. All terms
defined in the Loan Agreement shall have the same definitions when used herein,
unless otherwise defined herein.
Borrower further promises to pay interest on each Advance hereunder in like
funds on the principal amount hereof from time to time outstanding from the date
hereof until paid in full, at a rate or rates per annum and payable on the dates
determined pursuant to the Loan Agreement.
Payment on this Note shall be applied in the manner set forth in the Loan
Agreement. The Loan Agreement contains provisions for acceleration of the
maturity of Advances hereunder upon the occurrence of certain stated events and
also provides for optional and mandatory prepayments of principal hereof prior
to any stated maturity upon the terms and conditions therein specified.
All Advances made by Bank to Borrower pursuant to the Loan Agreement shall
be recorded by Bank on the books and records of Bank. The failure of Bank to
record any Advance or any prepayment or payment made on account of the principal
balance hereof shall not limit or otherwise affect the obligation of Borrower
under this Note and under the Loan Agreement to pay the principal, interest and
other amounts due and payable under the Advances.
Any principal or interest payments on this Note not paid when due, whether
at stated maturity, by acceleration or otherwise, shall bear interest at the
Default Rate.
Upon the occurrence of a default hereunder or an Event of Default under the
Loan Agreement, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Bank, be immediately collectible by or on
behalf of Bank pursuant to the Loan Agreement and applicable law.
Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest of this Note, and shall pay all costs of
collection when incurred, including reasonable attorneys' fees, costs and
expenses. The right to plead any and all statutes of limitations as a defense to
any demand hereunder is hereby waived to the full extent permitted by law.
The amount of this Note is secured by the Collateral identified and
described as security therefor in the Loan Agreement.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of California, excluding conflict of laws principles
that would cause the application of the laws of any other jurisdiction.
The provisions of this Note shall inure to the benefit of and be binding
upon any successor to Borrower and shall extend to any holder hereof.
JETFAX, INC.
By: ______________________________________
Printed Name: ____________________________
Title: ___________________________________
<PAGE>
EXHIBIT D
BORROWING BASE CERTIFICATE
_______________________________________________________________________________
Borrower: JetFax, Inc. Lender: Venture Lending
Commitment Amount: $1,500,000
________________________________________________________________________________
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _____ $_____________
2. Additions (please explain on reverse) $_____________
3. TOTAL ACCOUNTS RECEIVABLE $_____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_____________
5. Balance of 50% over 90 day accounts $_____________
6. Concentration Limits $_____________
7. Foreign Accounts $_____________
8. Governmental Accounts $_____________
9. Contra Accounts $_____________
10. Promotion or Demo Accounts $_____________
11. Intercompany /Employee Accounts $_____________
12. Other (please explain on reverse) $_____________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_____________
14. Eligible Accounts (#3 minus #13) $_____________
15. LOAN VALUE OF ACCOUNTS (75% of #14) $_____________
BALANCES
16. Maximum Loan Amount $_____________
17. Total Funds Available [Lesser of #15 or #16)] $_____________
18. Present balance owing on Line of Credit $_____________
19. Outstanding under Sublimits () $_____________
20. RESERVE POSITION (#17 minus #18 and #19) $_____________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Venture lending.
COMMENTS: BANK USE ONLY
---- --- ----
Rec'd By:______________
Auth. Signer
JetFax, Inc.
Date: _________________
By: ___________________________ Verified:______________
Authorized Signer Auth. Signer
Date:__________________
_______________________
<PAGE>
EXHIBIT E
COMPLIANCE CERTIFICATE
TO: VENTURE LENDING
FROM: JETFAX, INC.
The undersigned authorized officer of JetFax, Inc. hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending ____________ with all required covenants except
as noted below and (ii) all representations and warranties of Borrower stated in
the Agreement are true and correct in all material respects as of the date
hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) PYE within 120 days Yes No
A/R & A/P Agings Monthly within 30 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a Monthly Basis:
Minimum Quick Ratio 0.8:1.0 ____:1.0 Yes No
Minimum Tangible Net Worth $3,000,000 $_______ Yes No
Maximum Debt/Tangible Net
Worth 2:0:1.0/1.5:1.0 ____:1.0 Yes No
Minimum Liquidity 2.0:1.0 ____:1.0 Yes No
Minimum Debt Service 1.5:1.0 ____:1.0 Yes No
Profitability: Quarterly $1.00* $_______ Yes No
* 9/30/96 Loss is less than $300,000
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Received by: _______________
Sincerely, AUTHORIZED
_____________________________ SIGNER
SIGNATURE
Date________________________
Verified:___________________
AUTHORIZED
_____________________________
TITLE SIGNER
Date:_______________________
_____________________________ Compliance Status: Yes No
DATE
<PAGE>
JETFAX, INC.
WAIVER AND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This Waiver and Amendment ("Amendment") to Loan and Security Agreement
("Agreement") dated August 23, 1996, as amended September 18, 1996, is entered
into as of January 31, 1997, by and between VENTURE LENDING, a division of
Cupertino National Bank & Trust ("Bank") and JETFAX, INC. ("Borrower").
Borrower has requested certain modification(s) to the Agreement, and Bank
agrees to specified modification(s). This Amendment sets forth the modified
terms on which Bank will continue to advance credit to Borrower, and Borrower
will repay the amounts owing to Bank.
NOW, THEREFORE, the parties agree as follows:
WAIVER
------
Bank hereby acknowledges Borrower's breach of the Tangible Net Worth
(6.11) covenant of the section titled "Affirmative Covenants" for the period
ending November 30, 1996. Bank waives its remedial rights through November 30,
1996. Any further breach of this covenant is not waived.
Except as waived hereby, the Agreement, as the same may have previously
been waived, shall remain unaltered and in full force and effect. This Amendment
shall not be a waiver of any existing default or breach of a covenant unless
specified herein.
AMENDMENT
---------
The paragraph entitled Tangible Net Worth (6.11) is hereby deleted in its
entirety and replaced with the following:
6.11 Tangible Net Worth. Borrower shall maintain, as of the last day of
------------------
each calendar month, a Tangible Net Worth of not less than Two Million Five
Hundred Thousand Dollars ($2,500,000) commencing with calendar month end of
December 31, 1996.
CONDITIONS
----------
The effectiveness of the Amendment is conditioned upon signing Amendment.
Borrower signing below understands and agrees that in amending the
existing Agreement, Bank is relying upon Borrower's representation, warranties,
and agreements, as set forth in the existing Agreement. Except as expressly
modified pursuant to this Amendment, the terms of the existing Agreement remain
unchanged and in full force and effect. Bank's agreement to modifications to the
existing Agreement in no way shall obligate Bank to make any future
modifications to the Agreement. Nothing in the Amendment shall constitute a
satisfaction of the Obligation(s). It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Obligation(s), unless the
party is expressly released by Bank in writing. No maker, endorser, or guarantor
will be released by virtue of this Amendment. The terms of the Paragraph apply
not only to the Amendment, but also to all subsequent Amendments.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
JETFAX, INC. VENTURE LENDING, a division of
Cupertino National Bank and Trust
By: __________________________ By:_______________________________
Title:________________________ Title:____________________________
<PAGE>
EXHIBIT 10.41
JETFAX, INC.
DEALER AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the _____day of _______
1997, by and between JETFAX, INC., a Delaware corporation with its principal
offices at 1376 Willow Road, Menlo Park, CA 94025 U.S.A. ("JetFax"), and
______________________________________ a _______ corporation with its principal
offices at ______________ ______________________________________________ (the
"Dealer").
IN CONSIDERATION of the premises and the mutual covenants herein contained,
JetFax and the Dealer hereby agree as follows:
1. Definitions.
-----------
1.1 For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) "Products" shall mean the equipment and spare parts and associated
peripheral equipment listed on the then current Price List, as amended from time
to time. Products may be changed, abandoned or added by JetFax, at its sole
discretion. JetFax shall be under no obligation to continue the production of
any Products and may make any changes in the design, specifications or materials
of the Products.
(b) "Territory" shall mean that geographic area identified on Exhibit
A.
(c) "Price" shall mean Dealer's purchase price from JetFax for the
Products, as provided in Section 3.
(d) "Price List" shall mean the JetFax NOMDA dealer product and price
list, as amended from time to time by JetFax, prevailing at the time JetFax
accepts a Purchase Order from Dealer.
(e) "Purchase Order" shall mean the written purchase orders by which
Dealer orders the Products, as more particularly described in Section 4.
1.2 Certain other words and phrases are defined or described elsewhere in
this Agreement and/or the Exhibits hereto.
1.3 Wherever used in this Agreement (a) the words "include" or "including"
shall be construed as incorporating, also, "but not limited to" or "without
limitation", (b)the word "day" means a calendar day unless otherwise specified,
(c) the word "party" means each and every person or entity who is a party to
this Agreement, (d) the word "law" (or "laws") means any statute, ordinance,
resolution, regulation, code, rule, order, decree, judgment, injunction, mandate
or other
<PAGE>
legally binding requirements of a government entity, (e) the word "notice" shall
mean notice in writing (whether or not specifically stated) and shall include
notices, consents, approvals and any other written communication contemplated
under this Agreement and (f) the words "business day" shall mean any day other
than Saturday, Sunday or a day on which commercial banks located in San
Francisco, California are required or authorized by law to close.
1.4 Unless specified to the contrary, references to Sections and/or
Exhibits mean the particular Section or Exhibit in or to this Agreement.
References to this Agreement shall include this Agreement as varied or modified
from time to time by the parties. Unless the context otherwise requires, words
in the singular number include the plural and vice versa. All Exhibits hereto
are hereby incorporated herein and made a part hereof.
2. Appointment and Authority of Dealer.
-----------------------------------
2.1 Appointment. Subject to the terms and conditions set forth herein,
-----------
JetFax hereby appoints Dealer as a non-exclusive retail dealer of JetFax
Products in the Territory and Dealer hereby accepts such appointment. Dealer's
appointment pursuant to this Section 2.1 does not constitute an exclusive grant
of any territory or market. JetFax reserves the right to appoint other
authorized dealers and resellers and to make direct sales to anyone, at anytime,
without notice or liability to Dealer.
2.2 Retail Sales; Territorial Limitation. Dealer's appointment is as a
------------------------------------
retail seller to end-users only, and Dealer shall not sell the Products at
wholesale or otherwise for resale without obtaining JetFax's prior written
consent. Dealer shall promote, advertise, market, demonstrate, offer and sell
the Products only in the Territory, unless Dealer receives JetFax's prior
written consent to the contrary.
2.3 Independent Contractor. The relationship of JetFax and Dealer shall be
----------------------
that of independent contractors, and nothing contained in this Agreement shall
constitute the parties as partners, joint venturers, employer and employee, or
otherwise as agents or participants in a joint undertaking. Dealer shall not
create or assume any obligations on behalf of JetFax, and all financial
obligations associated with Dealer's business shall be the sole responsibility
of Dealer. Dealer shall be solely responsible for, and shall indemnify and hold
JetFax free and harmless from, any and all claims, damages or lawsuits
(including attorneys' fees and expenses) arising out of the acts of Dealer, its
employees or its agents.
3. Price; Payment.
--------------
3.1 Price. Dealer's Price for each of the Products shall be as set forth
-----
in the Price List in effect upon JetFax's receipt and acceptance of a Purchase
Order from Dealer. Dealer shall also pay JetFax a handling fee and rush fee (if
applicable) as set forth on the Price List. The difference between the Price
and Dealer's selling price shall be Dealer's sole remuneration for sale of the
Products. Dealer's Price may (but need not) be subject to volume discounts
based on quantity ordered and shipped, and in the event such volume discount is
given with respect to an order but fewer units are actually shipped, Dealer will
pay JetFax for the differential in Price due to the difference between quantity
ordered and quantity actually shipped.
<PAGE>
3.2 Price Modifications. JetFax reserves the right to revise the Price at
-------------------
any time upon JetFax's publishing of revisions to the Price List. Such revised
Prices shall apply to all orders received and accepted after the date of such
revision. In the event of any decrease to the Price of any Product, (a) such
decreased Price shall apply to all Purchase Orders received and accepted but for
which such Products have not been shipped and (b) Dealer shall receive credit
for the difference between the then existing and revised Price for any such
Product which was shipped during the period thirty (30) days prior to the
decrease in Price. Such credit shall in no event give rise to any payment
obligation on the part of JetFax but shall only be satisfied by a credit against
payment obligations of Dealer arising from future orders (and other than the
order under which the Products subject to Price revision were shipped) if any.
3.3 Taxes. The Price does not include any federal, state or local taxes,
-----
duties or assessments that may be applicable to the Products, all of which shall
be paid by Dealer. When JetFax has the legal obligation to collect such taxes,
the appropriate amount shall be added to Dealer's invoice and paid by Dealer, in
accordance with the payment terms set forth in this Agreement, unless Dealer
provides JetFax with a valid tax exemption certificate authorized by the
appropriate taxing authority.
3.4 Delivery Costs. The Price does not include any freight, insurance,
--------------
tariffs, duties and other shipping expenses, special packing expenses, imposts
and similar charges associated with delivery of the Products to Dealer, all of
which shall be the sole responsibility of Dealer.
3.5 Payment. Dealer shall pay JetFax in full for all Products ordered
-------
within thirty (30) days after shipment. Payment for the Products shall be made
by Dealer in U.S. Dollars by cash, or by such other means as may be agreed upon
between the parties. The amount of such payment shall include any additional
charges, taxes, fees and other amounts payable by Dealer under this Agreement.
Dealer shall at all times maintain a reasonable credit standing with JetFax. If
at any time JetFax shall have any reasonable doubt as to Dealer's financial
condition or ability to meet its payment or other obligations with respect to
amounts outstanding hereunder or amounts associated with any orders placed in
accordance with this Agreement, notwithstanding any provision to the contrary
contained elsewhere herein, JetFax may, without liability therefor, decline to
make any further shipment, except upon receipt from Dealer of cash or security
satisfactory to JetFax.
3.6 Security Interest. Dealer hereby grants to JetFax, and JetFax shall
-----------------
retain, a purchase money security interest in the Products and their proceeds
(including accounts receivable), which security interest shall be superior to
any other security interest granted or created by Dealer prior to the date
JetFax receives full payment of the purchase price of the Products and shall be
a first lien on the Products. Dealer hereby agrees to execute and deliver, and
JetFax may file in any appropriate public office, such documents as may be
necessary to perfect JetFax's security interest, including Uniform Commercial
Code financing statements. Without limitation on the foregoing, Dealer hereby
irrevocably appoints JetFax its attorney-in-fact to take any action and execute
any instrument necessary or advisable to perfect the security interest granted
herein. If Dealer fails to execute a financing statement, a copy of this
Agreement may be filed in any appropriate public office in order to protect
JetFax's security interest. Until full payment, Dealer shall segregate those
Products for which payment is due from other products in Dealer's inventory and
shall carry such insurance on the Products as JetFax requires.
<PAGE>
3.7 Late Payment. Dealer shall pay a late charge, at the lesser of one and
------------
one-half percent (1-1/2%) per month or the highest rate permitted by applicable
law, for any amounts which are not paid in full within the time periods provided
until such amounts are paid to JetFax. Late payment is a breach of Dealer's
obligations and is grounds for termination of this Agreement by JetFax. In the
event Dealer shall fail to make payment when and as due of any amounts due
hereunder, notwithstanding any provision to the contrary contained elsewhere
herein, JetFax may, without liability therefor, decline to make any further
shipment, except upon receipt from Dealer of cash or security satisfactory to
JetFax. Exercise by JetFax of its right to decline to make shipment or delivery
pursuant to Section 3.5, this Section 3.7 or Section 4.6 shall not excuse, or be
deemed a waiver of, Dealer's performance under any term of this Agreement,
including the provisions of Section 4.9.
3.8 Right of Set-Off. JetFax shall have the right to apply any amounts
----------------
owed by JetFax (or any person or entity affiliated with JetFax) to Dealer (or
any person or entity affiliated with Dealer) in reduction of any amounts due
JetFax under this Agreement.
4. Purchase Terms; Minimum Purchase.
--------------------------------
4.1 Purchase Orders. All orders for Products submitted by Dealer shall be
---------------
initiated by written purchase orders (each individually a "Purchase Order" and
collectively "Purchase Orders") in accordance with Section 4.2, provided,
however, Dealer may place an order by fax if a confirming Purchase Order is
received by JetFax within ten (10) business days thereafter. No Purchase Order
shall be binding until accepted by JetFax in writing, or upon shipment (but in
the case of acceptance by shipment, only to the extent of the portion of the
order actually shipped). JetFax shall have no liability to Dealer with respect
to Purchase Orders that are not accepted.
4.2 Purchase Order Terms. All Purchase Orders shall state (a) the type,
--------------------
item number and quantity of the Products ordered, (b) the requested delivery
date, (c) the requested location for delivery, (d) the requested method of
delivery and (e) that the Products are for resale. Any other terms in Dealer's
Purchase Order or acknowledgement are considered deleted and of no force or
effect.
4.3 Rescheduling and Cancellations.
------------------------------
(a) Dealer may delay delivery under a Purchase Order, provided that
(i) the request for such delay is received by JetFax at least ten (10) business
days prior to the scheduled shipment date and (ii) the rescheduled shipment date
is not more than thirty (30) days after the scheduled shipment date. Delivery
under a Purchase Order may only be rescheduled once. Any additional
rescheduling or rescheduling beyond the times permitted will be considered to be
a cancellation.
(b) Dealer may cancel all or any part of a Purchase Order provided
that (i) the request for such cancellation is received by JetFax prior to the
scheduled shipment date, (ii) in the event the order was subject to volume
discounts Dealer will pay JetFax for the differential in Price due to the
difference between quantity ordered and quantity actually shipped and (iii)
orders canceled will be subject to a cancellation fee (payable by Dealer to
JetFax immediately upon cancellation and subject to the provisions of Section 3)
calculated as follows:
<PAGE>
<TABLE>
<CAPTION>
Days Before Scheduled Cancellation Fee (% of
Shipment Date that Canceled Purchase Order
Request is Received Amount)
--------------------- -----------------------
<S> <C>
91 or more 0%
90 to 31 5%
30 or less 10%
</TABLE>
4.4 Fulfillment of Orders upon Termination. Upon termination of this
--------------------------------------
Agreement, JetFax may continue to fulfill, subject to the terms of Section 4,
all orders accepted by JetFax prior to the date of termination.
4.5 Allocation; Delivery Time. JetFax will give careful consideration to
-------------------------
each order received from Dealer, but JetFax shall have the unqualified right to
accept or reject each order as received, or to reduce the quantities of Products
which may be ordered by Dealer. Any delivery schedules quoted by JetFax or its
employees (whether orally or in writing) are estimates only. Dealer agrees that
JetFax shall not be liable for any direct or consequential loss or damage caused
by JetFax's failure or inability to make shipment of any Products to Dealer, and
Dealer agrees that its sole remedy if Products are not shipped by the requested
shipment date is to cancel, by notice, the order without cancellation charges.
4.6 Dealer Breach. Notwithstanding any prior acceptance by JetFax of a
-------------
Purchase Order, JetFax shall not be obligated to ship Products if Dealer is in
breach of this Agreement at the time of the scheduled shipment.
4.7 Delivery. All products delivered pursuant to the terms of this
--------
Agreement shall be packed for shipment in JetFax's standard shipping cartons,
marked for shipment to Dealer's address request in the Purchase Order, and
delivered to Dealer or its carrier F.O.B. (as that term is defined in Section
2319 of the California Uniform Commercial Code) JetFax's workplace in Menlo
Park, California. Title to such Products (except for such portions of the
Products as consist of software) and all risk of loss or damage to such Products
shall pass to Dealer at the F.O.B. point. In the absence of specific written
instructions from Dealer, shipment shall be by a carrier selected by JetFax or
as stated on the Price List, but JetFax shall not thereby assume any liability
in connection with the shipment. JetFax may make partial shipments of Products
which will be separately invoiced. Partial shipments will not affect Dealer's
obligation relating to the balance of the Purchase Order.
4.8 Dealer Inspection/Acceptance; Returns. Dealer shall inspect all
-------------------------------------
Products promptly following delivery and, within ten (10) days following
delivery (the "Inspection Period") shall notify the freight forwarder and JetFax
of any claim for damages or shortages. To reject a Product for non-conformity
with the specifications set forth in JetFax's documentation for that Product in
effect at the time of Dealer's Purchase Order for such Products, Dealer shall
notify JetFax, within the Inspection Period, in writing of its rejection and
shall promptly return the rejected Product to JetFax, insured, freight prepaid,
in its original shipping carton. Any Product not properly rejected within the
Inspection Period shall be deemed accepted.
<PAGE>
4.9 Minimum Purchase. Dealer agrees to purchase from JetFax at least the
----------------
aggregate quarterly minimum amounts specified on Exhibit B. In the event that
Dealer does not satisfy such total
minimum requirements for any quarterly period, then JetFax shall be entitled,
after ten (10) days written notice to Dealer, to immediately terminate this
Agreement if such failure is not remedied within such 10-day notice period.
5. Additional Obligations of Dealer.
--------------------------------
5.1 Promotion. Dealer shall, at its own expense, use its best efforts to
---------
promote the retail sale of the Products in the Territory and to develop, promote
and maintain the goodwill and reputation of JetFax.
5.2 Dealer Inventory. Dealer shall at all times maintain inventories of
----------------
the Products, including an adequate supply of documentation and software to use
with the Products, sufficient to meet the demand of Dealer's customers without
unreasonable delays in deliveries to such customers.
5.3 Finances and Personnel.Dealer shall maintain a net worth and working
----------------------
capital sufficient, in JetFax's reasonable judgment, to allow Dealer to perform
fully and faithfully its obligation under this Agreement. Dealer shall devote
financial resources and technically qualified sales and technical personnel
sufficient to market, service and support the Products in the Territory and as
otherwise necessary to carry out the obligations and responsibilities of Dealer
under this Agreement.
5.4 Sales Reporting. Dealer shall, at its own expense and consistent with
---------------
JetFax sales policies, (a) assist JetFax in assessing customer requirements for
the Products in terms of quality, design, functional capability and other
features, (b) submit market research information, as reasonably requested by
JetFax, regarding competition and changes in the market within the Territory and
(c) provide JetFax a written report by the twentieth (20th) day after the end of
each calendar quarter showing, for such quarter, the monthly current inventory
levels of Products carried by Dealer and Dealer's sales of Products in the
aggregate and by each Product.
5.5 Marketing Policies, Procedures and Materials. Dealer's marketing
--------------------------------------------
policies, procedures and materials (including advertisements) shall at all times
meet JetFax's reasonable standards. JetFax shall have the right, at JetFax's
option, to require JetFax's prior written consent for all Dealer advertising
using any JetFax Trademark (as defined below) and/or Dealer logo prior to
publication.
5.6 Service. Dealer shall establish and maintain suitable facilities for
-------
the service and repair of all Products in the Territory, whether sold by Dealer
or not, and shall use its best efforts to provide effective service at
reasonable rates with respect to all such Products. Dealer shall stock an
adequate amount of spare parts to perform such service. Dealer shall comply
with all rules and regulations issued by JetFax in relation to service of
Products.
5.7 General Conduct. Dealer agrees (a) to conduct business in a manner
---------------
that reflects favorably at all times on the Products and the good name, goodwill
and reputation of JetFax, (b) to comply with all applicable federal, state and
local laws, (c) to maintain liability and other insurance
<PAGE>
sufficient to protect JetFax against claims arising out of or relating to
Dealer's conduct in the sales, installation or service of JetFax Products, (d)
to avoid deception, misleading or unethical practices that are or might be
detrimental to JetFax or the public, including disparagement of JetFax or its
Products, (e) not to publish, employ or cooperate in the use of any misleading
or deceptive advertising material and (f) to make no representations, warranties
or guarantees to customers or to the trade with respect to the specifications,
features or capabilities of Products that are inconsistent with the literature
distributed by JetFax. JetFax may from time to time develop reasonable, non-
discriminatory criteria and policies with respect to Dealer obligations and
Dealer shall implement such criteria and policies.
5.8 Effect. Without limitation to any other right or remedy hereunder,
------
Dealer's failure to comply with any of the obligations set forth in Sections 5.1
through 5.7 shall constitute a material breach of this Agreement, and shall give
JetFax the right to terminate this Agreement pursuant to the second and third
sentences of Section 12.2.
6. Additional Obligations of JetFax.
--------------------------------
6.1 Product Materials and Parts. JetFax shall provide Dealer with
---------------------------
marketing and technical information concerning the Products, service manuals,
spare parts and other Product data and materials, as described and for the
prices listed on the then current Price List, as amended from time to time.
6.2 Cooperative Advertising. JetFax may, at JetFax's sole option, offer
-----------------------
cooperative advertising or other incentives to Dealer in connection with
Dealer's promotion of the Products. Such promotion shall be subject to such
terms and qualification requirements as specified by JetFax (which may include
the prior written approval of promotional materials). Any agreement by JetFax
to provide any such promotion once shall not be deemed to imply agreement for
any future or continuing promotion beyond the scope of such promotion. JetFax
further reserves the right to modify or cancel such promotion immediately upon
delivery of written notice to Dealer.
7. Warranty To Dealer's Customers.
------------------------------
7.1 Standard Limited Warranty. Dealer shall pass on to its customers
-------------------------
JetFax's standard limited warranty or warranties for the Products, as such
warranty or warranties may be amended from time to time by JetFax. JetFax shall
not be liable for any other warranties or similar obligation made or given by
Dealer. A copy of JetFax's standard limited warranty or warranties in use at
the time of this Agreement are attached as Exhibit C.
7.2 Limitation. EXCEPT FOR THE EXPRESS WARRANTY OR WARRANTIES ACCOMPANYING
----------
DELIVERY OF PRODUCTS AND REFERRED TO IN SECTION 7.1, JETFAX GRANTS NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, REGARDING THE PRODUCTS,
THEIR FITNESS FOR ANY PURPOSE, THEIR QUALITY, THEIR MERCHANTABILITY OR
OTHERWISE. IN NO EVENT SHALL JETFAX BE LIABLE FOR THE COST OF PROCUREMENT OF
SUBSTITUTE GOODS BY THE CUSTOMER OR FOR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL
DAMAGES FOR BREACH OF WARRANTY.
<PAGE>
8. Limitation Of Liability.
-----------------------
8.1 No Consequential Damages. JETFAX SHALL NOT BE LIABLE TO DEALER OR
------------------------
TO ANY OTHER PERSON FOR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES,
INCLUDING INJURY OR DAMAGE TO BUSINESS, EARNINGS, PROFITS OR GOODWILL SUFFERED
BY DEALER OR ANY OTHER PERSON AND CAUSED DIRECTLY OR INDIRECTLY BY THE PRODUCTS
SOLD PURSUANT TO THIS AGREEMENT, UNFILLED ORDERS OR OTHERWISE, EVEN IF JETFAX
SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF THE SAME.
8.2 Termination. In the event of termination by either party in accordance
-----------
with any of the provisions of this Agreement, JetFax shall not be liable to
Dealer or any other person, because of such termination, for compensation,
reimbursement or damages on account of the loss of prospective profits or
anticipated sales or on account of expenditures, inventory, investments, leases
or commitments in connection with the business or goodwill of Dealer or any
other person. Termination shall not, however, relieve either party of
obligations incurred prior to termination.
9. Indemnity.
---------
9.1 Dealer. Dealer shall be solely responsible for, and shall indemnify
------
and hold JetFax free and harmless from, any and all claims, damages or lawsuits
(including attorneys' fees and expenses) arising out of the acts of Dealer, its
employees or agents.
9.2 Patent, Copyright and Trademark Indemnity.
-----------------------------------------
(a) JetFax shall defend, or at its option settle, at its own expense,
any claim, suit or proceeding brought against Dealer on the issue of
infringement of any United States patent, copyright or trademark by the
Products, subject to the limitations herein. JetFax shall be relieved of the
foregoing obligation unless Dealer (i) notifies JetFax promptly in writing of
such claim, suit or proceeding, and (ii) gives JetFax information and assistance
with respect to any such claim, suit or proceeding. If the Products, or any
part thereof, are adjudicatively determined to be, or in JetFax's sole opinion
may become, the subject of any claim, suit or proceeding for infringement of any
United States patent, copyright or trademark, of if the sale or use of the
Products, or any part thereof, is enjoined, then JetFax may, at its option and
expense, (i) procure for Dealer and its customers the right to sell or use the
Products under such patent, copyright or trademark, (ii) replace the Products
with other suitable Products or parts, (iii) suitably modify the Products or
(iv) remove the Products and refund the Price paid therefor by Dealer, if any,
less a reasonable sum for use and damage. JetFax shall not be liable for any
costs or expenses incurred without its prior written authorization.
(b) Notwithstanding the provisions of Section 9.2(a), JetFax assumes
no liability for (i) infringement of patent claims covering completed equipment
or any assembly, circuit, combination, method or process in which any of the
Products may be used but not covering the Products standing alone, (ii) any
trademark infringement involving any marking or branding not applied by JetFax
or involving any marking or branding applied at the request of Dealer or (iii)
the modification of the
<PAGE>
Products, or any part thereof, unless such modification was made by JetFax.
(c) The foregoing provisions of Section 9.2 state the entire
liability and obligations of JetFax and the exclusive remedy of Dealer with
respect to any alleged patent, copyright or trademark infringement by the
Products or any part thereof.
10. Property Rights And Confidentiality.
-----------------------------------
10.1 Property Rights. Dealer agrees that JetFax owns all right, title, and
---------------
interest in the Products subject to this Agreement and in all of JetFax's
patents, trademarks, trade names, inventions, copyrights, know-how, and trade
secrets relating to the design, manufacture, operation or service of the
Products. The use by Dealer of any of these property rights is authorized only
for the purposes and to the extent set forth in this Agreement, and upon
termination of this Agreement for any reason such authorization shall cease.
10.2 No Right to Manufacture or Copy. The Products are offered for sale and
-------------------------------
are sold by JetFax subject in every case to the condition that such sale does
not convey any license, expressly or by implication, to manufacture, duplicate
or otherwise copy or reproduce any of the Products. Without JetFax's prior
written consent Dealer shall not (a) alter, reverse engineer, decompile or
disassemble the Products or (b) reproduce any components of the Products.
Dealer shall take appropriate steps with its customers, as JetFax may request,
to inform them of and assure compliance with the restrictions contained in this
Section 10.2.
10.3 Software License. Any software provided with the Products sold
----------------
hereunder, including any subsequent improvements, updates, modifications or
additions, are furnished to Dealer under a non-transferrable, non-exclusive
license for use and sub-license solely in connection with the Products. Dealer
shall not provide or otherwise make available the software or any part thereof
in any form to any third party, except that Dealer may license software to any
purchasers of any Product. Title to and ownership of the software, as well as
all maintenance documentation and user documentation, shall at all times remain
with JetFax.
10.4 Confidentiality. Dealer acknowledges that by reason of its
---------------
relationship to JetFax hereunder it may have access to certain information and
materials concerning JetFax's business, plans, customers, technology and
products that is confidential and of substantial value to JetFax, which value
would be impaired if such information were disclosed to third parties. Dealer
agrees that it will not reveal to third parties or use in any way for its own
account any such confidential information of JetFax. Upon request by Dealer,
JetFax shall advise whether or not it considers any particular information or
materials to be confidential. Dealer shall not publish any technical
description of the Products beyond the description published by JetFax.
11. Trademarks And Trade Names. During the term and subject to the provisions
--------------------------
of this Agreement (including Section 5.5), Dealer shall have the right to
indicate to the public that it is an authorized dealer of JetFax Products and to
advertise (within the Territory) such Products under the trademarks, marks, and
trade names that JetFax may adopt from time to time ("JetFax Trademarks").
Dealer shall not alter
<PAGE>
or remove any JetFax Trademark applied to the Products at the factory or
otherwise by JetFax. Nothing herein shall grant to Dealer any right, title or
interest in JetFax Trademarks. At no time during or after the term of this
Agreement shall Dealer challenge or assist others to challenge JetFax Trademarks
or the registration thereof or attempt to register any trademarks, marks or
trade names confusingly similar to those of JetFax. All representations of
JetFax Trademarks that Dealer intends to use shall first be submitted to JetFax
for approval of design, color, and other details or shall be exact copies of
those used by JetFax. If any JetFax Trademarks are to be used in conjunction
with another trademark on or in relation to the Products, then the JetFax
Trademark shall be presented equally legibly, equally prominently, and/or
greater size than the other but nevertheless separated from the other so that
each appears to be a mark in its own right, distinct from the other mark.
12. Term and Termination.
--------------------
12.1 Term. This Agreement shall be effective as of the date first written
----
above and shall remain in effect for an initial term of two (2) years from such
date, unless sooner terminated as provided herein. At the end of the term, this
Agreement shall terminate automatically without notice unless extended by mutual
written consent of the parties.
12.2 Termination. This Agreement may be terminated by either party for any
-----------
reason, without incurring any liability therefore, by giving the other party
written notice ninety (90) days in advance. If either party defaults in the
performance of any material provision of this Agreement, then the nondefaulting
party may give notice to the defaulting party that if the default is not cured
within thirty (30) days the Agreement will be terminated. If the nondefaulting
party gives such notice and the default is not cured during such 30-day period,
then the Agreement automatically shall terminate at the end of that period.
This Agreement shall terminate, without notice, in the event either party
becomes insolvent or unable to pay its debts when due or acknowledges in writing
its insolvency or inability to pay its debts or makes an assignment for the
benefit of its creditors or files a petition in any bankruptcy, winding-up or
reorganization proceeding of which it is subject or has a petition filed against
it under any bankruptcy or other law for the relief of debtors.
12.3 Return of Materials. All trademarks, trade names, patents, copyrights,
-------------------
designs, drawings, formulas or other data, photographs, samples, literature, and
sales aids of every kind shall remain the property of JetFax. Within thirty
(30) days after the termination of this Agreement, Dealer shall prepare all such
items in its possession for shipment, as JetFax may direct, at JetFax's expense.
Dealer shall not make or retain any copies of any confidential items or
information which may have been entrusted to it. Effective upon the termination
of this Agreement, Dealer shall cease to use all trademarks, marks, and trade
names of JetFax.
12.4 Survival of Terms. The provisions of Sections 2.3, 3.6, 4.4, 4.6, 7,
-----------------
8, 9.1, 10, 12.3, 12.4 and the relevant portions of Section 13 shall survive the
termination of this Agreement for any reason.
13. General Provisions.
------------------
13.1 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall
<PAGE>
be sent by telex, fax, or prepaid registered certified mail, return receipt
requested, addressed to the other party at the address shown at the beginning of
this Agreement or at such other address for which such party gives notice
hereunder. Such notice shall be deemed to have been given upon deposit, if by
mail, and if by telex or fax, shall be accompanied by a notice by mail within
five (5) days.
13.2 Assignments/Successors. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties, their successors and assigns. Dealer may not
transfer or assign its rights or obligations under this Agreement, directly or
indirectly, without JetFax's prior written consent.
13.3 Governing Law and Jurisdiction. This Agreement shall be governed by
------------------------------
and construed under the laws of the State of California without regard to the
choice of law provisions thereof, except for the security interest in the
Products retained by JetFax under Section 3.6 which shall be governed by the
laws of the Dealer's jurisdiction. The federal and state courts of California
shall have exclusive jurisdiction to adjudicate any dispute arising out of this
Agreement. Dealer hereby expressly consents to (a) the personal jurisdiction of
the federal and state courts of California, (b) service of process being
effected upon it by registered mail sent to the address set forth at the
beginning of this Agreement and (c) the uncontested enforcement of a final
judgment from such court in any other jurisdiction wherein Dealer or any of its
assets are present.
13.4 Entire Agreement; Amendments; Waiver. This Agreement sets forth the
------------------------------------
entire agreement and understanding of the parties relating to the subject matter
hereof and supersedes all prior discussions and negotiations. No modification
of or amendment to this Agreement shall be effective unless made in writing
signed by the party to be charged. Any waiver under this Agreement must be in
writing, and any waiver of one event shall not be construed as a waiver of
subsequent events.
13.5 Force Majeure. Nonperformance of either party shall be excused to the
-------------
extent that performance is rendered impossible by strike, fire, flood,
governmental acts or orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the control and not caused by the
negligence of the nonperforming party.
13.6 Severability. If any provision of this Agreement is held to be invalid
------------
by a court of competent jurisdiction, then the remaining provisions shall
nevertheless remain in full force and effect. The parties agree to renegotiate
in good faith any term held invalid and to be bound by the mutually agreed
substitute revisions.
13.7 Expenses and Costs. The prevailing party in any action brought by one
------------------
party to this Agreement against the other and arising out of the interpretation
or performance of this Agreement, including actions to collect amounts owed
hereunder, shall be entitled, in addition to any other applicable rights and
remedies, to reimbursement for its expenses, including court costs and
attorneys' fees and expenses.
13.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
JETFAX, INC. ______________________________
Dealer
By: _________________________ By: _________________________
Name: Allen Jones Name:
Title: CFO/JetFax, Inc. Title:
<PAGE>
EXHIBIT A
---------
TERRITORY
Territory:
----------
<PAGE>
EXHIBIT B
---------
MINIMUM PURCHASES
Quarterly minimum purchases:
----------------------------
<PAGE>
EXHIBIT C
---------
JETFAX
STANDARD LIMITED WARRANTY
FOR
JETFAX 4
Subject to the terms hereof, JetFax, Inc. ("JetFax") warrants to the
original retail user ("User") all parts of the JetFax 4 ("Product") to be free
of defect in material and workmanship for a period of one (1) year or 12,000
prints, whichever comes first, from the date of installation of the Product by
an authorized JetFax 4 dealer. JetFax's sole obligation under this warranty
shall be the repair, adjustment or replacement, at JetFax's option, of any
defective Product parts.
This warranty shall not apply to any defect or defects resulting from any
improper or inadequate maintenance by the User, any unauthorized modification or
misuse, any operation outside of the environmental specification for the Product
or any improper site preparation or maintenance as described in the JetFax 4
User Manual.
The foregoing is the only warranty by JetFax with respect to the Product
and may only be modified or amended by a written document sighed by an
authorized officer of JetFax.
THE EXPRESS WARRANTY SET FORTH ABOVE IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE EXPRESS
OBLIGATION SET FORTH ABOVE IS IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF
JETFAX FOR DAMAGES, INCLUDING WITHOUT LIMITATION FOR ANY LOSS, DAMAGE OR INJURY,
DIRECT OR CONSEQUENTIAL, ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE
OR PERFORMANCE OF THE PRODUCT, AND IT IS AGREED THAT REPAIR, ADJUSTMENT OR
REPLACEMENT AS SET FORTH ABOVE IS THE USER'S SOLE REMEDY FOR SUCH LOSS, DAMAGE
OR INJURY. USER FURTHER AGREES THAT JETFAX WILL NOT BE LIABLE FOR ANY LOST
PROFITS, LOSS OF BUSINESS OR THE LIKE OR ANY CLAIM OR DEMAND AGAINST SUCH USER
BY ANY OTHER PERSON OR ENTITY. IN NO EVENT WILL JETFAX BE LIABLE FOR ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES EVEN IF JETFAX SHALL HAVE BEEN
ADVISED OF THE POSSIBILITY OF THE SAME.
THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY HAVE OTHER
RIGHTS WHICH VARY FROM STATE TO STATE.
<PAGE>
EXHIBIT C
---------
JETFAX
STANDARD LIMITED WARRANTY
FOR
CONCORDE
Subject to the terms hereof, JetFax, Inc. ("JetFax") warrants to the
original retail user ("User") all parts of the Concorde ("Product") to be free
of defect in material and workmanship for a period of ninety (90) days or 9,000
prints, whichever comes first, from the date of installation of the Product by
an authorized JetFax Concorde dealer. JetFax's sole obligation under this
warranty shall be the repair, adjustment or replacement, at JetFax's option, of
any defective Product parts.
This warranty shall not apply to any defect or defects resulting from any
improper or inadequate maintenance by the User, any unauthorized modification or
misuse, any operation outside of the environmental specification for the Product
or any improper site preparation or maintenance as described in the Concorde
User Manual.
The foregoing is the only warranty by JetFax with respect to the Product
and may only be modified or amended by a written document signed by an
authorized officer of JetFax.
THE EXPRESS WARRANTY SET FORTH ABOVE IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE EXPRESS
OBLIGATION SET FORTH ABOVE IS IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF
JETFAX FOR DAMAGES, INCLUDING WITHOUT LIMITATION FOR ANY LOSS, DAMAGE OR INJURY,
DIRECT OR CONSEQUENTIAL, ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE
OR PERFORMANCE OF THE PRODUCT, AND IT IS AGREED THAT REPAIR, ADJUSTMENT OR
REPLACEMENT AS SET FORTH ABOVE IS THE USER'S SOLE REMEDY FOR SUCH LOSS, DAMAGE
OR INJURY. USER FURTHER AGREES THAT JETFAX WILL NOT BE LIABLE FOR ANY LOST
PROFITS, LOSS OF BUSINESS OR THE LIKE OR ANY CLAIM OR DEMAND AGAINST SUCH USER
BY ANY OTHER PERSON OR ENTITY. IN NO EVENT WILL JETFAX BE LIABLE FOR ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES EVEN IF JETFAX SHALL HAVE BEEN
ADVISED OF THE POSSIBILITY OF THE SAME.
THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY HAVE OTHER
RIGHTS WHICH VARY FROM STATE TO STATE.
<PAGE>
EXHIBIT C
---------
JETFAX
STANDARD LIMITED WARRANTY
FOR
JETFAX M5
Subject to the terms hereof, JetFax, Inc. ("JetFax") warrants to the
original retail user ("User") all parts of the JetFax M5 ("Product") to be free
of defect in material and workmanship for a period of ninety (90) days from the
date of installation of the Product by an authorized JetFax dealer. JetFax's
sole obligation under this warranty shall be the repair, adjustment or
replacement, at JetFax's option, of any defective Product parts.
This warranty shall not apply to any defect or defects resulting from any
improper or inadequate maintenance by the User, any unauthorized modification or
misuse, any operation outside of the environmental specification for the Product
or any improper site preparation or maintenance as described in the Jetfax M5
User Manual.
The foregoing is the only warranty by JetFax with respect to the Product
and may only be modified or amended by a written document signed by an
authorized officer of JetFax.
THE EXPRESS WARRANTY SET FORTH ABOVE IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE EXPRESS
OBLIGATION SET FORTH ABOVE IS IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF
JETFAX FOR DAMAGES, INCLUDING WITHOUT LIMITATION FOR ANY LOSS, DAMAGE OR INJURY,
DIRECT OR CONSEQUENTIAL, ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE
OR PERFORMANCE OF THE PRODUCT, AND IT IS AGREED THAT REPAIR, ADJUSTMENT OR
REPLACEMENT AS SET FORTH ABOVE IS THE USER'S SOLE REMEDY FOR SUCH LOSS, DAMAGE
OR INJURY. USER FURTHER AGREES THAT JETFAX WILL NOT BE LIABLE FOR ANY LOST
PROFITS, LOSS OF BUSINESS OR THE LIKE OR ANY CLAIM OR DEMAND AGAINST SUCH USER
BY ANY OTHER PERSON OR ENTITY. IN NO EVENT WILL JETFAX BE LIABLE FOR ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES EVEN IF JETFAX SHALL HAVE BEEN
ADVISED OF THE POSSIBILITY OF THE SAME.
THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY HAVE OTHER
RIGHTS WHICH VARY FROM STATE TO STATE.
<PAGE>
EXHIBIT 11.1
JETFAX, INC.
COMPUTATION OF LOSS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
DEC. 31, 1996
-------------
<S> <C>
Weighted average shares outstanding:
Common Stock................................................... 982,025
Common Stock equivalents issued pursuant to SAB 83(1).......... 1,033,431
Convertible Preferred Stock (2)................................ 6,293,978
Common Stock issuable upon conversion of cumulative dividends
on Series F Preferred Stock................................... 143,886
----------
Common and common equivalent shares used in computing pro forma
loss per share................................................ 8,453,320
==========
Net loss applicable to common stockholders:
Net loss....................................................... $ (1,042)
Less cumulative dividends on Series P Redeemable Preferred
Stock......................................................... 116
----------
Net loss applicable to common stockholders..................... $ (1,158)
==========
Pro forma net loss per common and equivalent share............... $ (0.14)
==========
</TABLE>
- --------
(1) Pursuant to Securities and Exchange Commission's Staff Accounting Bulletin
Number 83, all securities issued during the period from March 20, 1996
through the date of the initial filing of the Registration Statement
(March 21, 1997) are included in the calculation of common stock
equivalents as if outstanding for all periods prior to the initial public
offering, even if anti-dilutive. The common stock equivalents of options
and warrants are computed under the treasury stock method, using the
estimated initial public offering price of $9.00 per share and applicable
exercise prices.
(2) The convertible Preferred Stock converts to common stock upon the closing
of the initial public offering contemplated by this Registration
Statement. The pro forma loss per share is computed as if the conversion
had occurred at the beginning of the period.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JETFAX,
INC. FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 106
<SECURITIES> 0
<RECEIVABLES> 2,830
<ALLOWANCES> 396
<INVENTORY> 2,339
<CURRENT-ASSETS> 4,940
<PP&E> 1,154
<DEPRECIATION> 539
<TOTAL-ASSETS> 6,121
<CURRENT-LIABILITIES> 2,978
<BONDS> 0
2,726
63
<COMMON> 10
<OTHER-SE> 146
<TOTAL-LIABILITY-AND-EQUITY> 6,121
<SALES> 10,205
<TOTAL-REVENUES> 12,862
<CGS> 8,495
<TOTAL-COSTS> 8,495
<OTHER-EXPENSES> 5,317
<LOSS-PROVISION> 106
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (937)
<INCOME-TAX> 105
<INCOME-CONTINUING> (1,042)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,042)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> 0
</TABLE>
