<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1997
REGISTRATION NO. 333-23763
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
TO
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
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value................. 4,025,000 shares $10.00 $40,250,000 $12,197
- ---------------------------------------------------------------------------------
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</TABLE>
(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.
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<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 JUNE 5, 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's Common Stock has been approved
for quotation on The Nasdaq Stock Market's National Market (the "Nasdaq
National Market") under the symbol "JTFX."
SEE "RISK FACTORS" ON PAGES 6 TO 16 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.
- --------------------------------------------------------------------------------
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<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>
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(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 June ,
1997.
PRUDENTIAL SECURITIES INCORPORATED COWEN & COMPANY
June , 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 491,317 shares of Common Stock upon the automatic net
exercise in full of certain warrants, (iv) the issuance of 144,623 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. Certain terms not otherwise defined herein are
defined in the "Glossary."
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, effective in January 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 third 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.................................... 10,693,470 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.
Nasdaq National Market Symbol................ JTFX
</TABLE>
- --------
(1) Excludes (i) 1,160,635 shares of Common Stock issuable upon exercise of
stock options outstanding at March 31, 1997 under the Company's stock
option plans with a weighted average exercise price of $1.22 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 March 31, 1997 with an exercise price
of $2.75 per share and (iv) 100,000 shares of Common Stock issuable upon
exercise of warrants outstanding at March 31, 1997 with an exercise price
of $1.75 per share. 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 QUARTER ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31, MARCH 31,
------------------------------------- ------------------ ----------------
1993 1994 1995 1996 1995 1996 (1) 1996 1997(1)
-------- -------- ------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Product............... $ 4,542 $ 6,086 $ 6,413 $ 11,143 $ 7,336 $ 10,205 $ 3,807 $ 4,250
Development fees...... -- 75 1,200 699 466 1,416 233 743
Software and
technology license
fees................. -- -- 139 1,345 667 1,241 678 223
-------- -------- ------- -------- -------- -------- ------- -------
Total revenues....... 4,542 6,161 7,752 13,187 8,469 12,862 4,718 5,216
Costs and expenses:
Cost of product
revenues............. 3,695 5,486 5,249 11,102 7,793 8,495 3,309 2,979
Research and
development.......... 1,397 1,311 1,118 1,249 919 1,709 330 1,477(2)
Selling and marketing. 633 1,303 1,325 2,710 1,745 2,785 965 972
General and
administrative....... 1,019 615 746 750 500 823 250 352
-------- -------- ------- -------- -------- -------- ------- -------
Total costs and
expenses............ 6,744 8,715 8,438 15,811 10,957 13,812 4,854 5,780
-------- -------- ------- -------- -------- -------- ------- -------
Loss from operations... (2,202) (2,554) (686) (2,624) (2,488) (950) (136) (564)
Interest and other
income (expense)...... (18) (5) (68) (270) (192) 13 (78) (27)
-------- -------- ------- -------- -------- -------- ------- -------
Loss before
extraordinary item and
income taxes.......... (2,220) (2,559) (754) (2,894) (2,680) (937) (214) (591)
Provision for income
taxes................. -- -- -- 35 35 105 -- 45
-------- -------- ------- -------- -------- -------- ------- -------
Loss before
extraordinary item.... (2,220) (2,559) (754) (2,929) (2,715) (1,042) (214) (636)
Extraordinary item (3). -- -- 349 -- -- -- -- --
-------- -------- ------- -------- -------- -------- ------- -------
Net loss............... $ (2,220) $ (2,559) $ (405) $ (2,929) $ (2,715) $ (1,042) $ (214) $ (636)
======== ======== ======= ======== ======== ======== ======= =======
PRO FORMA DATA (4):
Net loss per share..... $ (0.14) $ (0.08)
======== =======
Common and common
equivalent shares used
in computing net loss
per share............. 8,454 8,474
======== =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED (5)
------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................................... $ 1,564 $ 19,867
Total assets.................................................................. 8,020 24,979
Long-term note payable, less current portion.................................. 181 --
Redeemable preferred stock.................................................... 2,764 --
Total stockholders' equity.................................................... 101 21,319
</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 and the 13-week period from
January 5, 1997 to April 5, 1997 is referred to herein as the quarter ended
March 31, 1997.
(2) Includes $551,000 of expenses related to the acquisition of the Crandell
Group, Inc. by the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(3) Represents a gain on exchange of stockholder debt and receivables for notes
payable. See Note 2 of Notes to Financial Statements.
(4) 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.
(5) 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 491,317 shares of Common Stock upon the automatic net exercise
in full of certain warrants upon the closing of the Offering, (iv) the
issuance of 144,623 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, $1.0 million and $636,000 for the
fiscal years ended March 31, 1995 and March 31, 1996, the nine months ended
December 31, 1996 and the quarter ended March 31, 1997, respectively. The
Company's historical losses and certain preferred stock dividends have
resulted in an accumulated deficit of approximately $14.6 million as of March
31, 1997. 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 third 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%, 21%
and 25% of the Company's total revenues in the fiscal year ended March 31,
1996, the nine months ended December 31, 1996 and the quarter ended March 31,
1997, respectively. Sales to A. Messerli AG ("Messerli"), one of the Company's
office equipment dealers located in Switzerland, accounted for 11%, 10% and 4%
of the Company's total revenues in the fiscal year ended March 31, 1996, the
nine months ended December 31, 1996 and the quarter ended March 31, 1997,
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 18%, 16%, 17% and 17% of the
Company's total revenues in the fiscal years ended March 31, 1995 and March
31, 1996, the nine months ended December 31, 1996 and the quarter ended
March 31, 1997, respectively. Revenues from Xerox accounted for 17%, 11%, 6%
and less than 1% of the Company's total revenues in the fiscal years ended
March 31, 1995 and March 31, 1996, the nine months ended December 31, 1996 and
the quarter ended March 31, 1997, respectively. In the quarter ended March 31,
1997, Hewlett-Packard accounted for 11% of the Company's total revenues, and
was the only OEM customer that accounted for greater than 10% of the Company's
total revenues in such period. 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,
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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, which
incorporated the Company's embedded system technology, as Xerox has ceased
production of that model due to the product reaching the end of its life cycle
and pricing pressures from competitors' products. 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%, 79% and 81% of the Company's total
revenues in the fiscal years ended March 31, 1995 and March 31, 1996, the nine
months ended December 31, 1996 and the quarter ended March 31, 1997,
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. Sales of the JetFax M5 (which
began shipping commercially in June 1995) and related consumables and upgrades
accounted for 48%, 64% and 71% of the Company's total revenues in the fiscal
year ended March 31, 1996, the nine months ended December 31, 1996 and the
quarter ended March 31, 1997, respectively. 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."
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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
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
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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 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
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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
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."
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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 key
person life insurance policies on Rudy Prince and Lon Radin. 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, 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%, 26% and 24% of the Company's
total revenues for the fiscal years ended March 31, 1995 and March 31, 1996,
the nine months ended December 31, 1996 and the quarter ended March 31, 1997,
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. Through
the closing of the Offering, the Company will incur certain significant
additional charges relating to the Crandell Acquisition. Based upon an assumed
closing date of June 30, 1997 and an assumed initial public offering price of
$9.00 per share, the Company anticipates such additional charges to be
approximately $1.2 million with no related tax benefit due to the Company's
operating losses. Such charges relate to noncash compensation of $200,000 from
a variable warrant issued to the selling stockholder/employees of the Crandell
Group and a payment of approximately $1.0 million required to be paid 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.
13
<PAGE>
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
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 10,693,470 shares of Common Stock outstanding
(11,218,470 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 7,193,470 shares of
Common Stock are "restricted securities" as that term is defined by Rule 144
promulgated under the Securities Act. Of such shares, 10,000 shares will be
eligible for sale in the public market immediately following commencement of
the Offering and 7,120,517 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, 7,018,708 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 110,000 shares are subject
to 90 day lock-up agreements with the Company and stockholders holding an
aggregate of 53,762 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 1,319,573 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,
7,120,517 shares will be eligible for immediate sale under Rule 144 or Rule
701 and 1,319,573 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 62,953 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
14
<PAGE>
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 7,367,549 shares of Common Stock of the Company
which 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."
BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS. The current stockholders
of the Company will receive certain benefits as a result of the Offering. The
Offering is expected to result in the creation of a public market for the sale
of shares held by the Company's stockholders. In addition, assuming an initial
public offering price of $9.00 per share, the Selling Stockholders will
receive, in the aggregate, net proceeds (after deducting underwriting
discounts and commissions) of $6.3 million from the sale of their shares in
the Offering. Each of the Selling Stockholders will realize a gain for each
share sold by such Selling Stockholder in the Offering equal to the difference
between $8.37 (which is the assumed initial public offering price per share,
net of underwriting discounts and commissions) and the acquisition cost of
such Selling Stockholder's shares (which purchase prices averaged
approximately $1.70 per share for all outstanding shares of Common Stock).
Each current stockholder of the Company will also receive an unrealized gain
for each share of Common Stock held by such stockholder upon completion of the
Offering equal to the price at which such share of Common Stock may be sold in
the public market less the acquisition cost of such share. The shares of
Common Stock held by the current stockholders upon completion of the Offering
(excluding shares subject to options outstanding under the Company's 1995 Plan
as of March 31, 1997 and shares issuable upon the exercise of outstanding
warrants as of March 31, 1997) will have an aggregate value of approximately
$64.7 million, assuming an initial public offering price of $9.00 per share,
which represents approximately $52.5 million in appreciation in the value of
such shares (based on an average price of $1.70 per share for all outstanding
shares of Common Stock). The shares of Common Stock which will be issued upon
the automatic net exercise in full of certain warrants held by certain
stockholders upon the closing of the Offering will have an aggregate value of
approximately $4.4 million, assuming an initial public offering price of $9.00
per share. Furthermore, of the net proceeds to be received by the Company from
the sale of the shares of Common Stock offered hereby, approximately $1.3
million will be used to pay the Company's obligations to the Crandell Group
and approximately $2.8 million will be used for payment to Ailicec
International Enterprises Ltd. in redemption of all outstanding shares of
Series P Redeemable Preferred Stock and accrued dividends thereon. See "Use of
Proceeds" and "Dilution."
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
15
<PAGE>
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.
16
<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 third 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.
17
<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
$2,764,000 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 ($1,244,000 at March
31, 1997) with a portion of the net proceeds of the Offering. The interest
rate on the line of credit is the bank's prime rate (8.5% as of March 31,
1997) 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.
18
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1997: (i) the unaudited
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 491,317 shares of Common
Stock upon the automatic net exercise in full of certain warrants at $2.15 per
share and the issuance of 144,623 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>
MARCH 31, 1997
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable (1)............................. $ 181 $ 181 $ --
-------- -------- --------
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.................................... 2,764 2,764 --
-------- -------- --------
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; 1,013,552
shares outstanding, actual; 7,943,470
shares outstanding, pro forma; 10,693,470
shares outstanding, as adjusted (2)........ 10 79 107
Additional paid-in capital.................. 14,670 14,664 36,854
Accumulated deficit......................... (14,642) (14,642) (15,642)
-------- -------- --------
Total stockholders' equity................... 101 101 21,319
-------- -------- --------
Total capitalization..................... $ 3,046 $ 3,046 $ 21,319
======== ======== ========
</TABLE>
- --------
(1) See Note 7 of Notes to Financial Statements.
(2) Excludes (i) 1,160,635 shares of Common Stock issuable upon exercise of
stock options outstanding at March 31, 1997 under the Company's stock
option plans with a weighted average exercise price of $1.22 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 March 31, 1997 with an exercise price
of $2.75 per share and (iv) 100,000 shares of Common Stock issuable upon
exercise of warrants outstanding at March 31, 1997 with an exercise price
of $1.75 per share. See "Management--Incentive Stock Plans," "Certain
Transactions" and Note 10 of Notes to Financial Statements.
19
<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 March 31, 1997 was $(361,000) or
$(0.05) 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 March 31, 1997. Without taking into account any changes in
net tangible book value subsequent to March 31, 1997, 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 March 31, 1997 would have been $20,857,000, or $1.95 per share.
This represents an immediate dilution in pro forma net tangible book value of
$7.05 per share to new investors purchasing shares in the Offering. The
following table illustrates the per share dilution as of March 31, 1997:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.......................... $9.00
Pro forma net tangible book value at March 31, 1997.......... $(0.05)
Increase per share attributable to new investors............. 2.00
------
Pro forma net tangible book value after the Offering........... 1.95
-----
Dilution per share to new investors............................ $7.05
=====
</TABLE>
The following table sets forth, on an as adjusted basis as of March 31,
1997, 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).................... 7,943,470 74.3% $ 13,519,652 35.3% $ 1.70
New investors (1)....... 2,750,000 25.7 24,750,000 64.7 9.00
---------- ----- ------------ -----
Total................. 10,693,470 100.0% $ 38,269,652 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) Sales by the Selling Stockholders in the Offering will reduce the number
of shares held by existing stockholders to 7,193,470 or approximately
67.3% 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 32.7% 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 March 31, 1997. At March
31, 1997, there were (i) 1,160,635 shares of Common Stock issuable upon
exercise of outstanding stock options at a weighted average exercise price of
$1.22 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. 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.
20
<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 and for the quarters ended
March 31, 1996 and 1997, and the balance sheet data at March 31, 1997, 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 QUARTER ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31, MARCH 31,
-------------------------------------- ------------------ ----------------
1993 1994 1995 1996 1995 1996 (1) 1996 1997 (1)
-------- -------- -------- -------- -------- -------- ------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Product............... $ 4,542 $ 6,086 $ 6,413 $ 11,143 $ 7,336 $ 10,205 $3,807 $4,250
Development fees ..... -- 75 1,200 699 466 1,416 233 743
Software and
technology license
fees................. -- -- 139 1,345 667 1,241 678 223
-------- -------- -------- -------- -------- -------- ------ ------
Total revenues ...... 4,542 6,161 7,752 13,187 8,469 12,862 4,718 5,216
Costs and expenses:
Cost of product
revenues ............ 3,695 5,486 5,249 11,102 7,793 8,495 3,309 2,979
Research and
development ......... 1,397 1,311 1,118 1,249 919 1,709 330 1,477(2)
Selling and marketing
..................... 633 1,303 1,325 2,710 1,745 2,785 965 972
General and
administrative ...... 1,019 615 746 750 500 823 250 352
-------- -------- -------- -------- -------- -------- ------ ------
Total costs and
expenses ........... 6,744 8,715 8,438 15,811 10,957 13,812 4,854 5,780
-------- -------- -------- -------- -------- -------- ------ ------
Loss from operations .. (2,202) (2,554) (686) (2,624) (2,488) (950) (136) (564)
Interest and other
income (expense)...... (18) (5) (68) (270) (192) 13 (78) (27)
-------- -------- -------- -------- -------- -------- ------ ------
Loss before
extraordinary item and
income taxes ......... (2,220) (2,559) (754) (2,894) (2,680) (937) (214) (591)
Provision for income
taxes ................ -- -- -- 35 35 105 -- 45
-------- -------- -------- -------- -------- -------- ------ ------
Loss before
extraordinary item ... (2,220) (2,559) (754) (2,929) (2,715) (1,042) (214) (636)
Extraordinary item (3). -- -- 349 -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------ ------
Net loss............... $ (2,220) $ (2,559) $ (405) $ (2,929) $ (2,715) $ (1,042) $ (214) $ (636)
======== ======== ======== ======== ======== ======== ====== ======
PRO FORMA DATA (4):
Net loss per share..... $ (0.14) $(0.08)
======== ======
Common and common
equivalent shares used
in computing net loss
per share............. 8,454 8,474
======== ======
<CAPTION>
DECEMBER 31, MARCH 31,
MARCH 31, 1996 1997
-------------------------------------- ------------ ---------
1993 1994 1995 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........ $ (2,138) $ (4,636) $ (2,097) $ 3,780 $1,962 $1,564
Total assets........... 2,939 2,527 3,434 9,619 6,121 8,020
Long-term note payable,
less current portion.. 4 4 2,372 -- 198 181
Redeemable preferred
stock................. -- -- -- 2,610 2,726 2,764
Total stockholders'
equity (deficiency)... (1,899) (4,458) (4,185) 1,369 219 101
</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 and the 13-week period from
January 5, 1997 to April 5, 1997 is referred to herein as the quarter
ended March 31, 1997.
(2) Includes $551,000 of expenses related to the Crandell Acquisition. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(3) Represents a gain on exchange of stockholder debt and receivables for
notes payable. See Note 2 of Notes to Financial Statements.
(4) 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.
21
<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 third 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 and the
13-week period from January 5, 1997 to April 5, 1997 is referred to herein as
the quarter ended March 31, 1997. 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 and $5.2 million for
the quarter ended March 31, 1997. At March 31, 1997, the Company had an
accumulated deficit of $14.6 million and total stockholders' equity of
$101,000.
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 quarter ended March 31, 1997, product revenues,
development fees and software and technology fees, as a percentage of total
revenues, were 82%, 14% and 4%, 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.
22
<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% and 30% of the
Company's total revenues for the nine months ended December 31, 1996 and the
quarter ended March 31, 1997, respectively. 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%, 26% and 24% of total revenues
for the fiscal years ended March 31, 1995 and March 31, 1996, the nine months
ended December 31, 1996 and the quarter ended March 31, 1997, 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.
23
<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 QUARTER ENDED
MARCH 31, DECEMBER 31, MARCH 31,
------------------- ------------------- ---------------
1995 1996 1995 1996 1996 1997
-------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product............... 82.7% 84.5% 86.6% 79.3% 80.7% 81.5%
Development fees...... 15.5 5.3 5.5 11.0 4.9 14.2
Software and
technology license
fees................. 1.8 10.2 7.9 9.7 14.4 4.3
-------- -------- -------- -------- ------ ------
Total revenues...... 100.0 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of product
revenues............. 67.7 84.2 92.0 66.0 70.1 57.1
Research and
development.......... 14.4 9.5 10.9 13.3 7.0 28.3(1)
Selling and marketing. 17.1 20.6 20.6 21.7 20.5 18.6
General and
administrative....... 9.6 5.7 5.9 6.4 5.2 6.8
-------- -------- -------- -------- ------ ------
Total costs and
expenses........... 108.8 119.9 129.4 107.4 102.8 110.8
-------- -------- -------- -------- ------ ------
Loss from operations.... (8.8) (19.9) (29.4) (7.4) (2.8) (10.8)
Interest and other
income (expense)....... (0.9) (2.0) (2.3) 0.1 (1.7) (0.5)
-------- -------- -------- -------- ------ ------
Loss before
extraordinary item and
income taxes............ (9.7) (21.9) (31.7) (7.3) (4.5) (11.3)
Provision for income
taxes................... -- 0.3 0.4 0.8 -- 0.9
-------- -------- -------- -------- ------ ------
Loss before
extraordinary item...... (9.7) (22.2) (32.1) (8.1) (4.5) (12.2)
Extraordinary item...... 4.5 -- -- -- -- --
-------- -------- -------- -------- ------ ------
Net loss................ (5.2)% (22.2)% (32.1)% (8.1)% (4.5)% (12.2)%
======== ======== ======== ======== ====== ======
</TABLE>
- --------
(1) Includes $551,000 of expenses (representing 10.6% of total revenues)
related to the Crandell Acquisition.
Quarter Ended March 31, 1997 Compared to Quarter Ended March 31, 1996
Revenues. Total revenues increased 11% from $4.7 million for the quarter
ended March 31, 1996 to $5.2 million for the quarter ended March 31, 1997.
Product revenues increased 12% from $3.8 million for the quarter ended March
31, 1996 to $4.3 million for the quarter ended March 31, 1997, reflecting
primarily increased domestic unit shipments of the JetFax M5 and related
consumables and upgrades, which more than offset the lower average selling
price of the JetFax M5 during the quarter ended March 31, 1997. Development
fees increased 219% from $233,000 for the quarter ended March 31, 1996 to
$743,000 for the quarter ended March 31, 1997 due to significant new OEM
programs undertaken in the last twelve months. Through March 31, 1997, the
Company recognized cumulative revenues of $316,000 pursuant to a development
agreement with one of its OEMs, of which approximately $96,000 was recognized
during the quarter ended March 31, 1997. The Company has experienced delays in
completion of the development project for this OEM. Pursuant to certain
provisions of the development agreement, the final milestone payment may be
reduced; however, the Company believes that a reduction, if any, in this
payment would not have a material adverse effect on the Company's results of
operations or cash flows. Software and technology licensing fees decreased 67%
from $678,000 in the quarter ended March 31, 1996 to $223,000 in the quarter
ended March 31, 1997, as the royalties from Xerox declined due to the end of
life of Xerox products for which JetFax earned royalties. International
revenues decreased from 33% of total revenues for the quarter ended March 31,
1996 to 24% for the quarter ended March 31, 1997 as a result of lower
international product shipments primarily in Europe, a reduction in German
distribution inventory levels and the transition from a local German
distributor to a new Company sales office in Germany.
Cost of Product Revenues. Cost of product revenues decreased 10% from $3.3
million for the quarter ended March 31, 1996 to $3.0 million for the quarter
ended March 31, 1997. The product gross margin increased
24
<PAGE>
from 13.1% for the quarter ended March 31, 1996 to 29.9% for the quarter ended
March 31, 1997. Product margins improved on the Company's main product, the
JetFax M5, due to the higher production levels and cost reduction efforts
implemented over the past year. Additionally, the higher margin JetFax M5 and
related consumables and upgrades accounted for a higher percentage of the
overall product mix than a year ago.
Research and Development. Research and development expenses increased from
$330,000 for the quarter ended March 31, 1996 to $1.5 million for the quarter
ended March 31, 1997. The quarter ended March 31, 1997 included an accounting
charge for a variable equity award of $525,000 classified as compensation,
which was related to warrants issued as part of the Crandell Acquisition and
$26,000 of compensation expenses associated with the continuing employment of
the founders of the Crandell Group. These compensation expenses are based on a
percentage of ongoing desktop software sales and will be paid in full and will
terminate upon the closing of the Offering. See Note 3 of Notes to Financial
Statements. Excluding these expenses, research and development expenses were
$926,000, or 17.8% of total revenues, for the quarter ended March 31, 1997, an
increase of 188% from the quarter ended March 31, 1996. This increase resulted
primarily from: (i) the software development personnel added with the Crandell
Acquisition in July 1996; (ii) quick turnaround engineering prototype expenses
for the development of an embedded system; and (iii) expenses related to
hiring additional engineering personnel.
Selling and Marketing. Selling and marketing expenses were essentially flat,
increasing from $965,000 for the quarter ended March 31, 1996 to $972,000 for
the quarter ended March 31, 1997. As a percentage of total revenues, selling
and marketing expenses declined from 20.5% for the quarter ended March 31,
1996 to 18.6% for the quarter ended March 31, 1997.
General and Administrative. General and administrative expenses increased
41% from $250,000, or 5.2% of total revenues, for the quarter ended March 31,
1996 to $352,000, or 6.8% of total revenues, for the quarter ended March 31,
1997. The increase was primarily due to higher personnel, consulting and
hiring expenses.
Interest and Other Income (Expense). Interest and other income (expense)
decreased from $78,000 for the quarter ended March 31, 1996 to $27,000 for the
quarter ended March 31, 1997. The decrease was primarily due to lower interest
expense resulting from the lower level of debt outstanding.
Provision for Income Taxes. Due to the Company's net losses, there was no
provision for federal or state income taxes for the quarters ended March 31,
1996 and March 31, 1997. The $45,000 income tax provision for the quarter
ended March 31, 1997 was related to foreign withholding taxes on certain
development fees.
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
25
<PAGE>
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.
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
26
<PAGE>
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 $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
27
<PAGE>
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
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.
28
<PAGE>
The following table presents the unaudited statements of operations for each
of the Company's last eight quarters.
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996 1996 1996 1996 1997
-------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <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 $ 4,250
Development fees....... -- 233 233 233 217 380 819 743
Software and technology
license fees.......... 107 120 440 678 289 518 434 223
------ ------- ------- ------- ------- ------- ------- -------
Total revenues........ 1,798 2,741 3,930 4,718 3,796 4,071 4,995 5,216
Costs and expenses:
Cost of product
revenues.............. 1,635 3,152 3,006 3,309 2,948 2,549 2,998 2,979
Research and
development........... 347 272 300 330 349 662 698 1,477(1)
Selling and marketing.. 389 576 780 965 925 924 936 972
General and
administrative........ 142 131 227 250 182 293 348 352
------ ------- ------- ------- ------- ------- ------- -------
Total costs and
expenses............. 2,513 4,131 4,313 4,854 4,404 4,428 4,980 5,780
------ ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (715) (1,390) (383) (136) (608) (357) 15 (564)
Interest and other
income (expense)....... (50) (67) (75) (78) 16 3 (6) (27)
------ ------- ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary item and
income taxes........... (765) (1,457) (458) (214) (592) (354) 9 (591)
Provision for income
taxes.................. 35 -- -- -- 1 63 41 45
------ ------- ------- ------- ------- ------- ------- -------
Net loss................ $ (800) $(1,457) $ (458) $ (214) $ (593) $ (417) $ (32) $ (636)
====== ======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Includes $551,000 of expenses related to the Crandell Acquisition.
The following table sets forth certain revenue and expense items as a
percentage of total revenues for each of the Company's last eight quarters.
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996 1996 1996 1996 1997
-------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product................ 94.0% 87.1% 82.9% 80.7% 86.7% 77.9% 74.9% 81.5%
Development fees....... -- 8.5 5.9 4.9 5.7 9.3 16.4 14.2
Software and technology
license fees.......... 6.0 4.4 11.2 14.4 7.6 12.7 8.7 4.3
----- ----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of product
revenues.............. 90.9 115.0 76.5 70.1 77.7 62.6 60.0 57.1
Research and
development........... 19.3 9.9 7.6 7.0 9.2 16.3 14.0 28.3(1)
Selling and marketing.. 21.6 21.0 19.9 20.5 24.4 22.7 18.7 18.6
General and
administrative........ 7.9 4.8 5.8 5.2 4.8 7.2 7.0 6.8
----- ----- ----- ----- ----- ----- ----- -----
Total costs and
expenses............. 139.8 150.7 109.8 102.8 116.0 108.8 99.7 110.8
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............. (39.8) (50.7) (9.8) (2.8) (16.0) (8.8) 0.3 (10.8)
Interest and other
income (expense)....... (2.8) (2.5) (1.9) (1.7) 0.4 0.1 (0.1) (0.5)
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
extraordinary item and
income taxes........... (42.6) (53.2) (11.7) (4.5) (15.6) (8.7) 0.2 (11.3)
Provision for income
taxes.................. 1.9 -- -- -- -- 1.5 0.8 0.9
----- ----- ----- ----- ----- ----- ----- -----
Net loss................ (44.5)% (53.2)% (11.7)% (4.5)% (15.6)% (10.2)% (0.6)% (12.2)%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- --------
(1) Includes 10.6% of total revenues from expenses related to the Crandell
Acquisition.
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
29
<PAGE>
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 March 31, 1997 in the form of Common
Stock and Series A through F Convertible Preferred Stock was $13.5 million.
Additionally, $2.8 million of Series P Redeemable Preferred Stock was
outstanding on March 31, 1997. 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.
At March 31, 1997, $1.5 million of debt was outstanding, which consisted of
$1.0 million under a bank line of credit, a $244,000 equipment term loan and a
$250,000 note payable related to the Crandell Acquisition. At March 31, 1997,
the Company had $452,000 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 $244,000 outstanding under an equipment loan due in monthly
30
<PAGE>
installments through February 2000. The interest rate on the line of credit is
the bank's prime rate (8.5% as of March 31, 1997) 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. In March
1997, the Company received a waiver of the quarterly net income and certain
other covenants in its bank line of credit through June 30, 1997. 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 $106,000 at December 31, 1996 to
$16,000 at March 31, 1997. Inventories increased $902,000 from $2.3 million at
December 31, 1996 to $3.2 million at March 31, 1997, due primarily to: (i)
stocking higher levels of consumables for the JetFax 4 and consumables and
product upgrades for the JetFax M5 to better match demand particularly as the
installed base of the JetFax M5 has grown, and (ii) increased parts inventory
to support projected higher sales levels. Accounts receivable increased
$764,000 from $2.4 million at December 31, 1996 to $3.2 million at March 31,
1997 principally due to the increase in product sales and higher receivables
related to development contracts. Net property and other assets increased by
$271,000 from $1.2 million at December 31, 1996 to $1.5 million at March 31,
1997, resulting primarily from a $243,000 increase in deferred costs related
to this Offering. Accounts payable increased from $1.9 million at December 31,
1996 to $3.0 million at March 31, 1997 related to the higher inventory levels
and deferred costs related to this Offering. During the quarter ended March
31, 1997, the Company borrowed $794,000 net against its bank line of credit to
cover working capital needs.
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.
31
<PAGE>
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 third 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%.
32
<PAGE>
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
33
<PAGE>
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 third 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.
34
<PAGE>
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 third
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 effective in January 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.
35
<PAGE>
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
fax machine Buyer's 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 PC Week magazine in 1988
paper fax
- --------------------------------------------------------------------------------
</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% and 18% of the Company's total revenues in the nine months
ended December 31, 1996 and the quarter ended March 31, 1997, respectively.
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 third
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, the nine months ended December 31, 1996
and the quarter ended March 31, 1997, revenues recorded by the Company from
dealers associated with IKON represented 13%, 21% and 25%, respectively, of
the Company's total revenues. The Company also distributes its products
through regional distributors. As of March 31, 1997, the Company had
approximately 200 dealer sales locations in the United States and Canada. The
Company sells its branded products internationally through office equipment
dealers. Sales to Messerli, one of the Company's office equipment dealers
located in Switzerland, accounted for 11%, 10% and 4% of the Company's total
revenues in the fiscal year ended March 31, 1996, the nine months ended
December 31, 1996 and the quarter ended March 31, 1997, respectively.
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. Effective in January 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.
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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.
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 May 1, 1997, the sales
and marketing department (including order entry, technology support and
customer service personnel) consisted of 27 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.
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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.
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 May 1, 1997,
the Company's research and development department consisted of 30 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
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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 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.
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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 May 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."
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
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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 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 May 1, 1997, the Company had 86 employees and 5 full-time equivalent
contractors. Of these persons, 30 were in research and development, 27 were in
sales and marketing, 24 were in manufacturing and operations and 10 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.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of May 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).. 45 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
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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 until his
retirement in 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 one of the general partners 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
45
<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. During the nine months ended December 31,
1996, no interlocking relationship existed 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.
46
<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>
LONG-TERM
COMPENSATION
------------
ANNUAL SECURITIES
COMPENSATION(1) 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,
$118,854.
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<PAGE>
OPTION GRANTS, EXERCISES AND HOLDINGS
Option Grants. The following table sets forth certain information regarding
options granted to the Named Executive Officers during the nine months ended
December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM (4)
OPTIONS FISCAL YEAR PRICE EXPIRATION ------------------------
NAME GRANTED (#) (1) ($/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.
48
<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 May 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 were approved by the stockholders in March 1997. A total of
3,400,000 shares of Common Stock have been reserved for issuance under the
1995 Plan. As of May 1, 1997, no shares had been issued upon the exercise of
stock options granted under the 1995 Plan, 1,096,725 shares were subject to
outstanding options and 2,303,275 shares remained available for future grant.
No stock purchase rights are outstanding under the
49
<PAGE>
1995 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 was
approved by the stockholders in March 1997. 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 was approved by the stockholders in March 1997. 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 May 1, 1997, approximately 90 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
50
<PAGE>
twelve-month offering periods will commence every six months thereafter. In
the event of a change in control of the Company, 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.
51
<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
one of the general partners of Poly Ventures, Limited Partnership, the General
Partner of Poly Ventures II, Limited Partnership, 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.
52
<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, Limited Partnership,
($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 one of the general partners of Poly Ventures, Limited Partnership,
the General Partner of Poly Ventures II, Limited Partnership, 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.
53
<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 May 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)................. 2,245,779 28.1% -- 2,245,779 20.9%
c/o Talkot Partners II, LLC
2400 Bridgeway, Suite 200
Sausalito, CA 94965
Talkot Partners II, LLC (4)........ 2,123,158 26.7 -- 2,123,158 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).................... 396,666 5.0 50,000 346,666 3.2
Steven J. Carnevale (10)........... 334,022 4.1 -- 334,022 3.0
Lon B. Radin (11).................. 229,166 2.9 25,000 204,166 1.9
John H. Harris (12)................ 137,916 1.7 15,000 122,916 1.1
Douglas Y. Bech (13)............... 110,437 1.4 20,000 90,437 *
Edward R. Prince, Jr. (14)......... 98,833 1.2 7,500 91,333 *
Hansgregory C. Hartmann (15)....... 44,916 * -- 44,916 *
All directors and executive
officers as a group,
(12 persons) (16)................. 5,148,941 58.1 242,500 4,906,441 42.3
</TABLE>
54
<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 (46 parties)..... 766,494 9.6 183,440 583,054 5.5
</TABLE>
- --------
* Less than 1%.
(1) Percentage ownership is based on (i) before the Offering, 7,943,470
shares of Common Stock outstanding as of May 1, 1997 (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 491,317 shares upon the automatic net
exercise in full of certain warrants upon the closing of the Offering the
issuance of 144,623 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
May 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 May 1, 1997, includes
62,214 shares of Common Stock held by his minor children and includes
2,123,158 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 May 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 one of the general partners of Poly Ventures, Limited
Partnership, the General Partner of Poly Ventures II, Limited
Partnership. Dr. Harrison disclaims beneficial ownership of these shares
except as to the pecuniary interest he will derive from these shares.
55
<PAGE>
(8) Includes an option to purchase 10,000 shares of Common Stock exercisable
within sixty days of May 1, 1997 which is held by Dr. Harrison for the
benefit of Poly Ventures II, Limited Partnership, and 492,474 shares of
Common Stock held by Poly Ventures II, Limited Partnership. Dr. Harrison
is one of the general partners of Poly Ventures, Limited Partnership, the
General Partner of Poly Ventures II, Limited Partnership. 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 29,166 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 May 1, 1997 and includes
30,424 shares of Common Stock held by Mr. Carnevale's wife.
(11) Includes options to purchase 29,166 shares of Common Stock exercisable
within sixty days of May 1, 1997.
(12) Includes options to purchase 14,583 shares of Common Stock exercisable
within sixty days of May 1, 1997.
(13) Includes options to purchase 10,000 shares of Common Stock exercisable
within sixty days of May 1, 1997.
(14) Includes options to purchase 10,000 shares of Common Stock exercisable
within sixty days of May 1, 1997.
(15) Includes options to purchase 22,916 shares of Common Stock exercisable
within sixty days of May 1, 1997.
(16) Includes options and warrants in the aggregate of 913,068 shares of
Common Stock exercisable within sixty days of May 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.
56
<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 May 1, 1997, there were 7,943,470 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 146 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 7,367,549 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 5,817,904 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 6,414,215 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
57
<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 by 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.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
10,693,470 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 7,193,470 shares of Common Stock outstanding
upon closing of the Offering are "restricted securities" as that term is
defined in Rule 144. Of the remaining 7,193,470 shares, 7,018,708 shares are
subject to lock-up agreements (described below).
Upon completion of the Offering, 10,000 shares will become eligible for
immediate sale pursuant to Rule 144(k) and, beginning 90 days after
commencement of the Offering, 7,120,517 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 2,347,089 shares will
become immediately eligible for sale without restriction pursuant to Rule
144(k) or Rule 701 (described below), and approximately 4,773,428 additional
shares will be eligible for sale subject to the timing, volume, and manner of
sale restrictions of Rule 144. The 62,953 remaining shares held by existing
stockholders will become eligible for sale at various times over a period of
less than one year. In addition, 1,319,573 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 106,935 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, 7,018,708 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 110,000 shares are subject
to 90 day lock-up agreements with the Company and stockholders holding an
aggregate of 53,762 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 1,319,573 shares of Common Stock are
subject to 180 day lock-up agreements with the Company and/or Prudential
59
<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 4,233,910 shares of Common Stock (including the 1,160,635 shares
subject to outstanding options as of May 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 7,367,549 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.
60
<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.
61
<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
than 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.
62
<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.
63
<PAGE>
JETFAX, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Equity (Deficiency)............................ F-5
Statements of Cash Flows................................................... 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, MARCH 31, MARCH 31,
1996 1996 1997 1997
--------- ------------ --------- ---------
UNAUDITED
(NOTE 1)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 3,452 $ 106 $ 16 $ 16
Trade receivables, net of
allowances of: March 31, 1996,
$310; December 31, 1996, $396;
March 31, 1997, $383.............. 1,919 2,434 3,198 3,198
Receivable from the sale of the
Series F Preferred Stock.......... 650 -- -- --
Inventories........................ 3,387 2,339 3,241 3,241
Prepaid expenses................... 12 61 113 113
-------- -------- -------- --------
Total current assets............ 9,420 4,940 6,568 6,568
Property--net....................... 174 615 686 686
Other assets........................ 25 566 766 766
-------- -------- -------- --------
Total assets........................ $ 9,619 $ 6,121 $ 8,020 $ 8,020
======== ======== ======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 4,169 $ 1,857 $ 3,023 $ 3,023
Accrued liabilities................ 1,410 619 638 638
Line of credit..................... -- 200 1,000 1,000
Current portion of long-term note
payable........................... -- 302 313 313
Related party notes payable and
advances--current portion......... 61 -- -- --
-------- -------- -------- --------
Total current liabilities....... 5,640 2,978 4,974 4,974
-------- -------- -------- --------
Long-term note payable less current
portion............................ -- 198 181 181
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; March 31,
1997 actual and pro forma 344,350
shares (liquidation preference of
$2,764)............................ 2,610 2,726 2,764 2,764
Stockholders' equity:
Convertible preferred stock, $0.01
par value; 9,000,000 shares
authorized, 5,000,000 shares pro
forma; shares outstanding: March
31, 1996, December 31, 1996 and
March 31, 1997, 6,293,978; March
31, 1997 pro forma, none
(liquidation preference of
$14,404).......................... 63 63 63 --
Common stock, $0.01 par value;
13,500,000 shares authorized,
35,000,000 shares pro forma;
shares outstanding: March 31,
1996, 954,474; December 31, 1996,
995,599; March 31, 1997,
1,013,552; March 31, 1997, pro
forma 7,943,470................... 9 10 10 79
Additional paid-in capital......... 13,160 13,880 14,670 14,664
Accumulated deficit................ (11,863) (13,734) (14,642) (14,642)
-------- -------- -------- --------
Total stockholders' equity...... 1,369 219 101 101
-------- -------- -------- --------
Total liabilities, redeemable
preferred stock and stockholders'
equity............................. $ 9,619 $ 6,121 $ 8,020 $ 8,020
======== ======== ======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
JETFAX, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTERS
YEARS ENDED NINE MONTHS ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31,
--------------- ------------------- --------------
1995 1996 1995 1996 1996 1997
------ ------- ----------- ------- ------ ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product................ $6,413 $11,143 $ 7,336 $10,205 $3,807 $4,250
Development fees....... 1,200 699 466 1,416 233 743
Software and technology
license fees.......... 139 1,345 667 1,241 678 223
------ ------- ------- ------- ------ ------
Total revenues...... 7,752 13,187 8,469 12,862 4,718 5,216
------ ------- ------- ------- ------ ------
Costs and expenses:
Cost of product
revenues.............. 5,249 11,102 7,793 8,495 3,309 2,979
Research and
development........... 1,118 1,249 919 1,709 330 1,477
Selling and marketing.. 1,325 2,710 1,745 2,785 965 972
General and
administrative........ 746 750 500 823 250 352
------ ------- ------- ------- ------ ------
Total costs and
expenses........... 8,438 15,811 10,957 13,812 4,854 5,780
------ ------- ------- ------- ------ ------
Loss from operations.... (686) (2,624) (2,488) (950) (136) (564)
Other income (expense):
Interest expense....... (70) (287) (200) (9) (87) (7)
Interest income........ 2 14 7 31 7 --
Other income (expense). -- 3 1 (9) 2 (20)
------ ------- ------- ------- ------ ------
(68) (270) (192) 13 (78) (27)
------ ------- ------- ------- ------ ------
Loss before
extraordinary item and
income taxes........... (754) (2,894) (2,680) (937) (214) (591)
Provision for income
taxes.................. -- 35 35 105 -- 45
------ ------- ------- ------- ------ ------
Loss before
extraordinary item..... (754) (2,929) (2,715) (1,042) (214) (636)
Extraordinary item--gain
on exchange of
stockholder debt and
receivables for notes
payable................ 349 -- -- -- -- --
------ ------- ------- ------- ------ ------
Net loss................ $ (405) $(2,929) $(2,715) (1,042) $ (214) (636)
====== ======= ======= ======
Series P Redeemable
Preferred Stock
dividends.............. (116) (38)
------- ------
Net loss applicable to
common stockholders.... $(1,158) $ (674)
======= ======
Pro forma net loss per
share.................. $ (0.14) $(0.08)
======= ======
Common and common
equivalent shares used
in computing pro forma
net loss per share .... 8,454 8,474
======= ======
</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
Exercise of Common Stock
options*............... -- -- 4,000 -- 1 -- 1
Exercise of Common Stock
warrant*............... -- -- 13,953 -- 30 -- 30
Cumulative dividends on
Series F Convertible
($234) and Series P
Redeemable ($38)
Preferred Stock*....... -- -- -- -- 234 (272) (38)
Warrant compensation
expense (Note 3)*...... -- -- -- -- 525 -- 525
Net loss*............... -- -- -- -- -- (636) (636)
--------- ---- --------- --- -------- --------- --------
Balances, March 31,
1997*.................. 6,293,978 $ 63 1,013,552 $10 $ 14,670 $ (14,642) $ 101
========= ==== ========= === ======== ========= ========
</TABLE>
* Unaudited
See notes to financial statements.
F-5
<PAGE>
JETFAX, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED QUARTERS ENDED
MARCH 31, DECEMBER 31, MARCH 31,
---------------- ------------------- ---------------
1995 1996 1995 1996 1996 1997
------- ------- ----------- ------- ------- ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $ (405) $(2,929) $(2,715) $(1,042) $ (214) $ (636)
Adjustments to
reconcile net loss to
net cash used for
operating activities:
Depreciation and
amortization.......... 115 250 136 143 74 52
Warrant compensation
expense............... -- -- -- -- -- 525
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) 362 (515) (630) (764)
Inventories........... (644) (1,912) (1,671) 1,048 (441) (902)
Prepaid expenses...... -- (12) (4) (49) (8) (52)
Accounts payable...... 1,822 1,771 2,718 (2,312) (871) 1,166
Accrued liabilities... (400) 53 (49) (511) 56 19
------- ------- ------- ------- ------- ------
Net cash used for
operating
activities......... (943) (2,411) (463) (3,518) (2,034) (592)
------- ------- ------- ------- ------- ------
Cash flows from
investing activities:
Purchase of property... (217) (154) (85) (515) (30) (123)
Increase in other
assets................ (1) (10) (174) (55) 164 (200)
Acquisition of Crandell
Group................. -- -- -- (305) -- --
------- ------- ------- ------- ------- ------
Net cash used for
investing
activities......... (218) (164) (259) (875) 134 (323)
------- ------- ------- ------- ------- ------
Cash flows from
financing activities:
Proceeds from sale of
common stock.......... 4 5 5 8 -- 31
Repayment of notes
payable............... (5) (1,362) -- -- (1,175) (6)
Repayment of related
party notes payable... (609) (70) -- (61) -- --
Line of credit
borrowings, net....... -- -- -- 200 -- 800
Equipment term note
borrowings............ -- -- -- 250 -- --
Proceeds from issuance
of notes payable...... 1,990 1,010 800 -- -- --
Proceeds from Series F
Convertible Preferred
Stock--net............ -- 6,222 -- 650 6,222 --
Restricted investments. (100) 100 100 -- -- --
------- ------- ------- ------- ------- ------
Net cash provided by
financing
activities......... 1,280 5,905 905 1,047 5,047 825
------- ------- ------- ------- ------- ------
Increase (decrease) in
cash and cash
equivalents............ 119 3,330 183 (3,346) 3,147 (90)
Cash and cash
equivalents, beginning
of year................ 3 122 122 3,452 305 106
------- ------- ------- ------- ------- ------
Cash and cash
equivalents, end of
year................... $ 122 $ 3,452 $ 305 $ 106 $ 3,452 $ 16
======= ======= ======= ======= ======= ======
Supplemental cash flow
information:
Interest paid.......... $ 37 $ 211 $ 202 $ 9 $ 9 $ 7
======= ======= ======= ======= ======= ======
Taxes paid--foreign
withholding........... $ -- $ 35 $ 35 $ 105 $ -- $ 45
======= ======= ======= ======= ======= ======
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 $ 2,287
======= ======= =======
Conversion of
convertible notes
payable into Series F
Convertible Preferred
Stock................. $ 1,929 $ 1,929
======= =======
Receivable--Series F
Convertible Preferred
Stock................. $ 650 $ 650
======= =======
Cumulative dividends on
Series F Convertible
and Series P
Redeemable Preferred
Stock................. $ 97 $ 9 $ 829 $ 90 $ 272
======= ======= ======= ======= ======
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, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
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 PERIOD 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 and the 13-week
period from January 5, 1997 through April 5, 1997 is referred to as the
quarter ended March 31, 1997. For presentation purposes, the Company refers to
its reporting year ended January 4, 1997 and the quarter ended April 5, 1997
as ending on December 31, 1996 and March 31, 1997, respectively.
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, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
The Company recognized net losses of approximately $405,000, $2.9 million,
$1.0 million and $636,000 for the fiscal years ended March 31, 1995 and 1996,
the nine months ended December 31, 1996, and the quarters ended March 31,
1997, respectively. The Company's historical losses and $1.2 million of
preferred stock cumulative dividends through March 31, 1997 have resulted in
an accumulated deficit of approximately $14.6 million at March 31, 1997.
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 and
March 31, 1997, one customer accounted for 12% and 14% of total accounts
receivable, respectively.
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 and $611,000
relating to development revenues at December 31, 1996 and March 31, 1997,
respectively (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 , NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996 AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997
(UNAUDITED)
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 adjusted for
cumulative dividends on Series P Redeemable Preferred Stock, to arrive at 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 and for the quarters ended March 31, 1996 and 1997 have 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, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
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) 491,317 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 661,193 shares of Common Stock (see Note 10), (iii) 144,623 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.
Assuming SFAS 128 had been adopted, basic and diluted EPS for the nine months
ended December 31, 1996 and the quarter ended March 31, 1997 would not have
differed significantly from the Company's reported pro forma net loss per
share.
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 Convertible 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, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
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. Accordingly, the Company recognized $525,000
of compensation expense for the quarter ended March 31, 1997.
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, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
4.INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1996 1996 1997
--------- ------------ ---------
<S> <C> <C> <C>
Materials and supplies...................... $ 2,851 $ 1,276 $1,477
Work-in-process............................. 307 235 242
Finished goods.............................. 229 828 1,522
------- ------- ------
Total....................................... $ 3,387 $ 2,339 $3,241
======= ======= ======
5.PROPERTY
Property consists of (in thousands):
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1996 1996 1997
--------- ------------ ---------
<S> <C> <C> <C>
Furniture and fixtures...................... $ 568 $ 570 $ 668
Manufacturing tools and tooling............. 209 187 190
Software.................................... -- 341 363
Leasehold improvements...................... 56 56 56
------- ------- ------
Total....................................... 833 1,154 1,277
Accumulated depreciation and amortization... (659) (539) (591)
------- ------- ------
Property-net................................ $ 174 $ 615 $ 686
======= ======= ======
</TABLE>
6.ACCRUED LIABILITIES
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1996 1996 1997
--------- ------------ ---------
<S> <C> <C> <C>
Compensation and related benefits........... $ 340 $ 220 $329
Product warranty............................ 147 140 172
Estimated loss on purchase commitment....... 649 -- --
Other....................................... 274 259 137
------- ------ ----
Total....................................... $ 1,410 $ 619 $638
======= ====== ====
</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, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
7.LINE OF CREDIT AND NOTES PAYABLE
Line of credit and notes payable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
<S> <C> <C>
Line of credit........................................ $ 200 $1,000
===== ======
Equipment term loan................................... $2250 $ 244
Note payable.......................................... 250 250
----- ------
Total notes payable................................. 500 494
Current portion....................................... (302) (313)
----- ------
Long-term portion..................................... $ 198 $ 181
===== ======
</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. 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 principal
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 at December 31, 1996 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, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
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 and March 31, 1997. 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 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, $116,000 and $38,000 in the year ended March
31, 1996, the nine months ended December 31, 1996 and the quarter ended March
31, 1997, respectively (for an aggregate of $143,000 at December 31, 1996 and
$181,000 at March 31, 1997). 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
The Company has reserved or otherwise committed to issue shares of Common
Stock as follows (see Note 15):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
<S> <C> <C>
Conversion of Convertible Preferred Stock
outstanding........................................ 6,293,978 6,293,978
Issuance under stock option plans................... 1,467,910 3,733,910
Exercise of Common Stock warrants................... 675,156 661,203
Employee stock purchase plan........................ -- 500,000
Other stock options................................. 401,999 401,999
Conversion of Series E Convertible Preferred Stock
issuable upon exercise of warrants (Note 2)........ 388,500 388,500
Conversion of Redeemable Preferred Stock (Note 9)... 344,350 344,350
Conversion of cumulative dividends on Series F
Convertible Preferred Stock........................ 115,833 144,623
Crandell Common Stock warrants (Note 3)............. 100,000 100,000
--------- ----------
Total............................................... 9,787,726 12,568,563
========= ==========
</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
F-14
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
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 (warrants to
purchase 661,203 shares of Common Stock were outstanding at March 31, 1997).
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 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 Convertible
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 and March 31, 1997 consists
of:
<TABLE>
<CAPTION>
LIQUIDATION PREFERENCE
------------------------
DECEMBER 31, MARCH 31,
DESIGNATED OUTSTANDING 1996 1997
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Series A........................ 1,000,000 750,996 $ 563,247 $ 563,247
Series B........................ 1,000,000 533,974 533,974 533,974
Series C........................ 600,000 564,834 706,043 706,043
Series D........................ 100,000 67,890 109,982 109,982
Series E........................ 2,500,000 930,594 2,000,777 2,000,777
Series F........................ 3,500,000 3,445,690 10,256,419 10,490,065
--------- --------- ----------- -----------
Total........................... 8,700,000 6,293,978 $14,170,442 $14,404,088
========= ========= =========== ===========
</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
Converible Preferred Stock and certain affiliates of Poly Ventures II,
Limited Partnership 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 Convertible Preferred Stock. Series
F Convertible 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. No dividends have been declared. In
the event the Series F Convertible 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 Convertible Preferred
Stock. The Company has recorded cumulative dividends of $70,000,
$713,000 and $234,000 in the fiscal year ended March 31, 1996, the nine
months ended December 31, 1996, and the quarter ended March 31, 1997,
respectively (for an aggregate of $783,000 at December 31, 1996 and $1.0
million at March 31, 1997).
F-15
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
. 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, at December 31, 1996 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 and March 31, 1997, 433,125 and 2,573,275 shares,
respectively, remain available for further option grants under the Company's
stock option plans (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.
Stock option activity and balances are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE PRICE
OF SHARES PER SHARE
--------- --------------
<S> <C> <C>
Balance, April 1, 1994................................ 169,000 $0.14
Granted............................................... 82,519 0.20
Canceled.............................................. (38,000) 0.16
Exercised............................................. (31,609) 0.13
---------
Balance, March 31, 1995............................... 181,910 $0.16
Granted............................................... 31,000 0.20
Canceled.............................................. (27,500) 0.20
Exercised............................................. (55,760) 0.10
---------
Balance, March 31, 1996............................... 129,650 $0.19
Granted............................................... 1,009,000 0.55
Canceled.............................................. (62,740) 0.27
Exercised............................................. (41,125) 0.20
---------
Balance, December 31, 1996............................ 1,034,785 $0.54
Granted............................................... 148,100 5.92
Canceled.............................................. (18,250) 5.47
Exercised............................................. (4,000) 0.20
---------
Balance, March 31,1997................................ 1,160,635 $1.22
=========
</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>
F-16
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
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 and March 31, 1997, respectively, 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 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, the nine months ended December 31, 1996 and the quarter
ended March 31, 1997 due to the Company's net losses. Foreign withholding
taxes of approximately $35,000, $105,000 and $45,000 were paid during the year
ended March 31, 1996, the nine months ended December 31, 1996 and the quarter
ended March 31, 1997, 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 1,013 365
Foreign withholding taxes................. -- 35 105
--------- ----------- ------
Total provision........................... $ -- $ 35 $ 105
========= =========== ======
</TABLE>
F-17
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995 AND 1996, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
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>
MARCH 31,
---------------- DECEMBER 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
Accounts receivable allowances.................. 50 110 142
Depreciation.................................... -- 43 91
Inventory valuation............................. 43 177 78
Nondeducted expense accrual..................... -- 1,354 74
Warranty reserve................................ 69 42 40
Capitalized research and development............ -- 60 41
Vacation accrual................................ 23 19 37
Other........................................... 2 32 106
------- ------- -------
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.
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.
F-18
<PAGE>
JETFAX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
YEARS ENDED MARCH 31, 1995 AND 1996, NINE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED) AND 1996
AND QUARTERS ENDED MARCH 31, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
13.CUSTOMER AND GEOGRAPHIC INFORMATION
Two customers accounted for 21% and 10%, respectively, 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.
15.SUBSEQUENT EVENTS
On February 19, 1997, the Board of Directors adopted the following
resolutions which were subsequently approved by the stockholders:
. 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 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. The resolution was subsequently approved by the stockholders.
F-19
<PAGE>
GLOSSARY
In this Prospectus, the following terms have the meanings indicated below,
unless the context otherwise requires:
Proprietary ASIC: A custom-designed "proprietary" semiconductor chip which
performs specific hardware functions for the intended application of the chip.
Firmware: Programming instructions that are stored in a read-only memory
unit and typically responding on a real-time basis.
Controller: A printed circuit board containing all of the circuitry, ASICs
and embedded systems software necessary to enable a device to interpret and
execute instructions for the operation of the device.
Modular controller circuit board: A controller circuit board design in which
the software programs that control the device are organized into modules,
which may operate independently or jointly.
Embedded system: A controller circuit board on which proprietary ASICs,
software and firmware reside.
Integrated embedded system technology: A combination of proprietary ASICs,
software and firmware that reside together on a controller circuit board and
perform a number of functions in one design.
ASIC: Application specific integrated circuit.
DMA: Direct memory access.
OCR: Optical character recognition.
PCL: Printer control language.
G-1
<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............................................................... 17
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Financial Data................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 32
Management................................................................ 44
Certain Transactions...................................................... 52
Principal and Selling Stockholders........................................ 54
Description of Capital Stock.............................................. 57
Shares Eligible for Future Sale........................................... 59
Underwriting.............................................................. 61
Legal Matters............................................................. 62
Experts................................................................... 62
Additional Information.................................................... 63
Index to Financial Statements............................................. F-1
Glossary.................................................................. G-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,500,000 Shares
[LOGO OF JETFAX]
Common Stock
---------------
PROSPECTUS
---------------
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
June , 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........................................... 10,000
Transfer Agent and Registrar fees.................................... 3,500
Miscellaneous expenses............................................... 100,573
---------
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, 133,494 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.
10. In May 1997, the Registrant issued an aggregate of 22,791 shares to
Thomas B. Akin and 41,860 shares each to Mr. Akin's two minor children
at a purchase price of $2.15 per share pursuant to the exercise of
outstanding warrants.
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 May 7, 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 of 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, as amended and restated, 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.
10.17** Subscription and Stock Purchase Agreement dated September 7, 1990 by
and between Registrant and Adlar Turnkey Manufacturing Corporation.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
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 and the amendment thereto dated March 31,
1997.
10.41** Form of Dealer Agreement.
10.42+ Agreement dated November 30, 1994 by and between the Crandell Group,
Inc. and Intel Corporation as amended May 11, 1995, assigned and
delegated to Registrant as of July 30, 1996 and as further amended
December 23, 1996.
11.1** Calculation of loss per share.
21.1 Subsidiaries of Registrant.
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>
- --------
**Previously filed.
+ Portions of the exhibit have been omitted pursuant to a request for
confidential treatment and the omitted portions have been separately filed
with the Commission.
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 Amendment to the 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 5th day of June, 1997.
JetFax, Inc.
By /s/ Edward R. Prince, III
----------------------------------
EDWARD R. PRINCE, III, PRESIDENT,
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Edward R. Prince, III President, Chief June 5, 1997
- ------------------------------------- Executive Officer
(EDWARD R. PRINCE, III) and Chairman of the
Board (Principal
Executive Officer)
/s/ Allen K. Jones Vice President of June 5, 1997
- ------------------------------------- Finance, Chief
(ALLEN K. JONES) Financial Officer,
and Secretary
(Principal
Financial and
Accounting Officer)
/s/ Thomas B. Akin Director June 5, 1997
- -------------------------------------
(THOMAS B. AKIN)
/s/ Douglas Y. Bech Director June 5, 1997
- -------------------------------------
(DOUGLAS Y. BECH)
/s/ Steven J. Carnevale Director June 5, 1997
- -------------------------------------
(STEVEN J. CARNEVALE)
/s/ Chung Chiu Director June 5, 1997
- -------------------------------------
(CHUNG CHIU)
/s/ Shelley Harrison Director June 5, 1997
- -------------------------------------
(SHELLEY HARRISON)
/s/ Edward R. Prince, Jr. Director June 5, 1997
- -------------------------------------
(EDWARD R. PRINCE, JR.)
/s/ Lon B. Radin Director June 5, 1997
- -------------------------------------
(LON B. RADIN)
</TABLE>
II-6
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
JetFax, Inc.:
We consent to the use in this Amendment No. 2 to Registration Statement
No. 333-23763 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
May 12, 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 INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1** Underwriting Agreement (draft of May 7, 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 of
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, as amended and restated, 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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.
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
and the amendment thereto dated March 31, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.41** Form of Dealer Agreement.
10.42+ Agreement dated November 30, 1994 by and between the
Crandell Group, Inc. and Intel Corporation as amended
May 11, 1995, assigned and delegated to Registrant as
of July 30, 1996 and as further amended December 23,
1996.
11.1** Calculation of loss per share.
21.1 Subsidiaries of Registrant.
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>
- --------
**Previously filed.
+ Portions of the exhibit have been omitted pursuant to a request for
confidential treatment and the omitted portions have been separately filed
with the Commission.
<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
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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.
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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.
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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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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:
--------------------------
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<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>
FIRST AMENDMENT TO LEASE AGREEMENT
EXTENSION OF LEASE TERM
This First Amendment to Lease Agreement (the "Amendment") is made and entered
into as of March 4, 1997, by and between LINCOLN MENLO PHASE I ASSOCIATES, A
CALIFORNIA LIMITED PARTNERSHIP ("LANDLORD"), AND JET FAX, INC., A DELAWARE
CORPORATION ("TENANT"), with reference to the following facts:
RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement dated
December 1, 1992 (the "Lease"), for the leasing of certain premises
containing approximately 26,000 rentable square feet of space located at
1376 Willow Road, Menlo Park, California (the "Premises") as such Premises
are more fully described in the Lease.
B. Landlord and Tenant wish to extend the Term of the Lease and to address
other matters with respect to the Premises and the Lease, all on the terms
and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. Recitals: Landlord and Tenant agree that the above recitals are true
--------
and correct.
2. Term: The Term of the Lease is hereby extended for a period of five (5)
----
years (the "Extended Term"), commencing on February 9, 1998 and
terminating on January 31, 2003.
3. Base Rent: The monthly Base Rent for the Premises for the Extended term
---------
shall be $20,800.00.
4. Right of First Refusal:
----------------------
4.1 During the Extended Term of the Lease only, Tenant shall have a
one time First Right to Lease ("Right of First Refusal") the contiguous
space within the Building commonly known as 1374-1376 Willow Road,
Menlo Park, California, and containing approximately 23,000 rentable
square feet, located at 1374 Willow Road, Menlo Park, California, as
outlined on Exhibit A attached hereto and made a part hereof (the
"Expansion Space"). Tenant's right, as granted herein, is subject to
the following conditions:
i. Tenant's Right of First Refusal shall be void if, at any
time, Tenant has been, or is currently in default, beyond
applicable cure periods, in the performance of any of its
obligations under the Lease;
ii. Tenant's Right of First Refusal shall be subject to
Landlord's review and approval of Tenant's then current
financial condition; and
iii. Tenant's Right of First Refusal shall be subject to and
subordinate to the rights of: (a) the then existing tenant
pursuant to its existing Lease, as such Lease may be
modified, amended or extended, and (b) to the expansion
option held by Sequus Pharmaceuticals, Inc. ("Sequus") on
the Expansion Space.
4.2 Provided the above conditions are satisfied, and upon Landlord's
receipt of a third party offer to lease the Expansion Space which
Landlord is willing to accept (other than by the current occupant of
the Expansion Space) and Sequus, Landlord will offer this Right of
First Refusal to Tenant in writing stating all material terms on which
Landlord proposes to lease such Expansion Space to Tenant and Tenant
shall have three (3) business days after delivery of such notice to
notify Landlord in writing ("Election Notice") of Tenant's election to
lease all the Expansion Space upon those terms. If Tenant fails to
notify Landlord of Tenant's election to lease the Expansion Space
within the time specified herein, it shall be deemed that (i) Tenant
has elected not to lease said Expansion Space; (ii) Landlord may
thereafter into a Lease Agreement with a third party; and (iii) all
rights under this Right of First Refusal shall terminate and be of no
further force and effect. Time is of the essence herein.
4.3 In the event Tenant exercises this Right of First Refusal as
herein provided, Tenant shall provide Landlord a $18,400.00
nonrefundable deposit, and the parties shall have ten (10) working
days after Landlord receives the Election Notice from Tenant in which
to execute an amendment the Lease setting forth the agreed-upon terms.
Upon full execution of the amendment, for the Expansion Space, the
nonrefundable deposit shall be credited toward Rent or security
deposit for the Expansion Space, as agreed between the parties.
4.4 This Right of Refusal shall terminate and be of no force and
effect if, at any time, Tenant is or has been in default, beyond
applicable cure periods, of the performance of any of the covenants,
conditions or agreements to be performed under this Lease; or the
Premises are being subleased at the time of this Right of First
Refusal is offered.
4.5 This Right of First Refusal is personal to Tenant and may not be
assigned, voluntarily or involuntarily, separate from or as a part of
the Lease.
4.6 Should Tenant exercise the Right herein, Landlord and Tenant
shall execute an amendment to this Lease, adding the Expansion Space
to the Premises and adjusting the Rent and Tenant's proportionate
share of the items set forth in Paragraph 6 of this Lease. If Tenant
does not elect to exercise the Right herein, based upon the material
terms proposed by Landlord, all Rights under this Right of First
Refusal shall terminate and be of no further force and effect.
THIS LEASE IS A CROSS COLLATERAL LEASE WITH THE 1378 WILLOW ROAD LEASE
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
EXTENSION OF LEASE TERM
PAGE 2
5. Condition Precedent: This amendment and the effectiveness thereof is
-------------------
expressly conditioned upon the full execution by Lessor and Jet Fax,
Inc. of a lease covering the premises located at 1378 Willow Road
("1378 Premises"), wherein LINCOLN MENLO PHASE I ASSOCIATES LIMITED has
agreed to undertake certain seismic improvements to the building of
which the 1378 Premises is located as shown on the plan(s) or scope(s)
of work prepared by Cabak, Randall, Jasper, Griffiths, dated September
26, 1988, a copy of which is attached to the 1378 Premises Lease as
Exhibit I-2. The parties hereby acknowledge that the extension of this
lease is being entered into for consideration of the improvements to
the 1378 Premises. If the 1378 Premises lease is not executed on or
prior to April 30th, 1997, then this Amendment shall be deemed null and
void and the lease shall continue in full force and effect without
regard to this Amendment.
6. Collateral Lease Agreements: The full and faithful performance by the
---------------------------
parties of all of their obligations under the Lease and the 1378
Premises lease shall be required under the provisions of this Lease.
This Lease and the 1378 Premises lease are collectively referred to
herein as the "Collateral Lease Agreements".
7. Disclosure: The land described herein contains residual hazardous
----------
substances. Such condition renders the land and the owner, Tenant or
other purchaser of the land subject to requirements, restrictions,
provisions, and liabilities contained in Chapter 6.5 and Chapter 6.8 of
Division 20 of the Health and safety code, as may be amended from time,
and any such statutes thereof. This statement is not a declaration that
a hazard to public health, safety and welfare exists. Notwithstanding
anything to the contrary contained in this Paragraph 7, nothing
contained herein shall be deemed to modify the provisions of Paragraph
29 of the Lease, including, without limitation, Landlord's
indemnification obligations set forth therein.
8. Effect of Amendment: Except as modified herein, the terms and
-------------------
conditions of the Lease shall remain unmodified and continue in full
force and effect. In the event of any conflict between the terms and
conditions of the Lease and this Amendment, the terms and conditions of
this Amendment shall prevail.
9. Definitions: Unless otherwise defined in this Amendment, all terms not
-----------
defined in this Amendment shall have the meaning set forth in the
Lease.
10. Authority: Subject to the provisions of the Lease, this Amendment
---------
shall be binding upon and inure to the benefit of the parties hereto,
their respective heirs, legal representatives, successors and assigns.
Each party hereto and the persons signing below warrant that the person
signing below on such party's behalf is authorized to do so and to bind
such party to the terms of this Amendment.
11. The terms and provisions of the Lease are hereby incorporated in this
Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
TENANT:
Jet Fax, Inc.,
a Delaware corporation
By: /s/ Hans C. Hartmann
------------------------
Its: VP Manufacturing
------------------------
Date: 5/9/97
------------------------
LANDLORD:
LINCOLN MENLO PHASE I ASSOCIATES LIMITED,
a California limited partnership
By: Lincoln Property Company Management Services, Inc.
As Manager and Agent for Landlord
By: /s/ Barry DiRaimondo
---------------------
Vice President
Date:
---------------------
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
EXHIBIT A - EXPANSION SPACE
Expansion Space:
- ---------------
1374 Willow Road
Menlo Park, California
Approximately 23,000 rentable square feet
Diagram is a map with a line and arrow pointing to exact physical location of
1374 Willow Road, Menlo Park, California
<TABLE>
<CAPTION>
Caption to diagram:
<S> <C> <C> <C> <C>
WILLOW PARK I - VIII PLANNING DEPARTMENT DATE: 28 MARCH 96
MASTER SITE PLAN HAMILTON COURT-WILLOW ROAD LPC 101 LINCOLN CENTRE DRIVE SCALE: N.T.S.
MENLO PARK, CALIFORNIA FOSTER CITY, CALIFORNIA 94404 FILE:
415 571-2200
</TABLE>
INITIALS:
TENANT: HCH
-------
LANDLORD: BD
---------
<PAGE>
EXHIBIT 10.27
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
REDACTED
DEVELOPMENT AGREEMENT
This Agreement is made and entered into as of this 25th day of September,
1991 by and between Ailicec International Enterprises Ltd., a Hong Kong
corporation with offices at Rm. 503 5/F, Tower B, Hung Hom Commercial Centre,
37-39 Ma Tau Wai Road, Hung Hom, Kowloon, Hong Kong ("AILICEC") and JetFax,
Inc., a Delaware corporation with offices at 978 Hamilton Court, Menlo Park,
California 94025 ("JETFAX").
RECITALS
--------
WHEREAS, JETFAX is engaged in the development of a certain plain paper
facsimile product for AILICEC;
WHEREAS, AILICEC is engaged in the manufacture of facsimile products, and
WHEREAS, AILICEC and JETFAX have agreed that JETFAX will develop the plain
paper facsimile product to be owned and manufactured by Ailicec as specified
below;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
set forth herein, AILICEC and JETFAX agree as follows:
1. Product.
-------
As used in this Agreement, the term "Product" shall mean the plain paper
facsimile machine designed and manufactured in accordance with the
specifications set forth in Exhibit A-1 annexed hereto, as may subsequently be
modified by mutual written agreement between the parties (the "Specifications").
2. Development and Ownership of the Product.
----------------------------------------
(a) JETFAX shall develop the Product in accordance with this Agreement,
including without limitation, the Specifications, and shall accomplish the
various milestones described in Section 3 by the respective dates set forth
therein. AILICEC may provide JETFAX with requests for Specific Product
requirements and/or modifications beyond those established in Exhibit A-1, and
in response JETFAX shall, within a reasonable time, provide AILICEC with a good
faith quotation and revised schedule within which such modifications may be
implemented.
In its discretion, AILICEC may accept or reject such quotation and revised
schedule. Upon
1
<PAGE>
AILICEC'S written acceptance thereof, if any, such quotation and revised
schedule shall be incorporated into this Agreement.
(b) All of the following shall be the exclusive property AILICEC:
(i) All results of the work of JETFAX in developing the Product,
including without limitation all tangible materials such as the drawings,
designs, prototypes, plans, work papers, schematic diagrams, circuit board
layouts, and related documentation; specifically excluding all software source
code as described in Section 4 below;
(ii) All patent rights, mask work rights and trade secrets in and to
the Product hardware, specifically including all inventions, discoveries, ideas,
technology, processes, formulas, production methods, techniques, concepts and
embodied or incorporated in the Product hardware; and
(iii) Copies of all tangible materials containing or embodying any
of the foregoing.
Items (i) through (iii) above shall collectively be the "AILICEC Property."
JETFAX hereby assigns to AILICEC all rights and title to the AILICEC Property as
they are generated by JETFAX. JETFAX hereby irrevocably sells, transfers and
assigns any and all rights that it may have in the AILICEC Property to AILICEC.
Upon the request of AILICEC, JETFAX shall execute any and all documents or
instruments, and take all other actions, necessary or convenient to evidence,
perfect or confirm AILICEC'S exclusive ownership of the AILICEC Property.
(c) JETFAX shall not manufacture or sell the Product, directly or
indirectly, through any related or unrelated third party, or authorize others to
manufacture or sell the Product, without the prior written consent of AILICEC's
board of directors.
3. Development Milestones and Payments.
-----------------------------------
(a) JETFAX shall develop the Product with reference to the Telstar II
Schedule in Exhibit A-2 and in accordance with the schedule set forth below, and
AILICEC shall pay JETFAX the following amounts upon the parties' execution of
this Agreement and upon JETFAX's completion of each of the following specific
development milestones. The milestones referred to below will be achieved on the
date indicated and it is AILICEC's sole responsibility to be at hand or have a
representative present at JETFAX's office if necessary on such dates to
determine the validity of the milestone being reached:
2
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<TABLE>
<CAPTION>
Development Milestone/ Development Work
Milestone Date Tasks Accomplished Payment Materials Delivered
- -------------- ---------------------- ------- -------------------
<S> <C> <C> <C>
[*]
</TABLE>
3
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(b) In the event that the milestone under sections 3(a)(4) or 3(a)(5)is not
completed on the specified Milestone Date set forth ; above, the payment to be
paid on such Milestone Date shall be reduced by [*] for every one day of delay.
In addition to these reductions, JETFAX shall be obligated to reimburse AILICEC
for all costs and expenses incurred by AILICEC arising out of or resulting from
JETFAX's delay in meeting any development milestone set forth above. JETFAX
shall make such reimbursement within thirty (30) days of AILICEC's submission to
JETFAX of a reasonably determined statement of such costs and expenses. Any
reduction in the development payments shall not affect JETFAX's obligations to
continue performance under subsection (a) herein.
(c) Except as expressly stated otherwise in this Agreement and in Sections
3(d) and 6, JETFAX shall bear all of the engineering costs in developing the
Product, including without limitation all industrial design, plastic enclosure
design, scanner and document feeder design, and related tasks; all electronic
hardware and software design and programming; all required prototypes of the
electronics hardware to meet the milestones described in Section 3(a) above; and
all costs associated with writing and documenting the user and service manuals
in English.
(d) Except as expressly stated otherwise in this Agreement and in Sections
3(c) and 6, AILICEC shall bear all of the costs of all models, prototypes and/or
test fixtures of the document feeders, laser engines and any other mechanical
components included in the Product; all plastic, metal or other tooling costs to
build either prototypes or production units; all in-circuit testers and other
test equipment and fixtures needed for production; all costs associated with any
shipping carton designs and materials; all printing costs for manuals, control
panels, and logos. These costs will be reimbursed by AILICEC only if JETFAX
obtains the prior written approval of AILICEC. AILICEC may, in its discretion
and by subsequent written agreement with JETFAX, agree to reimburse JETFAX for
certain additional costs associated with development of the Product.
(e) JETFAX shall send AILICEC, with a copy to Ailicec California
Corporation ("ACC"), a California corporation and an affiliate of AILICEC, a
development progress report by facsimile transmission by Monday of each week.
This report shall be prepared and approved by Rudy Prince or Lon Radin and shall
give the status of the development and an evaluation of whether JETFAX is able
to meet the development milestone deadlines set forth in subsection (a) herein.
4. Delivery of AILICEC Property; Software.
--------------------------------------
(a) JETFAX shall physically deliver all tangible materials in JETFAX's
possession in relation to the Product pursuant to Section 3(a) and all AILICEC
Property to AILICEC at any location designated by AILICEC and pursuant to
instructions given by AILICEC. The parties agree that beyond the final
development payment pursuant to Section 3(a)(5) above, JETFAX shall continue the
development in good faith until the Specifications are complied with in all
respects or as modified and agreed upon between the parties; and all final and
necessary documents are provided to AILICEC.
(b) The parties acknowledge that AILICEC shall have all rights, title and
interest of any kind, nature or description in the source code for software
incorporated in all the standard features of the Product as described in Exhibit
A-1 attached hereto ("Standard Feature Source Code"), and JETFAX hereby assigns
to AILICEC full title and interest in the worldwide rights to the Standard
Feature Source Code, including all
4
<PAGE>
applicable copyrights and trade secret rights. As the owner of the Standard
Feature Source Code, AILICEC shall have the unrestricted rights, without further
obligation to compensate JETFAX, (1) to reproduce and use the Standard Feature
Source Code in the manufacture, distribution, marketing and sale of the Product,
(2) to reproduce, decompile, debug, analyze, modify, and/or upgrade the Standard
Feature Source Code to the extent necessary to ensure proper operation of the
Product in compliance with the Specifications, to address defects therein,
and/or to enhance the Product with additional features. Upon request JETFAX
shall assist AILICEC in correcting any errors or malfunctions in the Standard
Feature Source Code that may arise in connection with the use or operation of
the Product.
(c) The parties acknowledge that JETFAX shall retain full title to and
ownership of the source code for the software incorporated in the optional
features of the Product as described in Exhibit A-1 attached hereto ("Options
Source Code"), including all applicable copyrights and trade secret rights.
JETFAX hereby grants a perpetual, nonexclusive, worldwide royalty-free license
to AILICEC to use the Options Source Code (1) to reproduce and use the Options
Source Code in the manufacture, distribution, marketing and sale of the Product,
(2) to reproduce, decompile, debug, analyze, modify, upgrade and/or reverse
engineer the Options Source Code to the extent necessary to ensure proper
operation of the Product in compliance with the Specifications, to address
defects therein, and/or to enhance the Product with additional features, all
without further obligation to compensate JETFAX. Upon request and at JETFAX's
own expense, JETFAX shall assist AILICEC in correcting any errors or
malfunctions in the Options Source Code that may arise in connection with the
use or operation of the Product.
(d) Concurrent with AILICEC's receipt of the final version of the Product
pursuant to Section 3(a)(6) JETFAX shall provide AILICEC with the Standard
Feature Source Code and the object code version of the Options Source Code on a
floppy disk and in printed text form. AILICEC agrees that such Standard Feature
Source Code and object code version of the Options Source Code shall be held in
the strictest confidence for use only by employees or agents of AILICEC. In the
event of the bankruptcy or insolvency of JETFAX, the parties acknowledge that
AILICEC may have the option to purchase JETFAX's ownership right of the Options
Source Code.
(e) AILICEC shall not use the Standard Feature Source Code to develop any
new product related or unrelated to the Product for a period of two (2) years
beginning on the date that AILICEC commences manufacturing the Product.
Thereafter, AILICEC may develop any new product provided it first offers to
JETFAX the opportunity to develop such new product jointly with AILICEC. JETFAX
shall not use the technology provided to AILICEC under this Agreement to develop
(i) any products which are competitive with and substantially equivalent to the
Product for a period of one (1) year beginning on the date that AILICEC
commences manufacturing the Product, thereafter, JETFAX may use the technology
to develop any new product provided it first offers to AILICEC the opportunity
to jointly develop such new product. AILICEC agrees not to sell, assign or
otherwise transfer the Standard Feature Source Code during the term hereof and
for a period of five (5) years beginning on the date that AILICEC commences
manufacturing the Product. JETFAX agrees not to sell, assign or otherwise
transfer the Options Source Code during the term hereof and for a period of two
(2) years beginning on the date that AILICEC commences manufacturing the
Product.
5. Training and Documentation.
--------------------------
If requested by AILICEC, JETFAX shall provide training-in the manufacturing,
operation, installation and maintenance of the Product to not less than three
(3) employees designated by AILICEC, at no charge to
5
<PAGE>
AILICEC at a location in the United States designated by JETFAX and reasonably
acceptable to AILICEC. AILICEC shall bear reasonable costs for travel, lodging
and other reasonable expenses related to such training. The training shall be in
such depth that AILICEC personnel so trained will be able to train other
personnel to make, use, install and maintain the Product. JETFAX shall also
furnish such trainees, at no charge to AILICEC, with copies of all manuals,
schematic diagrams, blueprints and all other material required for the
manufacture of and training concerning the Product.
6. Regulatory Approvals.
--------------------
Upon AILICEC's final development payment pursuant to Section 3(a)5 above,
the parties shall use their best efforts and cooperate, using both parties'
names as applicant, to obtain necessary regulatory approvals for the unlimited
commercial manufacture, sale and use of the Product, including without
limitation an Underwriters Laboratories Listing; Federal Communications
Commission certification under applicable requirements as appearing in 47 C.F.R.
Section 15.801 et seq., Part 15, subpart J, as a Class A computing device, and
in 47 C.F.R. Section 15.801, Part 68; Canadian Department of Commerce
certifications for telecommunication equipment and/or a Canadian Standards
Association Listing for Safety compliance. The out-of-pocket costs of obtaining
such approvals, including the costs of hiring consultants and all necessary
registration fees, shall be shared equally between the parties; provided,
however, that the parties shall agree in advance prior to incurring any such
out-of-pocket costs.
7. Warranty by JETFAX.
------------------
(a) JETFAX hereby warrants to AILICEC that the Product shall be free from
defects in design, and Products properly manufactured from such design shall be
suitable for commercial use and shall be compatible with any widely distributed
fax machine which conforms to applicable CCITT (Coordinating Committee on
International Telephone and Telegraph) fax transmission protocols in effect as
of the date of final delivery of the Product pursuant to Sections 3(a)(5) and
3(a)(b).
(b) THE ABOVE WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL JETFAX BE LIABLE FOR
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF JETFAX IS ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT.
8. Nondisclosure.
-------------
Neither party shall, at any time during the term of this Agreement, disclose
to any third person the terms and conditions of this Agreement except (i) with
the prior written consent of the other party, which consent shall not be
unreasonably withheld where such disclosure is necessary to the business
operations of the party requesting disclosure, or (ii) by reason of legal
compulsion in any legal proceeding or pursuant to applicable, laws.
9. Indemnification.
---------------
(a) AILICEC shall defend, indemnify and hold JETFAX harmless from and
against any and all damage, liability, cost, or expenses (including without
limitation reasonable attorney's fees and related costs),
6
<PAGE>
whether or not litigation is instituted, incurred by JETFAX based upon or in
connection with a willful and material breach by AILICEC of any or all of its
covenants in this Agreement.
(b) JETFAX shall defend, indemnify and hold AILICEC harmless from and
against any and all damage, liability, cost, or expenses (including without
limitation reasonable attorney's fees and related costs), whether or not
litigation is instituted, incurred by AILICEC based upon or in connection with a
willful and material breach by JETFAX of any or all of its covenants in this
Agreement.
(c) JETFAX shall defend, indemnify and hold AILICEC harmless from and
against any claims of patent, copyright, trade secrets and mask works
infringement worldwide. In such event that a third party claims infringement of
patents, trade secrets, copyrights, mark works rights with respect to AILICEC's
use of, sale, licensing or other exploitation of the AILICEC Property, or any
impending claim comes to the attention of AILICEC, it shall immediately inform
JETFAX in writing, stating the full facts of the infringement known to it.
AILICEC agrees to cooperate fully with JETFAX at the expense of JETFAX if JETFAX
requires assistance defending against such claims.
10. Term of Agreement.
-----------------
The term of this Agreement shall commence on the date first written above
and shall expire when all of the following is completed: (i) the final
development payment is made pursuant to Section 3 (a) (5); (ii) demonstration by
JETFAX that the final working prototype of Product functions properly in
compliance with all the Specifications set forth in Exhibit A-1 pursuant to
section 3(a)(6); and (iii) all of JETFAX's work materials in relation to the
development of the Product, the AILICEC Property, the Standard Feature Source
Code and the optional features object code pursuant to Section 2(a), 3(a) and
4(d) have been received by AILICEC.
11. Termination.
-----------
(a) Notwithstanding Section 10, either party may terminate this Agreement
prior to its expiration by written notice to the other party, if the other party
has materially breached any provision hereof and failed to cure such breach
within thirty (30) days after receipt of written notice from the terminating
party describing the breach in reasonable detail.
(b) Notwithstanding Sections 10 and 13, AILICEC may (i) cause l no further
payments to be made to JETFAX pursuant to paragraph 2(f) of the Series E Stock
Purchase Agreement entered into by JETFAX and ACC on August 18 , 1991 and (ii)
make no further payments pursuant to Section 3 of this Agreement by delivering
written notice of termination to JETFAX, if JETFAX fails to meet its obligations
for thirty (30) days after the date of the milestone deadlines set forth in
subsection (3), (4) and (5) of Section 3(a) above.
(c) If JetFax's failure to perform under Section 3(a) continues for thirty
(30) days after the date of any milestone deadline thereunder, JETFAX shall be
deemed to be in material breach of this Agreement, and AILICEC may terminate
this Agreement forthwith. JETFAX shall deliver to AILICEC all work materials
generated by JETFAX up to the date of such early termination. JETFAX shall be
further obligated to reimburse AILICEC for all costs and expenses incurred by
AILICEC arising out of or resulting from JETFAX's failure to perform under
Section 3(a) up to a maximum of $200,000 and for all prior development payments
received from AILICEC within one year after receiving notice from AILICEC of
such termination of this Agreement.
7
<PAGE>
(d) Any termination of this Agreement in whole or part pursuant to this
Section shall not preclude resort by the terminating party to any other remedies
available to it.
12. Confidentiality.
---------------
(a) For the purposes of this Agreement, "Confidential Information" means
any information provided by a party to the other party in confidence during the
term of this Agreement. Information shall be presumed to be provided in
confidence if it is disclosed in writing, or, if disclosed orally, it is
identified as "confidential" at the time of disclosure and promptly confirmed in
writing to be confidential.
(b) Neither party shall disclose any Confidential Information of the other
party to any third party, or to any of its employees except for persons who
require access to such Confidential Information to accomplish the intended
purposes of this Agreement. Both parties shall take the same precautions to
protect the confidentiality of the other party's Confidential Information that
they take with respect to their own valuable, confidential and proprietary
information of like importance, including without limitation having all persons
who are permitted access to such Confidential Information execute agreements
requiring them not to disclose the Confidential Information. Neither party shall
use Confidential Information disclosed by the other party for any purpose other
than the purposes for which that Confidential Information was disclosed.
(c) The obligations set forth in clause (b) above shall not apply to any
particular portion of any Confidential Information that: (i) the disclosing
party authorized the recipient party in writing to disclose or copy; (ii) is or
becomes publicly available through no act or omission of the recipient party; or
(iii) came or comes into the possession of the recipient party without
restriction and through a source that has not breached any confidential
relationship with the disclosing party. Confidential Information shall not be
deemed to be "publicly available" if only generally described in the public
domain or if only portions of the Confidential Information are found in several
sources in the public domain, even if all such sources, when compiled together,
specifically describe such Confidential Information.
(d) For the purpose of this Agreement, all information included in the
AILICEC Property and work materials generated by JETFAX pursuant to this
Agreement shall be deemed Confidential Information.
13. Survival of Obligations.
-----------------------
Notwithstanding anything to the contrary in this Agreement, the expiration
or early termination of this Agreement shall not release either JETFAX or
AILICEC from their respective obligations under Sections 2, 4, 7, 9, 12 and 23
hereof, and such Sections shall survive such expiration or termination and
remain in effect. Similarly, such expiration or termination shall not release a
party from any liability which has already accrued to the other party as of the
date of expiration or termination.
14. Assignment.
----------
Neither party may assign any rights or delegate any duties under this
Agreement without the other party's prior written consent, and any attempt to do
so without such consent shall be void.
15. Notices.
-------
8
<PAGE>
Except as otherwise provided herein, all notices required or permitted to be
given hereunder shall be in writing and shall be valid and sufficient only if
dispatched by certified or registered mail, postage prepaid, confirmed facsimile
transmission or personal delivery, addressed to the party to be notified at its
address first above written, or such other address as such party may designate
in writing to the other party hereto. In the case of a notice sent by certified
or registered mail, such notice shall be deemed to have been given ten (10) days
after dispatch of the same. In the case of a notice sent by confirmed facsimile
transmission or personal delivery, such notice shall be deemed to have been
given upon receipt of same.
16. Severability.
------------
Any provision or term of this Agreement which is prohibited or unenforceable
in any jurisdiction shall be, as to such jurisdiction, unenforceable only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable any provision hereof
in any other jurisdiction. To the extent permitted by applicable law, JETFAX and
AILICEC hereby waive any provision of law which prohibits or render
unenforceable in any respect any provision hereof.
17. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument. Execution and delivery of this Agreement may be completed
by execution and delivery of original, signed copies hereof, or by facsimile
transmission of executed copies hereof, each of which shall constitute an
original and enforceable counterpart.
18. Applicable Law.
--------------
This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of California, without regard to conflicts
of law provisions thereof and without regard to the United Nations Convention on
Contracts for the International Sale of Goods.
19. Entire Agreement.
----------------
This Agreement is the final, complete and exclusive agreement between JETFAX
and AILICEC with respect to the subject matter hereof. the parties hereto shall
not be bound by any prior or collateral statement, warranties, representations,
agreement, arrangements of course of dealing between them affecting the subject
matter hereof, and each party hereby represents and warrants to the other that
in entering into this Agreement it has not relied and is not relying on any such
statements, warranties, representations, agreements or course of dealings.
20. Effect of Headings.
------------------
The headings to the paragraphs of this Agreement are for convenience of
reference only, they do not form a part of this Agreement and shall not in any
way affect the interpretation hereof.
21. Force Majeure. Neither party shall be responsible for any failure to
-------------
perform its obligations hereunder (except for obligations to make any payments
when due) due to any cause or event beyond such
9
<PAGE>
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
and in no case any 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.
22. Compliance with Laws.
--------------------
The parties shall comply with, at their own expense, all laws, ordinances,
rules, regulations and other requirements of all governments or agencies of
domestic or foreign jurisdictions relating to their respective obligations and
rights hereunder. The parties agree that the Product and each of their
respective obligations and rights hereunder may be subject to the Export
Administration Regulations of the U.S. Department of Commerce, as may be amended
from time to time, and agree to comply therewith, and the parties further agree
to comply with the requirements of the U.S. Foreign Corrupt Practices Act and
not to make any payments to third parties which would cause either party to
violate such Act.
23. Attorney's Fees. The prevailing party in any action or proceeding to
---------------
enforce the terms of this Agreement shall be entitled to reimbursement by the
other party for all costs (including the reasonable fees, costs and expenses of
attorneys and other professionals) incurred in connection with such action or
proceeding.
24. Independent Contractors. No provision of this Agreement shall be
-----------------------
construed to constitute either party as the agent, servant, employee, partner,
or joint venturer of the other party. The parties to this Agreement are and
shall remain independent contractors. Each party shall retain exclusive
management, direction, and control of its employees and the work to be performed
by it hereunder.
IN WITNESS WHEREOF, the parties have executed or have caused this Agreement
to be executed by their duly authorized representatives, as of the day and year
first above written. Agreed to as of this 25th day of September 1991 by and
between:
Ailcec International JetFax, Inc.
Enterprises Ltd.
By: /s/ Chung Chiu By: /s/ Edward R. Prince III
-------------- ------------------------
Title: CHAIRMAN Title: PRESIDENT
Date: September 26, 1991 Date: September 25, 1991
10
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A-1
PRODUCT SPECIFICATION
[*]
STANDARD FEATURES
- -----------------
[*]
11
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*]
OPTIONAL FEATURES
- ------------------
[*]
12
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A-2
Telstar II Schedule - July 15, 1991
-----------------------------------
<TABLE>
<CAPTION>
Jul Aug Sep Oct Nov Dec Jan Feb Mar
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*]
</TABLE>
13
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Jul Aug Sep Oct Nov Dec Jan Feb Mar
- --------------------------------------------------------------------------------
[*]
14
<PAGE>
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT is made as of February 12, 1997, by and between
JetFax, Inc., a Delaware corporation with its principal place of business at
1376 Willow Road, Menlo Park, CA 94025 ("JetFax"), and Ailicec International
Enterprises Limited, a Hong Kong corporation with its principal place of
business at Unit C, 2/F., Kaiser Estate, Phase 1, 41 Man Yue Street, Hunghom,
Kowloon, H.K. ("Ailicec").
WHEREAS, JetFax and Ailicec are parties to a Development Agreement dated as
of September 25, 1991 (the "Development Agreement");
WHEREAS, JetFax and Ailicec are parties to a Manufacturing Agreement dated
as of October 21, 1991 (the "Manufacturing Agreement") and a related Security
Agreement dated as of October 1991 (the "Security Agreement"); and
WHEREAS, in order, among other things, to clarify their relationship and
induce JetFax to raise capital in the public market, Ailicec and JetFax desire
to amend the Development Agreement as set forth below and to terminate the
Manufacturing Agreement and the Security Agreement;
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 Development Agreement, the Manufacturing
Agreement or the Security Agreement.
2. Section 2 of the Development Agreement is hereby amended by
adding the following new Section 2(d) at the end thereof:
(d) Notwithstanding anything in this Agreement to the contrary,
Ailicec hereby grants to JetFax, and JetFax hereby accepts, a non-
exclusive, perpetual, fully paid, royalty free, transferable, worldwide
right and license, with the right to sublicense, under all of its
intellectual property rights, to do any and all of the following: use,
modify, prepare derivative works of, include in other product material,
copy and reproduce, make and have made, publicly display, publicly perform,
license,
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<PAGE>
support, maintain, market, sell and otherwise distribute and otherwise
commercialize the Ailicec Property, the Product, the Standard Feature
Source Code and any technology, proprietary rights and know-how related
thereto and any derivative works thereof. In the event of any conflict
between the terms of this Section 2(d) and any other provisions of this
Agreement, the terms of this Section 2(d) shall control.
3. The third and fifth sentences of Section 4(e) of the Development
Agreement are hereby amended by deleting the text thereof in their entirety.
4. Text intentionally omitted.
5. The term "Agreement" as used in the Development Agreement shall
for all purposes refer to the Development Agreement as amended by this Amendment
Agreement.
6. The Manufacturing Agreement and the Security Agreement are hereby
terminated and neither of such agreements shall have any further force or
effect.
7. 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.
8. This Amendment Agreement shall become effective only upon the
closing of a public offering by the Company of any of its equity securities
sufficient to cause the conversion of the Company's Series E Preferred Stock
into Common Stock.
[balance of this page intentionally left blank]
-16-
<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. AILICEC INTERNATIONAL
ENTERPRISES LIMITED
By: /s/Edward R. Prince III By: /s/Chung Chiu
----------------------- ----------------
Edward R. Prince III Chung Chiu
President Title: Managing Director
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<PAGE>
EXHIBIT 10.31
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
REDACTED
DEVELOPMENT AND SUPPLY AGREEMENT
BY AND BETWEEN
JETFAX, INC.
AND
SAMSUNG ELECTRONICS CORPORATION
JUNE 30, 1995
CONFIDENTIAL
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<PAGE>
DEVELOPMENT AND SUPPLY AGREEMENT
THIS DEVELOPMENT AND SUPPLY AGREEMENT (the "Agreement") is entered
into and is effective as of June 30, 1995 (the "Effective Date"), by and between
JetFax, Inc., a corporation duly organized and existing under the laws of
Delaware, U.S.A. with its principal place of business at 1376 Willow Road, Menlo
Park, California 94025 ("JetFax"), and Samsung Electronics Corporation, a
corporation duly organized and existing under the laws of the Republic of Korea,
having its principal place of business at 20th Floor, Severance Building, 84-11,
5-Ka, Namdaemoon-Ro, Chung-Ku, Seoul, Korea ("Samsung").
A. Samsung is in the business of manufacturing and selling a variety of
electronic products including facsimile machines;
B. Samsung is currently developing a new product (the "Product" as
hereinafter defined) which will require certain controller electronics and
associated software;
C. JetFax is willing, subject to the terms and conditions set forth in
this Agreement, to develop the controller electronics and associated software to
be incorporated as part of the Product, supply the custom computer chips
required by JetFax's design and license to Samsung the intellectual property on
the terms and conditions herein; and
D. Samsung desires to have JetFax design and develop the necessary
electronics and software, procure from JetFax the custom computer chips required
by JetFax's design and to acquire a license to make, use and sell such
electronics, software and computer chips on the terms and conditions herein-,
IN CONSIDERATION of the foregoing and the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "Acceptance Date" shall mean the date of acceptance of a "JetFax
Deliverable" or "Samsung Deliverable," as hereinafter defined, pursuant to
Section 4.2(c) hereof.
1.2 "Affiliate" shall mean all entities and persons controlled by,
controlling or under common control with a party.
1.3 "ASIC Set" shall mean a single set of Application Specific Integrated
Circuit chips developed by JetFax for use in a single Product.
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<PAGE>
1.4 "Bill of Materials and Source List" shall mean the identification by
manufacturer and model of certain components and the source from which such
components may be obtained. A preliminary Bill of Materials is attached hereto
as Exhibit F.
1.5 "Deliverable" shall mean a JetFax Deliverable or Samsung Deliverable.
1.6 "Electronic" shall mean those controller electronics and "Software,"
as hereinafter defined, to be developed by JetFax and incorporated as part of
the Product.
1.7 "Errors" shall mean: (i) reproducible defects in any Deliverable which
causes it not to function in conformance with the Specifications, and (ii)
Software miscoding which results in the Software failing to function in
conformance with the Specifications, if such failure is reproducible.
1.8 "Hardware Designs" shall mean those designs for circuit boards,
including information for in-circuit testers, to be developed by JetFax in
accordance with the Specifications.
1.9 "JetFax Deliverables" shall mean, collectively or individually, JetFax
developed Electronics, Software, Hardware Designs and the Bill of Materials and
Source List. A more detailed description of the JetFax Deliverables is set
forth in Exhibit A to this Agreement.
1.10 "Product" shall mean the new Samsung combined laser printer,
telecopier, scanner and copier with features and "Specifications," as
hereinafter defined, as provided in Exhibit B.
1.11 "Project Schedule" shall mean the schedule of events for the parties'
performance under this Agreement, as set forth in Exhibit C.
1.12 "Services" shall mean the work and labor necessary for the performance
of the respective obligations of the parties.
1.13 "Software" shall mean software object code designed in accordance with
the Specifications.
1.14 "Specifications" shall mean the engineering, operational and/or
functional descriptions, details and requirements for the Product and the
Software and the Hardware Designs, as set forth in Exhibit B and mutually agreed
to between the parties as the same may be modified as provided herein.
1.15 "Samsung Deliverables" shall mean the sample Product units (minus
motherboard), list of connectors and connector pinouts, mechanical drawings and
power supply specifications as more fully set forth in Exhibit D.
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<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
2. SCOPE OF WORK
2.1 Services. Upon the terms and conditions set forth in this Agreement,
JetFax and Samsung agree to perform the Services required to provide their
respective Deliverables in accordance with the terms and conditions herein.
Each party will be responsible for obtaining all the technology, labor,
material, tooling and facilities necessary for the completion of its portion of
the Services, except as otherwise set forth in this Agreement.
2.2 Progress Reports. Each party hereto shall provide the other party
with progress reports, as reasonably requested by the other party, starting
after the Effective Date and ending on the final Acceptance Date. Each report
shall be in such form and contain such information as may be mutually agreed
upon by the parties, including but not limited to, progress to current scheduled
milestones, description of any problems in meeting milestones, and if any
problems are encountered, proposed recovery methods.
2.3 Agency Approvals.
(a) The parties agree that JetFax shall make all engineering changes with
respect to the Electronics necessary for obtaining any required governmental or
private agency approvals or certifications for the Product in the countries
fisted in Exhibit E. All costs of certification (except fees for FCC and IC
telecom approvals in the U.S. and Canada which shall be paid by JetFax),
including, but not limited to, testing fees, filing fees and rework charges
required in connection with applying for such approvals in such countries shall
be paid by Samsung. Alternatively, at Samsung's written election, JetFax shall
make such engineering changes and complete all necessary filings and
certifications for Samsung at a price of [*] per country, based on Samsung's
making such election for a minimum of three (3) countries. Such payment shall be
made at the time of Samsung's election to have JetFax provide such services.
(b) The parties agree that Samsung has the responsibility for and shall bear
the expense of obtaining any necessary Republic of Korea government (the "Korean
Government") or private agency approvals or certifications which are required in
connection with this Agreement. Samsung shall make no commitment to the Korean
Government or any agency thereof regarding this Agreement without the express
written consent of JetFax. If any approval or certification is conditioned upon
changes in the terms and conditions of this Agreement, such changes shall be
effective only if a formal amendment is executed by both parties. Samsung shall
advise Jetfax immediately of the receipt of such approvals and certifications
and shall provide JetFax a copy of the documents received by Samsung related to
such approvals and certifications.
3. DESIGN REVIEW AND SPECIFICATION CHANGES
3.1 Design Review. The parties agree to promptly confer at the request of
either party with respect to any material issues a party may have with the
performance of the other party of its obligations under this Agreement and to
review design and engineering issues. JetFax shall pay all travel related costs
for up to four (4) trips to Samsung's laboratory for two (2) of its employees in
providing the Services required hereunder up until the final Acceptance Date.
Airfare, transportation, housing and meal expenses associated with any trips by
JetFax employees in excess of the foregoing shall be paid for by Samsung.
3.2 Changes to the Specifications. JetFax shall make reasonable efforts
to ensure that the Hardware Designs are cost-effective. Each party is entitled
to request modifications in the form of changes or additions to the
Specifications at any time during the term of this Agreement. Such requests
shall be submitted in writing, and shall not be deemed or considered binding
unless accepted by the other party in writing. If any such modification of the
Specifications is agreed upon, the parties will negotiate an equitable
adjustment to the Agreement, including the apportionment of any additional
development, testing or tooling costs. Upon mutual agreement to any change to
the Specifications, both parties will proceed with the implementation of the
prescribed changes, and the Specifications and other Exhibits to this Agreement
shall be modified accordingly to reflect such agreed upon changes.
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<PAGE>
3.3 Modification to Specifications Upon Acceptance. Jetfax and Samsung
agree that upon acceptance of each Deliverable pursuant to Section 4.2, the
Specifications shall be modified as necessary to conform to the Deliverables, as
accepted, except as to material deviations from the Specifications noted in a
writing signed by both parties. The party responsible for such Deliverable
shall perform further work to correct such deviations. After acceptance of each
Deliverable pursuant to Section 4.2, the term "Specifications" as used herein
shall refer in all cases to the Specifications as so modified.
4. DELIVERABLES AND DELIVERY; ACCEPTANCE, AND REJECTION
4.1 Deliverables. Samsung and JetFax agree to use reasonable efforts to
perform their respective obligations hereunder and deliver their respective
Deliverables, which conform to the Specifications, in accordance with the
Project Schedule. Each party's obligation shall be contingent upon the other
party successfully providing any prerequisite Deliverable (as specified in the
Project Schedule) in a timely fashion. AU Deliverables shall be delivered by
the times set forth in the Project Schedule, The parties shall use such
Deliverables for testing and acceptance and marketing purposes only and shall
not sell, lease or transfer the same to any third party.
4.2 Acceptance.
(a) Each party will examine and test each Deliverable (and/or part thereof of
the other party upon receipt. Each receiving party shall, as soon as reasonably
practicable following the receipt of same, but in no event later than fifteen
(15) business days after receipt, (i) accept the Deliverable (or part thereof)
and so inform the other party in writing or (ii) if the Deliverable (or part
thereof) contains material Errors, reject the Deliverable (or part thereof and
provide the other party with a written statement of such material Errors. The
failure of a party to respond within the specified fifteen (15) day period shall
be deemed acceptance of the Deliverable (or part thereof, but shall not limit
the provisions of Section 4.4 hereof. Either party may request a reasonable
extension of time to complete such testing if required under the circumstances,
and both parties shall reasonably consider such requests, provided that no such
extension shall be effective unless in writing and signed by a duly authorized
representative of the party granting such extension.
(b) The developing party will promptly correct the material Errors set forth in
the statement of material Errors with respect to any Deliverable (or part
thereof) and redeliver the Deliverable (or part thereof to the receiving party
within such reasonable period of time as may be agreed upon by JetFax and
Samsung. The receiving party shall, as soon as reasonably practicable after such
redelivery, but in no event later than fifteen (15) business days thereafter,
accept or reject the redelivered Deliverable in accordance with the procedure
set forth in Section 4.2(a). Such procedure shall be repeated until the
Deliverables are accepted or the receiving party invokes the provisions of
Section 4.2(d) hereof.
(c) "Acceptance" shall be deemed to occur upon the earlier of (i) acceptance,
pursuant to this section, of all JetFax and Samsung Deliverables or (ii) the
first sale, lease, license or other distribution or transfer of a Product by
Samsung to a customer or other third party other than solely for test purposes.
(d) The parties further agree that if a dispute arises as to whether any
Deliverable (or part thereof) is acceptable under the foregoing procedure, and
the parties are unable after good faith negotiation to resolve such dispute, the
parties agree to submit the acceptability of any such Deliverable (or part
thereof to a mutually acceptable independent third party mutually acceptable to
the parties. Such third party shall test the Deliverable (or part thereof and
determine if the Deliverable (or part thereof meets the Specifications for the
Deliverable and thus is acceptable. The determination of such independent third
party as to the acceptability of any Deliverable (or part thereof shall be
deemed final. The cost, if any, of employing such independent third party shall
be borne by the losing party.
4.3 Rejection. If any Deliverable is determined under Section 4.2(d) to
not be acceptable, such feature may be deemed a breach of this Agreement by such
delivering party, and the non-breaching party may elect to
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<PAGE>
terminate this Agreement pursuant to Section 12.2(a) hereof or may elect to
accept further resubmission of the applicable Deliverable.
4.4 JetFax Support. For a period of one (1) year after JetFax's release
of the final production Software, JetFax shall provide Samsung with reasonable
engineering support as required to incorporate the Hardware Designs and Software
in the manufacture of the Product. All related airfare, transportation, housing
and meal expenses incurred by JetFax during visits requested by Samsung shall be
paid by Samsung. After the initial one (1) year period, JetFax shall make its
engineering support reasonably available to Samsung at JetFax's customary rates.
For two (2) years after the first date of production of the Product, JetFax
shall use reasonable efforts to correct all material, documented and
reproducible Errors in the Software at no additional charge. Samsung shall
provide such assistance as JetFax may reasonably request in making such
corrections. All such corrections to the Software and Hardware Designs shall be
deemed to be included in the licenses granted under Section 5.3 hereof JetFax
will have no obligation under this section with respect to any Error in the
Software or Hardware Designs caused by any person or entity other than JetFax,
and JetFax is not obligated to correct any Errors in the Software unless such
Error or defect causes the Software to fail to function in conformance with the
Specifications.
5. SUPPLY AND OWNERSHIP RIGHTS
5.1 ASIC Set Procurement. Samsung shall purchase all the ASIC Sets
Samsung or its Affiliates require from JetFax under the terms and conditions
contained herein.
5.2 Material Cost Estimates. If Samsung is unable to procure key
semiconductor components of the Electronics at a price similar to that price at
which JetFax is able to obtain such components, JetFax shall use reasonable
efforts to supply such components to Samsung at JetFax's cost plus handling,
shipping, packaging and insurance expenses.
5.3 JetFax Hardware Designs and Software Etc,
(a) Subject to the terms and conditions of this Agreement, JetFax hereby grants
to Samsung, effective only upon receipt of the final payment due under Section
6.1 herein, a nonexclusive, worldwide license for a period of five (5) years,
commencing on such date, to the Hardware Designs and the Software as required to
manufacture, distribute, sell and service the Product; provided, however, such
license shall not include the right to manufacture the ASIC Sets, which right
shall be retained by JetFax. All ownership rights of all intellectual property
pertaining to the Hardware Design and the Software, including documentation,
designs, schematics and software shall remain the sole property of JetFax.
(b) The non-exclusive license granted to Samsung pursuant to Section 5.3(a) of
this Agreement shall include the right to grant sublicenses to Affiliates of
Samsung but to no other party. Samsung shall give JetFax written notice of any
such sublicense and provide JetFax with a copy of the sublicense.
Notwithstanding any such sublicense, Samsung shall remain fully liable for
compliance with all of its obligations under this Agreement, including without
limitation, the payment of the amounts due under Section 6.2 of this Agreement.
(c) Samsung shall not alter, reverse engineer, decompile or disassemble the
Software or the ASIC Sets or the Field Programmable Gate Arrays included in the
Hardware Designs. JetFax retains all ownership rights in and to the Software,
Hardware Designs, and corresponding intellectual property.
5.4 Samsung Deliverables. Samsung retains its ownership rights in and to
any and all intellectual property developed by it and contained in the Samsung
Deliverables. Subject to the terms and conditions of this Agreement, Samsung
hereby authorizes JetFax to use the Samsung Deliverables and any other Samsung
"Confidential Information," as hereinafter defined, disclosed to JetFax under
this Agreement as necessary or useful to develop the JetFax Deliverables.
During the term of this Agreement, JetFax may reverse engineer, decompile or
disassemble any software provided by Samsung as necessary or useful for the
development of the JetFax Deliverables.
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<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
5.5 Third Party Confidential Disclosure Agreements. Prior to disclosing
any JetFax Deliverables to any third party in connection with Samsung's limited
"have manufactured" license pursuant to Section 5.3 (a), Samsung shall procure
from such third party a fully executed confidential disclosure agreement in a
form acceptable to JetFax, pursuant to which such party agrees to not disclose
or use such information except pursuant to such license, and naming JetFax and
such third party as parties thereto.
6. PAYMENTS
6.1 Development Fees. In consideration for the Services to be performed
by JetFax hereunder, Samsung agrees to pay to JetFax a nonrefundable development
fee of [*] paid in the following [*] at the times indicated:
(a) [*]
(b) [*] and
[*]
6.2 ASIC Price. Samsung shall pay JetFax for each ASIC Set procured from
JetFax pursuant to Section 5.1 an amount (the "ASIC Set Price") equal to the sum
of [*] Samsung shall pay the amount due hereunder to JetFax upon placing an
order for the ASIC Sets with JetFax. Notwithstanding the foregoing, the amount
due for the first [*] In determining the total cost of the components, the
costs used shall (i) be from the lowest cost suppliers located by JetFax or
Samsung, (ii) not include shipping, handling, taxes or other similar costs,
(iii) not include the cost of printed circuit boards, (iv) not include the cost
of additional or upgraded components required due to changes in the
Specifications or configuration after the Effective Date and (v) not include any
increase in DRAM or SRAM costs occurring after the Effective Date.
6.3 Method of Payment. Payment shall be made by check or by wire transfer
to such bank account or other place as designated in writing by JetFax from time
to time. All taxes, duties, imposts and similar charges which may be assessed
or imposed by any governmental authority upon the sums due to JetFax pursuant to
this Agreement shall be borne and discharged by Samsung except as may otherwise
be agreed to in writing by the parties. No part of the charges borne and
discharged by Samsung shall be deducted by Samsung from any payment due to
JetFax under this Agreement.
6.4 Late Fees. Any late payments shall include interest at the lesser of
(i) [*] per annum or (ii) the maximum rate allowed by applicable law. The
payment of such late charges shall not prevent JetFax from exercising any other
rights it may have as a consequence of the lateness of any payment.
7. REPRESENTATIONS AND INDEMNIFICATIONS
7.1 Representations. Each party represents and warrants that:
(a) it has full right and authority to enter into this Agreement, to perform
its obligations hereunder; and
(b) it has full right and authority to grant the rights granted to the other
party herein.
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<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
7.2 Samsung Indemnity. Subject to the terms hereof, Samsung agrees to
indemnify, defend and hold JetFax harmless from any claim, loss, or damage
arising from (a) any patent infringement of any third party's rights by any part
of the Product, including the Hardware Designs and Software if such items are
modified by, or on behalf of, Samsung and (b) any sale, use or other disposition
of the Product by Samsung or its transferees. Such obligation to indemnify
shall be subject to the condition that: (i) JetFax promptly notifies Samsung in
writing of any such claim, loss or damage and permits Samsung, through counsel
of choice, to answer the charge of infringement and defend such claim; (ii)
Samsung has sole control of the defense and all related settlement negotiations;
(iii) the claim does not involve a patent that is already licensed by JetFax in
its existing patent license agreements; and (iv) JetFax provides Samsung with
the assistance, information and authority to perform the above. If Samsung
agrees to settle the suit, both Samsung and JetFax agree not to publicize the
settlement nor to permit the party claiming infringement to publicize the
settlement.
7.3 JetFax Indemnity. In the countries fisted in Exhibit E, JetFax agrees
to indemnify, defend and hold Samsung harmless from any claims, loss or damage
arising from any patent infringement by JetFax's Hardware Design and Software.
Such obligation to indemnify shall be subject to the condition that: (i) Samsung
promptly notifies JetFax in writing of any such claim, loss or damage and
permits JetFax, through counsel of choice, to answer the infringement and defend
such claim; (ii) JetFax has sole control of the defense and all related
settlement negotiations; (iii) the claim does not involve a patent that is
already licensed by Samsung in its existing patent license agreements; and (iv)
Samsung provides JetFax with the assistance, information, and authority to
perform the above. If JetFax is liable for such infringement, JetFax may either
modify its design to be non-infringing or obtain a license to continue using
JetFax's design at JetFax's expense. If JetFax is unable to obtain a license
under reasonable terms and the parties are unable to reasonably design around
such patent(s), the parties shall negotiate in good faith a settlement between
them to omit the infringing patent from this indemnity provision.
If JetFax agrees to settle the suit, both JetFax and Samsung agree not to
publicize the settlement nor to permit the party claiming infringement to
publicize the settlement. Notwithstanding anything contained herein to the
contrary, JetFax's liability under this section of this Agreement shall be
limited to an amount not greater than the sum of [*]
Notwithstanding the foregoing, JetFax shall have no liability hereunder for any
claim, loss or damage based on modifications or other alterations made to the
Software or the Hardware Designs by a party other than JetFax or the
combination, operation or use of the Software or the Hardware Designs with other
hardware or software not furnished or developed by JetFax if such infringement
would have been avoided by the use of the Software and the Hardware Designs
without such modification or alteration or without such other hardware or
software.
8. CONFIDENTIALITY
Samsung and JetFax acknowledge that in the course of performance hereunder, each
party may disclose to the other Confidential Information. Confidential
Information shall include, but not be limited to, the Hardware Designs, the
Software, any other hardware designs or software provided, source lists, and
other trade secrets or proprietary information. Confidential Information shall
be treated as confidential by the receiving party. The receiving party shall
not disclose to others (including to any Affiliates of the receiving party not
bound by like conditions of confidentiality), nor make any use of the
Confidential Information received from the providing party for any purpose other
than as contemplated in this Agreement, without the prior written consent of the
providing party. Each party shall not so disclose or use Confidential
Information of the other except to the extent any of the Confidential
Information: (i) was known to the receiving party prior to the disclosure
hereunder; (ii) is or becomes publicly known through no fault or omission
attributable to the receiving party; or (iii) is rightfully given to the
receiving party from sources independent of the providing party, which sources
rightfully possess such information.
9. TRADEMARKS AND LOGOS
-8-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Samsung agrees to place JetFax's name and copyright notice on all electronic
components designed by JetFax including the firmware, the circuit boards and the
ASIC Sets. JetFax shall also have the right to prominently display its name on
all Windows software pieces, including but not limited to, the printer and
scanner drivers and the configuration program. JetFax shall have the right to
revoke Samsung's right to use JetFax's name and any logo or trademark if the
quality of the Products is not reasonably acceptable to JetFax.
10. MARKETING RIGHT
Samsung agrees to manufacture and sell the Products to JetFax on an OEM basis.
If Samsung has not entered into any OEM contract to supply the Products to a
third party for sale in the United States at the time JetFax wishes to first
place an order for the Products, JetFax and Samsung shall negotiate an agreement
with mutually agreeable terms for such sales. If at any time, Samsung enters
into an agreement to supply the Products to any third party for sale in the
United States on terms more favorable than those then currently in the agreement
between JetFax and Samsung, Samsung shall offer in writing to sell the Products
on the more favorable terms to JetFax. JetFax's rights under this section shall
not prevent Samsung from selling the Product to other OEMS.
11. TERM
This Agreement will commence on the Effective Date and will continue to be in
effect until five (5) years after the date JetFax releases the final production
Software, unless terminated earlier pursuant to other provisions in this
Agreement.
12. TERMINATION
12.1 JetFax Default. If JetFax breaches any of its material obligations
hereunder and fails to cure such breach within sixty (60) days of receiving
written notice thereof from Samsung, or if it is not reasonable to expect such a
cure within that period, fails to commence to cure within that period and to
continue to diligently cure the breach, the price to be paid by Samsung per ASIC
Set under Section 6.2 shall be reduced by [*] until such breach is cured.
12.2 Termination for Cause by Either Part . Either party may terminate this
Agreement:
(a) upon sixty (60) days written notice to the other party if the other party
breaches any of its material obligations hereunder and fails to cure such breach
during the notice period, or if it is not reasonable to expect such a cure
within that period, does not within such time commence to cure, and continues to
diligently cure, the breach; or
(b) upon sixty (60) days written notice to the other party if a petition in
bankruptcy or similar debtor protection law is filed by or against the other
party, or if the other party makes an assignment for the benefit of creditors,
or a receiver is appointed, and such events are not discontinued, vacated or
terminated during the notice period.
12.3 Effect of Termination.
(a) Upon termination of this Agreement, the license set forth in Section 5.3
hereof shall terminate and Samsung shall have no further rights hereunder and
JetFax shall have no obligation to provide any additional ASIC Sets. JetFax
shall retain all rights to the Hardware Designs and the Software.
(b) Upon termination of this Agreement, each party shall return to the other
party all Confidential Information of the other party and shall make no other or
further use of such Confidential Information. Upon termination of this Agreement
for any reason other than default by JetFax, Samsung shall immediately pay to
JetFax all amounts due hereunder which have not yet been paid.
-9-
<PAGE>
13. JETFAX FAILURE TO PERFORM
-------------------------
Subject to JetFax's rights in Article 12 and subject to Section 17. 1, if JetFax
discontinues its performance hereunder prior to the release of the final
production software and fails to make a good faith effort to complete
performance of its obligations hereunder, JetFax shall repay to Samsung, as
liquidated damages, all payments received by JetFax under Section 6. 1.
14. RIGHT TO DEVELOP FOR OTHERS
---------------------------
Nothing in this Agreement will impair JetFax's right to acquire, license,
develop, manufacture, sell or distribute for itself or others similar technology
performing the same or similar functions as the technology contemplated by this
Agreement.
15. DISPUTE RESOLUTION
------------------
15.1 DisputeResolution. All disputes under this Agreement shall be
-----------------
settled, if possible, through good faith negotiations between the parties. If
such good faith negotiations are unsuccessful, either party may, after thirty
(30) days written notice to the other party, seek arbitration as hereinafter
provided.
15.2 Arbitration. Any dispute under this Agreement shall be settled by
arbitration in San Francisco, California, U.S.A. as follows:
(a) The matter in dispute to be settled by arbitration shall be submitted to a
panel of three (3) arbitrators in accordance with the Rules of Arbitration and
Conciliation of the International Chamber of Commerce C'ICC") then in effect.
(b) Each party shall appoint one arbitrator within fifteen (15) days after
giving or receiving the demand for arbitration. The two arbitrators thus
appointed shall, within fifteen (15) days after both have been appointed,
appoint the third arbitrator.
(c) Any appointment required herein not made within the prescribed time shall
be made by the ICC.
(d) The proceedings shall be conducted in English and all arbitrators shall be
fluent in English.
(e) The determination of the arbitrators shall be conclusive and binding upon
the parties and judgment may be entered thereon and enforced by any court
of competent jurisdiction and each party hereby irrevocably consents to the
jurisdiction of such courts for such purpose.
16. DISCLAIMER OF CONSEQENTIAL DAMAGES AND IMPLIED WARRANTIES
---------------------------------------------------------
In no event shall either party be liable to the other for any indirect, special,
incidental or consequential damages for breach of or failure to perform under
this Agreement, even if that party has been advised of the possibility of such
damages. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 7. 1, NEITHER PARTY MAKES ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR UALIED, WITH RESPECT TO ANY
DELIVERABLE OR OTHERWISE, INCLUDING WITHOUT LMTATION, THE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TECHNICAL PERFORMANCE, OR
COMMERCIAL SUCCESS AND HEREBY DISCLAIMS ALL SUCH OTHER WARRANTIES. EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY ASSUMES ANY RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO THE DEVELOPMENT, MANUFACTURE, USE, SALE, LEASE, OR
OTHER DISPOSITION BY THE OTHER PARTY OR ITS VENDEES OF PRODUCTS INCORPORATING
DELIVERABLES LICENSED OR PROVIDED UNDER THIS AGREEMENT.
-10-
<PAGE>
17. GENERAL
17.1 Force Majeure. Neither party shall be liable for any failure or delay
-------------
in its performance under this Agreement due to causes which are beyond its
reasonable control, including, but not limited to, acts of God, acts of civil or
military authority, fires, epidemics, floods, earthquakes, riots, wars,
sabotage, labor shortages or disputes, and governmental actions; provided that
(a) the delayed party: (i) gives the other party written notice of such cause
promptly, and in any event within fifteen (1 5) days of discovery thereof, and
(ii) uses its reasonable efforts to correct such failure or delay in its
performance, and (b) the delayed party's time for performance or cure under this
Agreement shall be extended for a period equal to the duration of the cause or
sixty (60) days, whichever is less.
17.2 Relationship of Parties. Samsung and JetFax are independent
-----------------------
contractors. Neither company nor its respective employees, consultants,
contractors or agents are agents, employees or joint venturers of the other, nor
do they have any authority to bind the other by contract or otherwise to any
obligation. They will not represent to the contrary, either expressly,
implicitly, by appearance or otherwise. Each party will determine, in its sole
discretion, the manner and means by which the Services are accomplished, subject
to the express condition that each party will at all times comply with
applicable law.
17.3 Personnel. The respective employees, consultants, contractors and
---------
agents of each party will observe the working hours, working rules and holiday
schedule of the other while working on the other's premises. Notwithstanding
the foregoing, employees of a party shall be and remain employees of that party
and shall not be deemed or claim to be employees of the other party even when
working on such other party's premises.
17.4 Employment Taxes and Benefits. Each party shall be responsible for
-----------------------------
any and all employment taxes and benefits payable to its employees,
representatives, contractors, subcontractors and other engaged by it to perform
Services hereunder and in no event shall either party look to the other for such
payments.
17.5 Other Tax Implications. The purpose of development of the
----------------------
Deliverables under this Agreement is to demonstrate that the Product developed
hereunder will conform to the Specifications. The Deliverables have no
intrinsic value as an item. As such, no value added, sales, or use taxes are
anticipated to be required as a result of the Services performed under this
Agreement.
17.6 Export Controls. Samsung acknowledges that it and JetFax are subject
---------------
to and agrees to abide by the United States laws and regulations (including the
Export Administration Act of 1979 and Arms Export Control Act) controlling the
export of technical data, computer software, laboratory prototypes, biological
material and other commodities. The transfer of such items may require a
license from the cognizant agency of the U.S. Government or written assurances
by Samsung that it shall not export such items to certain foreign countries
without prior approval of such agency. JetFax neither represents that a license
is or is not required or that, if required, it shall be issued.
17.7 Assignment. Except as expressly provided herein, neither party may
----------
assign or delegate this Agreement, or any of its respective rights or
obligations hereunder without the prior written consent of the other party
hereto; provided, however, that JetFax may, with prior written notice to
Samsung, assign or delegate this Agreement and JetFax's rights and obligations
hereunder to any successor in interest to JetFax in connection with any sale or
transfer of all or substantially all of its assets or upon any merger,
consolidation, or dissolution. Either party may, from time to time and upon
prior written notice to the other party, subcontract with one of its
subsidiaries for the performance of certain obligations under this Agreement
provided that the party so subcontracting shall remain liable for performance of
its obligations hereunder. Any attempted assignment in violation of the
provisions of this section shall be void and without force or effect. In the
event of a pen-nitted assigm-nent hereunder, this Agreement or the applicable
provisions shall be binding upon the successors, executors, and assigns of the
parties hereto.
17.8 Applicable- Law. This Agreement shall be governed by and construed in
---------------
accordance with the laws of the State of California, U.S.A. without giving
effect to the principles of conflicts of law thereunder.
-11-
<PAGE>
17.9 Severability. If for any reason a court of competent jurisdiction
------------
finds any provision of this Agreement, or portion thereof, to be unenforceable,
that provision of the Agreement shall he enforced to the maximum extent pen-
nissible so as to effect the intent of the parties, and the remainder of this
Agreement shall continue in full force and effect.
17.10 Notices. All notices required or permitted under this Agreement shall
-------
be in writing, reference this Agreement and be deemed given when: (i) delivered
personally; (ii) when sent by confirmed telex or facsimile; (iii) fifteen (15)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a commercial
overnight carrier, with written verification of receipt. All communications
will be sent to the addresses set forth below. Either party may change its
address by giving notice pursuant to this section.
JetFax:
- -------
Rudy Prince, President
Jet Fax, Inc.
1376 Willow Road
Menlo Park, California 94025
U. S. A.
Samsung:
- --------
Attn:
Samsung Electronics Corporation
20th Floor, Severance Building 84-11,
5-Ka, Namdaemoon-Ro, Chung-Ku
Seoul, Korea
With a copy to:
James Prince, Esq.
4200 Texas Commerce Tower
Houston, Texas 77002
U.S.A.
17.11 Waiver. Failure by either party to enforce any provision of this
------
Agreement shall not be deemed a waiver of future enforcement of that or any
other provision.
17.12 No Rights in Third Parties. This Agreement is made for the benefit of
--------------------------
Samsung and JetFax and not for the benefit of any third parties.
17.13 Language. This Agreement is executed in original English counterparts,
--------
each of which shall be deemed an original, but collectively shall constitute but
one and the same instrument. The English text of the Agreement shall prevail
over any translation thereof
17.14 Headings and References. The headings and captions used in this
-----------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
17.15 Construction. This Agreement has been negotiated by the parties and
------------
their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
17.16 Trademark Usage. Except for the provision stated in Section 9 of this
---------------
Agreement, neither party shall make any use of any trademark, service mark or
trade name of the other in connection with its advertising, promotional material
or packaging for the Product without first obtaining the other party's written
consent.
-12-
<PAGE>
17.17 Complete Agreement. This Agreement, including all Exhibits
------------------
constitutes the entire agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces all prior or contemporaneous
understandings or agreements, written or oral, regarding such subject matter.
No amendment to or modification of this Agreement shall be binding unless in
writing and signed by duly authorized representatives of both parties. To the
extent any terms and conditions of this Agreement conflict with the terms and
conditions of any invoice, purchase order or purchase order acknowledgement
placed hereunder, the terms and conditions of this Agreement shall govern and
control.
17.18 Survival. The provisions of Sections 5.3(c), 8, 12.3, 13, 14, 15 and
--------
16 shall survive the expiration or termination of this Agreement for any reason.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives effective as of the Effective Date.
JETFAX, INC., a Delaware corporation SAMSUNG ELECTRONICS
CORPORATION, a Korean
Bv: /s/ Edward R. Prince III Bv: /s/ DONGJA KIM
- ---------------------------- -------------------
NAME: Rudy Prince NAME: Dongja Kim
PRESIDENT DIRECTOR
-13-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A
JETFAX DELIVERABLES
[*]
-14-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT B
PRODUCT SPECIFICATION
[*]
-15-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
PRODUCT SPECIFICATION(CONTINUED)
[*]
-16-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
PRODUCT SPECIFICATION(CONTINUED)
[*]
-17-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT C
PROJECT SCHEDULE
[*]
-18-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT D
SAMSUNG DELIVERABLES
A. H/W DESIGN AND PRODUCTION RELATED DOCUMENTATIONS
1. [*]
2. [*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
B: S/W RELATED DOCUMENTATIONS
1. [*]
2. [*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
-19-
<PAGE>
EXHIBIT E
COUNTRY FOR AGENCY APPROVAL
** UNITED STATES
** CANADA
** UNITED KINGDOM
** GERMANY
** ITALY
** SPAIN
** SWEDEN
** HOLLAND
-20-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT F
SAMSUNG LAMP Controller Component Cost Estimate Preliminary Costed Bill of
Materials
<TABLE>
<CAPTION>
Target Extended
Item Quantity Unit Cost Cost Description
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[*]
</TABLE>
[*] - PAGES 22 THROUGH 24 ARE REDACTED
-21-
<PAGE>
EXHIBIT 10.32
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
REDACTED
SOFTWARE LICENSE AGREEMENT
BETWEEN
OKIDATA CORPORATION
AND
JETFAX, INC.
Effective Date: September 30, 1996
<PAGE>
SOFTWARE LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<S> <C> <C>
1. DEFINITIONS................................. 3
2. SUPPLIER WARRANTIES......................... 5
3. GRANT OF LICENSE............................ 6
4. DUTIES OF SUPPLIER.......................... 8
5. COMPENSATION................................ 8
6. INTELLECTUAL PROPERTY PROTECTION............ 9
7. TERMINATION................................. 11
8. TERM........................................ 12
9. LIMITATION OF LIABILITY..................... 13
10. MISCELLANEOUS............................... 13
11. SURVIVAL.................................... 14
SCHEDULES:
A SPECIFICATION
B SUPPLIER DOCUMENTATION
C ROYALTIES
D CUSTOM MODIFICATIONS
E DELIVERY
F MAINTENANCE
G CONFIDENTIALITY
H TRADEMARK USAGE
I ODC MFF Products
</TABLE>
<PAGE>
SOFTWARE LICENSE AGREEMENT
This Software License Agreement (the "Agreement") is entered into by and
between:
JetFax, Inc. ("Supplier"), a California corporation having its principal
business address at 1374 Willow Road, Menlo Park, CA 94025-1430, USA; and,
Oki Data Corporation ("ODC"), a Japanese corporation, having its principal
business address at 4-11-22 Shibaura, Minato-ku, Tokyo 108, Japan.
RECITALS
A. Supplier is currently developing certain multi functional software
referred to in portions of this Agreement as JetSuite(TM), in "Light"
and "Pro" versions.
B. ODC wishes to have JetSuite customized by Supplier to permit its
operation with ODC's Multi Functional Peripheral Interface, and
Supplier wishes to perform such customization for ODC.
C. Supplier wishes to grant to ODC and ODC wishes to obtain from Supplier
a non-exclusive worldwide license to distribute object code versions
of JetSuite, as customized, together with supporting documentation, to
purchasers of certain ODC multi functional products.
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein, Supplier and ODC agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the meanings set forth in
this Paragraph:
3
<PAGE>
1.1 "SOFTWARE". That group of computer programs developed by or
provided by Supplier known as "JetSuite(TM)", including the versions
customized hereunder by Supplier for ODC's Multi Functional Peripheral
Interface, which is more fully described in the Specification, together
with all Maintenance Modifications thereto.
1.2 "SPECIFICATION". The description of the design and function of
the Software contained in Schedule A, attached hereto and incorporated
herein.
1.3 "AFFILIATE". A corporation, company, or other entity in which a
party hereto owns, directly or indirectly, a beneficial interest of fifty
percent (50%) or more, or which, directly or indirectly, owns a beneficial
interest in fifty percent (50%) or more in such party or which directly or
indirectly controls such party, or is directly or indirectly controlled by,
or under common control with, such party and/or the parent company of such
party. For the purpose of this definition, the term "controls", "controlled
by", or "under common control with", as used with respect to any
corporation, company or other entity, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such corporation, company or other entity, whether through
the ownership of voting securities, or by contract, or otherwise.
1.4 "SUPPLIER DOCUMENTATION". The documentation, prepared by Supplier
in machine-readable form, of the design and operation of the Software, as
listed and described in Schedule B attached hereto and incorporated herein.
1.5 "ODC DOCUMENTATION". A derivative work of Supplier Documentation
prepared by ODC, or its sublicensees, by editing, reorganizing, and
expanding the Supplier Documentation into the format and trade dress deemed
appropriate by ODC, or its sublicensees, for purposes of marketing the ODC
MFF Products.
1.6 "DOCUMENTATION". A term that includes both Supplier Documentation
and ODC Documentation.
1.7 "ERROR". A defect in the Software which causes the Software not to
operate substantially in accordance with the Specification, or a mistake in
the Supplier Documentation which causes such a result, or which
substantially misleads the reader in the operation or maintenance of the
Software.
1.8 "MAINTENANCE MODIFICATION". A modification or revision to the
Software made by Supplier that (i) corrects an Error, (ii) supports a new
release of an operating system designated in the Specification with which
the Software is designed to operate; or, (iii) make enhancements or
improvements in efficiency or effectiveness, or constitutes
4
<PAGE>
any other change made at the option of Supplier for the convenience of
Supplier, within existing functions without adding new features.
1.9 "ODC MFF PRODUCTS". Multi function hardware products and associated
software developed by or provided by ODC that makes use of ODC's Multi
Functional Peripheral Interface as more fully described in Schedule I.
1.10 "END-USER". A third party using the Software and Documentation for
ordinary and customary business and personal use and not for
redistribution.
1.11 "RESELLER". A third party, such as distributor, dealer or private
label supplier, in ODC's chain of distribution that distributes the
Software and Documentation to other Resellers or to End Users.
1.12 REVENUE UNIT". One unit, determined for royalty purposes, as
described in Schedule C, attached hereto and incorporated herein.
1.13 "NON-REVENUE UNIT". One unit, determined for royalty purposes, as
described in Schedule C.
1.14 "MAINTENANCE SOURCE CODE". Source Code of certain portions of the
Software made available to ODC for maintenance purposes pursuant to
Paragraph 4.1 of this Agreement, as described in Schedule D.
1.15 "ODC-SUPPLIED SOFTWARE". Certain software of ODC, in object code
form, made available to Supplier to assist in its customization effort on
behalf of ODC, as described in Schedule D.
2. SUPPLIER WARRANTIES
2.1 Ownership. Supplier warrants that is owns (and to the extent
developed during the term of this Agreement, that it will own) or otherwise
has the full and complete right to license (and to the extent developed
during the term of this Agreement, that it will have the full and complete
right to license) the Software and Supplier Documentation and that there
are no claims, liens or clouds on such title or such rights.
2.2 Conformance With Specifications. Supplier warrants that the
Software and Supplier Documentation shall comply in all material respects
with the Specification and shall function on the machines and with the
operating systems identified in the Specification.
2.3 Preservation of Intellectual Property Rights. Supplier warrants
that the
5
<PAGE>
Software and Supplier Documentation, or any portions thereof, have not been
published or made available outside of Supplier without appropriate
proprietary or copyright notices where required to preserve Supplier's
ownership and proprietary rights therein.
2.4 Warranty Disclaimer. SUPPLIER MAKES NO WARRANTIES, OTHER THAN THOSE
SET FORTH IN THIS PARAGRAPH 2, WHETHER EXPRESS OR IMPLIED, AND SPECIFICALLY
DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR THAT THE SOFTWARE, INCLUDING THE CUSTOM SOURCE CODE, WILL RUN
ERROR-FREE. ODC has provided the opportunity under this Agreement to test
and evaluate the Software and is responsible for determining the
suitability of the Software for its purposes.
2.5 Remedy Limitation. ODC's sole remedy against Supplier for breach of
warranty of Paragraph 2.2 of this Agreement shall be to request a
Maintenance Modification and, if such Maintenance Modification is not
effected so as to correct the Error, to terminate this Agreement. The
foregoing limitation of remedies shall not apply to the enforcement of
ODC's right to damages or equitable relief for breach of the warranties
contained in Paragraphs 2.1 and 2.3 hereof, to enforcement of the
indemnities set forth in this Agreement, or to any remedies either party
may seek with respect to infringement of its trademarks, trade names, or
other intellectual property rights.
3. GRANT OF LICENSE.
3.1 Software. Supplier grants to ODC a nonexclusive, non-transferable
worldwide right and license, in compliance with the terms of this
Agreement, to reproduce the Software for inclusion in the ODC MFF Products,
in object code form only, and to market and distribute copies of the
Software, as included in the ODC MFF Products, in object form only, to its
Affiliates, Resellers and End Users under sublicenses that comply with
Paragraphs 6.4, 6.5 and 6.7 hereof.
3.2 Documentation. Supplier grants to ODC a nonexclusive, non-
transferable worldwide right and license, in compliance with the terms of
this Agreement, to copy the Supplier Documentation, to prepare ODC
Documentation as a derivative work thereof, and to copy and distribute the
ODC Documentation as part of the ODC MFF Products to its Affiliates,
Resellers and End Users under sublicenses that comply with Paragraphs 6.4,
6.5 and 6.7 hereof.
3.3 Demo Units. Supplier grants to ODC a nonexclusive, non-transferable
worldwide right and license, in compliance with the terms of this
Agreement, to make a total of [*] demonstration and training copies of
the Software and associated ODC Documentation for use by ODC and its sales
force in demonstration and training
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
6
<PAGE>
activities. Each such demonstration and training copy shall be prominently
marked with a legend stating "Demonstration and Training Copy--No Sale,
Transfer or Copying Authorized."
3.4 Maintenance Source Code. Supplier grants to ODC a nonexclusive non-
transferable, royalty-free internal company license to use and copy the
Maintenance Source Code, at a secure ODC site, for the limited purposes of
enabling ODC employees: (i) to understand its design, structure and
interface with the ODC MFF Products; and, (ii) when and to the extent
permitted under this Agreement, to correct Errors and to make other
maintenance modifications.
EXCEPT AS SET FORTH IN THIS SUBPARAGRAPH 3.4, ODC HAS NO RIGHT TO USE,
DISCLOSE, MODIFY, TRANSFER, SUBLICENSE OR OTHERWISE DISTRIBUTE THE
MAINTENANCE SOURCE CODE, AND ODC SHALL PROTECT THE MAINTENANCE SOURCE CODE
UNDER ALL PROVISIONS FOR CONFIDENTIALITY UNDER THIS AGREEMENT.
3.5 Trademarks. Supplier grants to ODC a non-exclusive, non-
transferable, worldwide, royalty-free right to use and reproduce certain of
Supplier's logos, trademarks and servicemarks in connection with the
distribution and promotion of the ODC MFF Products. ODC agrees to use such
logos, trademarks and servicemarks in a manner approved by Supplier and
consistent with Schedule H, attached hereto and incorporated herein.
3.6 Compliance. The licenses granted to ODC hereunder extend to its
Affiliates and any third party approved by Supplier; provided, however,
that ODC represents and warrants that such sublicensed Affiliates and third
parties shall be bound fully by the terms and conditions of this Agreement.
3.7 Cooperation. Supplier agrees to deliver to ODC all such duly
executed instruments (to be supplied by ODC) of license, application papers
and rightful oaths as are (i) necessary to vest in ODC, or any designee of
ODC, the foregoing rights in the Software Documentation, and (ii) necessary
or useful in enforcing and defending such rights.
3.8 Commencement. The license grants made by Supplier under this
Paragraph 3 shall be deemed made as of the Effective Date of this
Agreement.
3.9 Product Configuration. [*]
7
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[*]
(ii)
4. DUTIES OF SUPPLIER
4.1 Custom Modifications. Supplier shall develop certain custom
modifications to its JetSuite software to permit it to operate in the
environment of the ODC MFF Products and ODC's Multi Functional Peripheral
Interface on a schedule and for compensation, the terms of which are
described in Schedule D, attached hereto and incorporated herein.
4.2 Deliverables. Supplier shall furnish to ODC copies of the Software,
Maintenance Source Code and Supplier Documentation incorporated herein.
4.3 Maintenance. Supplier shall maintain the Software and the Supplier
Documentation on terms and for compensation as set forth in Schedule F
attached hereto and incorporated herein.
4.4 Technical Assistance and Training. Supplier agrees to provide, at no
additional costs to ODC, up to 20 hours of technical assistance and
training, at times and places to be designated by ODC, for the purpose of
transferring the Software to ODC and training selected ODC personnel, and,
if requested by ODC, ODC licensees, in the application, use and maintenance
of the Software. Supplier represents that Supplier has sufficient trained
personnel to perform the foregoing. In the event such technical assistance
and training sessions take place at a location other than Supplier's
facility in Menlo Park, ODC will reimburse Supplier for its reasonable
authorized travel and living expenses according to ODC's then current
practices, with receipts to be provided to ODC for all expenses in excess
of $25.00 US.
4.5 Option. Supplier agrees to offer to ODC the option to license any
multi-function software product Supplier may develop that it offers for
license on a non-exclusive basis, including any upgraded version of
JetSuite, on terms, except prices, similar to those set forth in this
Agreement. ODC shall have sixty (60) days, following any such offer by
Supplier, to respond with an expression of interest or no interest in
accepting such a license.
5. COMPENSATION
5.1 Royalties. In consideration of the rights and licenses conveyed
herein to ODC in and to the Software and Documentation, as well as the
obligations to be performed by
8
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Supplier hereunder, ODC agrees to compensate Supplier (i) for the custom
modifications addressed in Paragraph 4.1 hereof on the terms set forth in
Schedule D; and (ii) in accordance with the royalties and other terms set
forth in Schedule C.
5.2 Demo Units. Unless specifically provided otherwise in Schedule C, no
royalty shall be due or payable with respect to the [*] copies of the
Software and the ODC Documentation licensed pursuant to Paragraph 3.3
hereof, provided each such copy is marked "Demonstration and Training
Copy--No Sale, Transfer or Copying Authorized" and is used only for
demonstration and training purposes.
5.3 Reporting. ODC shall keep accurate and complete records of all
copies made of the Software and the description of such copies. ODC shall
allow an independent certified public accountant, chosen and paid by
Supplier, at reasonable intervals and during normal business hours of ODC,
to examine all books and records relating to the copying, distribution, and
sublicensing of the copies of the Software and ODC's Documentation for
purposes of determining royalties that have accrued. ODC shall deliver to
Supplier within sixty (60) days following the end of each quarter of ODC's
fiscal year, a written report showing the number of copies of the Software,
identifying Revenue Units and Non-Revenue Units, distributed by ODC during
the preceding period.
5.4 Payment. Payments to Supplier for royalties and for custom
modifications shall be made by ODC on the terms set forth in Schedules C
and D respectively.
6. INTELLECTUAL PROPERTY PROTECTION
6.1 Supplier Ownership. Title to and ownership of the Software and
Supplier Documentation, including the Maintenance Source Code, as well as
any modifications thereto made during the term of this Agreement, shall at
all times remain with Supplier, and ODC shall not be deemed to have
acquired hereby any title or ownership therein.
6.2 ODC Ownership. Title to and ownership of the ODC-Supplied Software,
as well as any modifications thereto made during the term of this
Agreement, shall at all times remain with ODC, and Supplier shall not be
deemed to have acquired any title or ownership therein. Supplier shall not
disclose, transfer, sublicense or otherwise distribute the ODC-Supplied
Software to any third party in any form.
6.3 Confidentiality. The parties have entered into a Proprietary Rights
and Non Disclosure Agreement effective March 25, 1996 ("Confidentiality
Agreement"), attached hereto and incorporated herein as Schedule G, which
expires by its terms one year following the effective date. The parties
hereby agree that the expiration date of the Confidentiality Agreement
shall be extended so that it expires on the expiration date of this
Agreement. All other provisions of the Confidentiality Agreement are
unchanged and in full force and effect.
9
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HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
6.4 ODC Protection. ODC shall take, and shall require its sublicensees
to take, all reasonable precautions, including those specifically requested
by Supplier, necessary to protect and preserve the rights of Supplier in
and to the Software and Supplier Documentation. In this connection,
notwithstanding the "sale" or "transfer" of the ODC MFF Products, each
transfer by ODC or its sublicensees of the Software and/or Supplier
Documentation to an End User shall be pursuant to a written End User
License Agreement, the form of which is approved by Supplier.
6.5 Marketing. The Software shall be marketed on a joint logo basis in
the trade dress of ODC, or its sublicensees, with a byline identifying
Supplier. ODC Documentation shall contain the following notice after the
title of the Program:
"JetSuite(TM), a trademark of JetFax, Inc.; Copyright (C) 19__ JetFax,
Inc., edited and distributed by [ODC or sublicensee] under license. All
------------------
rights reserved"
The year of copyright shall be as designated by Supplier (currently,
"1996") and the name of the sublicensee as designated by ODC.
6.6 Cooperation. The parties shall, to the extent commercially
reasonable under the circumstances, cooperate in the enforcement of all
rights in the Software and Documentation against infringers.
6.7 Reverse Engineering. ODC shall not reverse-assemble,
reverse-compile, or reverse-engineer the Software. ODC shall require of all
employees, Affiliates, Resellers, End-Users and any third parties who are
given access to the Software and Documentation, whether as part of the ODC
MFF Product organization or otherwise, that they not, except as expressly
authorized in this Agreement, copy, modify, distribute, reverse-engineer,
reverse-assemble, or reverse-compile the Software. ODC shall use all
reasonable efforts to enforce such requirement.
6.8 ODC Documentation Review. ODC shall, following receipt of the
Software and the Supplier Documentation, provide to Supplier a final draft
of the ODC Documentation for Supplier's review. Supplier shall review the
ODC Documentation for technical accuracy and within 14 days, report to ODC
in writing, any perceived inaccuracies and recommend corrections. ODC shall
incorporate into the ODC Documentation any such recommended corrections
necessary to ensure technical accuracy.
6.9 Product Review. ODC shall furnish to Supplier, prior to publication
or other dissemination, a copy of each version of the ODC MFF Product to be
distributed by ODC and representative copies of all other material and
publications that use or display the trade name, logos, trademarks or
servicemarks of Supplier. Supplier shall, after its review, return to ODC
such ODC MFF Products and other material and publications. ODC shall make
such changes as Supplier may reasonably require to ensure proper use of its
intellectual property and to avoid any statement that is, in Supplier's
business
10
<PAGE>
judgment, inaccurate, objectionable, or misleading. Neither party shall
have the right to use the other's intellectual property except in
connection with the ODC MFF Products and the promotion and publication
thereof.
6.10 Infringement Indemnity. Supplier agrees to defend, indemnify, and
hold harmless ODC from and against any claims that the Software or Supplier
Documentation infringes a U.S., Canadian, European, Japanese or Chinese
(PRC) copyright, trademark, trade secret, or other intellectual property
right of any other party. If such a claim arises, or if in Supplier's
judgment is likely to arise, Supplier may, at its sole option, procure the
right for ODC to continue to exercise its rights and licenses granted
herein, or to replace or modify the Software or Supplier Documentation in a
functionally equivalent manner so they become non-infringing. If neither of
the foregoing alternatives is available on terms that are reasonable in
Supplier's judgment, ODC, upon written request by Supplier, may return the
Software, Maintenance Source Code and Supplier Documentation to Supplier
and shall receive, as its sole remedy, reimbursement of the amounts paid to
Supplier hereunder with respect to distribution in the country or countries
in which the alleged infringement occurred. Notwithstanding the foregoing,
Supplier shall have no obligation of indemnity with respect to claims
arising out of (i) modifications made by ODC or its licensees; or, (ii) any
combination of the Software or Documentation with data not supplied by
Supplier, or with the software or hardware supplied by ODC or its
licensees, excluding ODC MFF Products.
6.11 Misstatement Indemnity. ODC agrees to defend, indemnify, and hold
harmless Supplier from and against any claims based on or arising out of
any statements or representations made by ODC, or its Affiliates, or the
employees or agents of any of them, or placed in the ODC Documentation,
that are not accurately derived from the Supplier Documentation or the
Specification, except for any such statement or representation contained in
the ODC Documentation reviewed by Supplier pursuant to Paragraph 6.8 and
not recommended for correction by Supplier.
6.12 Conditions of Indemnity. The foregoing indemnities are conditioned
on the following:
(i) Prompt written notice of any claim for which indemnity is sought, by
the party claiming indemnification, together with an offer to permit
the indemnifying party to conduct the defense;
(ii) Cooperation in the defense of any such claim, with each party
bearing its own respective costs of such cooperation; and
(iii) Sole control of the indemnifying party over any defense, settlement
or offer of settlement regarding any such claim.
11
<PAGE>
7. TERMINATION
7.1 Bankruptcy. This Agreement may be terminated by either party in the
event that the other party is adjudicated bankrupt, or if a receiver or
trustee is appointed for such party or for a substantial portion of its
assets, or if any assignment for the benefit of its creditors is made and
such adjudication, appointment or assignment is not-set aside within sixty
(60) days.
7.2 Material Breach. In the event of a material breach of this
Agreement, including, without limitation, Supplier's failure to deliver the
required custom modifications of the Software, which breach is not cured or
otherwise resolved within sixty (60) days after written notice from the
other party, the party giving notice may choose, at its sole discretion, to
pursue its remedies at law subject to the other provisions of this
Agreement, or to terminate this Agreement.
7.3 Stop Work. Upon receipt of a termination notice from ODC, unless the
parties specifically agree otherwise in writing, Supplier must immediately
stop all further non-recurring engineering ("NRE") cost incurrence
hereunder relating to custom modifications for ODC, and no such costs
incurred following such notice shall be reimbursable.
7.4 Maintenance. In the event of termination of this Agreement by ODC,
all obligations of Supplier to ODC for maintenance and support shall cease.
7.5 End User sublicenses and royalties. Termination of this Agreement
shall have no effect on End User sublicenses granted by or through ODC
prior to the effective date of such termination, or on any unfulfilled
obligation of ODC to pay royalties for copies of the Software made and
distributed at any time.
7.6 Confidentiality. Neither termination nor expiration of this
Agreement shall relieve either party of its continuing obligations of
confidentiality and non-disclosure expressed herein.
7.7 Maintenance Source Code Return. Seven (7) years following any
termination of this Agreement, ODC shall promptly return to Supplier the
Maintenance Source Code furnished hereunder.
8. TERM
8.1 Duration. This Agreement shall commence as of the Effective Date set
forth at the end of this Agreement and, unless terminated earlier pursuant
to the provisions of Paragraph 7 hereof, shall continue in effect for five
(5) years, at which time it shall expire.
12
<PAGE>
8.2 Effect of Expiration. Upon expiration of this Agreement, all
distribution rights granted hereunder shall cease, however, expiration
shall have no effect on End User sublicenses granted by or through ODC
prior to the effective date of expiration, or on any unfulfilled obligation
of ODC to pay royalties for copies of the Software made and distributed at
any time. Seven (7) years following expiration of this Agreement, ODC shall
promptly return to Supplier the Maintenance Source Code furnished
hereunder.
9. LIMITATION OF LIABILITY.
EXCEPT FOR CLAIMS INVOLVING PERSONAL INJURY OR DEATH, INTENTIONAL
MISAPPROPRIATION OF THE INTELLECTUAL PROPERTY OF A PARTY BY THE OTHER PARTY
OR THE LOSS OF VALUABLE INTELLECTUAL PROPERTY THROUGH THE FAILURE OF THE
OTHER PARTY TO PROTECT IT AS REQUIRED HEREUNDER, IN NO EVENT SHALL EITHER
PARTY OR THEIR AFFILIATES OR LICENSEES BE ENTITLED TO ANY SPECIAL,
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) OR
DAMAGES EXCEEDING THE AMOUNTS THERETOFORE PAID TO SUPPLIER UNDER THIS
AGREEMENT, WHETHER SUCH LIABILITY ARISES FROM ANY CLAIM BASED ON BREACH OR
REPUDIATION OF CONTRACT, WARRANTY, BUSINESS TORT, NEGLIGENCE, OR OTHERWISE.
10. MISCELLANEOUS
10.1 Independent Contractors. Nothing contained in this Agreement or
done in pursuance thereof shall be deemed to constitute (i) a joint venture
between ODC or its Affiliates and Supplier, or (ii) any party hereto the
agent of the other party for any purpose whatsoever.
10.2 Survival of Basic Understanding. If any provision of this Agreement
is held to be unenforceable or illegal for any reason, such decision shall
not affect the validity or enforceability of the remaining portions hereof,
provided that with respect to any material provision deemed to be
unenforceable or illegal, the parties shall negotiate in good faith to
achieve a new legally enforceable provision which most closely approximates
the original intent of the provision declared unenforceable or illegal.
10.3 Amendments. Any amendments or alterations hereof shall be valid
only when made in writing and executed by authorized representatives of
both parties.
10.4 Notices. Notices and other formal communications by a party under
this Agreement shall be deemed given when delivered at the address below
(or such other address as may be furnished by either party hereafter) as
evidenced by registered mail return receipt or by telex, or facsimile
transmission followed by registered mail or other hard copy.
13
<PAGE>
For ODC: Oki Data Corporation
4-11-22 Shibaura, Minato-Ku
Tokyo, 108, Japan
Attn: Hiroyuki Sakai
For Supplier: JetFax, Inc
1376 Willow Road,
Menlo Park, CA 94025-1430 USA
Attn: Rudy Prince
10.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors or assigns of each party, however, this Agreement
is not assignable by either party without the prior written consent of the
other party, except that this Agreement may be assigned to an Affiliate, or
to a successor to all or substantially all of the assets and business of
the assigning party, provided that such Affiliate or successor in interest
agrees to perform all the responsibilities of the assigning party and the
assigning party guarantees such performance.
10.6 Non-Waiver. Either party's waiver of any instance of the other's
non-compliance with this Agreement shall not be deemed a waiver of any
future non-compliance.
10.7 Force Majeure. Neither party hereto shall be liable for any delay
or failure to perform any provision of this Agreement if such delay or
failure arises directly or indirectly out of any act of nature, acts of a
public enemy, earthquake, flood, government order, riot or any other cause
beyond the reasonable control of ODC or Supplier.
10.8 Governing Law and Dispute Resolution. This Agreement and the
performance of the parties hereunder shall be governed by and construed in
accordance with the laws of the State of California, USA. All disputes,
controversies or differences which may arise between the parties hereto out
of, in relation to or in connection with this Agreement, or the breach
hereof, shall be settled by binding arbitration held in San Francisco,
California, pursuant to the rules of the American Arbitration Association.
10.9 Integration. This Agreement sets forth the entire agreement and
understanding of the parties with respect to the subject matter of this
license, and merges all proposals, prior discussions or prior agreements
between them.
11. SURVIVAL
Paragraphs 1,2,6,8,9, and 10 shall survive for five (5) years after
termination or expiration of this Agreement.
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
caused this
14
<PAGE>
Agreement to be executed and consider the same to be effective as of September
30, 1996 ("Effective Date").
Supplier:
JETFAX, INC.
By: /s/ Edward R. Prince III
--------------------------
Title: PRESIDENT
-----------------------
ODC:
OKI DATA CORPORATION
By: /s/ Y. Shinaisho
--------------------------
Title: General Manager
-----------------------
15
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE A: SPECIFICATION
A.1 Design & Function. [*]
A.2 ODC MFF Products. [*]
A.3 Operating Systems. [*]
A.4 Communications. [*]
A.5 Schedule. [*]
JetFax Company Confidential Page 16
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
JETSUITE for OKI Functional Specification:
APPLICATION AND DRIVERS
(C) JetFax, Inc.
11/12/96
Rev 15
<TABLE>
<S> <C>
1. DOCUMENT SCOPE............................................................ 18
2. REFERENCES................................................................ 18
2.1 [*]................................................................... 18
2.2 [*]................................................................... 19
2.3 [*]................................................................... 19
2.4 [*]................................................................... 19
2.5 [*]................................................................... 19
3. JETSUITE DRIVERS.......................................................... 19
3.1 [*]................................................................... 19
3.2 [*]................................................................... 20
3.2.1 [*].............................................................. 20
3.3 [*]................................................................... 22
3.3.1 [*].............................................................. 22
3.3.2 [*].............................................................. 22
3.4 [*]................................................................... 23
3.4.1 [*].............................................................. 23
3.4.2 [*].............................................................. 23
3.4.3 [*].............................................................. 23
3.4.4 [*].............................................................. 24
3.5 [*]................................................................... 24
3.6 [*]................................................................... 24
3.7 [*]................................................................... 24
3.7.1 [*].............................................................. 24
3.7.2 [*].............................................................. 25
3.7.3 [*].............................................................. 26
3.7.4 [*].............................................................. 26
3.7.5 [*].............................................................. 26
3.8 [*]................................................................... 27
3.9 [*]................................................................... 27
3.10 [*].................................................................. 27
3.11 [*].................................................................. 28
3.11.1 [*]............................................................. 28
3.11.2 [*]............................................................. 28
3.12 [*].................................................................. 28
3.13 [*].................................................................. 29
4. JETSUITE APPLICATION...................................................... 29
4.1 [*]................................................................... 29
</TABLE>
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JetFax Company Confidential Page 17
<PAGE>
<TABLE>
<S> <C>
4.2 [*]...................................................................... 29
4.3 [*]...................................................................... 30
4.4 [*]...................................................................... 31
4.5 [*]...................................................................... 31
4.6 [*]...................................................................... 32
4.7 [*]...................................................................... 32
4.8 [*]...................................................................... 32
4.9 [*]...................................................................... 32
4.10[*]...................................................................... 32
4.11[*]...................................................................... 33
4.12[*]...................................................................... 33
4.13[*]...................................................................... 33
4.14[*]...................................................................... 34
</TABLE>
Table of Figures
<TABLE>
<S> <C>
Figure 1 [*]................................................................. 20
Figure 2 [*]................................................................. 21
Figure 3 [*]................................................................. 23
Figure 4 [*]................................................................. 24
Figure 5 [*]................................................................. 27
Figure 6 [*]................................................................. 27
Figure 7 [*]................................................................. 28
Figure 1 [*]................................................................. 30
Figure 1 [*]................................................................. 34
</TABLE>
Document Scope
[*]
References
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 18
<PAGE>
[*]
JetSuite Drivers
Overview
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 19
<PAGE>
[*]
Figure 1: JetSuite Block Diagram
Status Monitor
Overview
[*]
JetFax Company Confidential Page 20
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[*]
Figure 2: Status Monitor Block Diagram
System Configuration
[*]
Printer setup
[*]
Scanner setup
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JexFax Company Confidential Page 21
<PAGE>
[*]
MFP Daemon
[*]
Status Monitor API
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 22
<PAGE>
TWAIN Driver
[*]
Figure 3: TWAIN Driver Block Diagram
[*]
TWAIN API
[*]
Scan MFPI Client Comm
[*]
Status API
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 23
<PAGE>
[*]
Setup Dialog
[*]
[*]
Figure 4: Basic MFPI Client Block Diagram
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 24
<PAGE>
[*]
Common Client API
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 25
<PAGE>
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 26
<PAGE>
Print Client
[*]
Figure 5: Print Client Block Diagram
Fax Client
Scan Client
[*]
Figure 6: Scan Client Block Diagram
JetFax Company Confidential Page 27
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Memory Clients
[*]
Figure 7: Memory Client Block Diagram
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 28
<PAGE>
[*]
[*]
JetSuite Application
Overview
[*]
Desktop
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 29
<PAGE>
[*]
Diagram of Computer Screen [*]
[*]
Figure 8: JetSuite Desktop User Interface
[*]
Viewing
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 30
<PAGE>
[*]
Printing
[*]
Faxing
[*]
Scanning
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 31
<PAGE>
Copying
[*]
PCL Emulation
[*]
Memory Requirements
[*]
Host Installer/Uninstaller & Localization
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 32
<PAGE>
[*]
Format of Deliverables
[*]
Documentation
[*]
Testing and Qualification
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 33
<PAGE>
JetSuite Table of Features
[*]
Listing Feature, Product included in, milestone and description.
Pages 34 through 40 have
been redacted [*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 34
<PAGE>
[*]
Introduction
- ------------
[*]
Terminology
- -----------
[*]
Alpha Quality Acceptance Criteria
- ---------------------------------
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
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<PAGE>
[*]
Beta Quality Acceptance Criteria
- --------------------------------
[*]
Documentation
[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 42
<PAGE>
[*]
FCS (First Customer Shipment) Quality Acceptance Criteria
- ---------------------------------------------------------
[*]
Documentation
[*]
Revision B. FCS Quality Acceptance Criteria
- -------------------------------------------
[*]
Documentation
[*]
Quality Statement
[*]
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<PAGE>
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 44
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE B: SUPPLIER DOCUMENTATION
Supplier Documentation shall consist of User's Manuals for JetSuite Lite and
JetSuite Pro versions. Each manual shall be sufficiently descriptive to permit a
user of average computer capability to operate the Software features required by
the Specification.
JetFax Company Confidential Page 45
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE C: ROYALTIES
C.1 REVENUE UNIT. For purposes of assessing royalties payable hereunder, each
of the following, when offered for sale, lease or sublicense by ODC, shall be
deemed one Revenue Unit ("RU"):
a. A copy of the Software, in either the Lite or Pro version,
made available as a component bundled with a hardware device that
makes use of ODC's Multi Functional Peripheral Interface.
b. A copy of the Software, in either the Lite or Pro version,
made available by any means independently of a hardware device.
C.2 NON-REVENUE UNIT. For purposes of assessing royalties payable hereunder, a
Non-Revenue Unit ("NRU") shall be deemed to be any RU on which no royalty shall
be due and payable. The following are the only NRU's authorized hereunder:
a. Demo Units described in Paragraph 5.2 hereof.
C.3 ROYALTY. In consideration of the rights and licenses granted to ODC
pursuant to Paragraph 3 hereof, ODC agrees to pay Supplier the following sums
for each RU distributed by ODC either directly or through sublicensing to third
parties:
QUANTITIES AMOUNT DUE
---------- ----------
JetSuite Lite Version
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 46
<PAGE>
C.4. MEDIUM OF PAYMENT. All royalties are payable in U.S. dollars.
C.5. PAYMENT OF ROYALTIES. The royalty payment obligation shall accrue upon
distribution, which shall mean delivery of a copy of the Software to a third
party, regardless of whether a sublicense shall have been executed or delivered
and regardless of whether fees or prices are paid by such third party. ODC shall
pay Supplier, within thirty (30) days after the conclusion of each calendar
quarter, the amount of royalties owing to Supplier based on the Revenue Units
distributed by ODC during such calendar quarter.
C.6. TAXES. The royalties and other payments set forth herein are net of, and
ODC shall hold Supplier harmless from any withholding, sales, excise or use tax
or taxes in lieu thereof, customs, local taxes or levies or similar governmental
charges, including any interest and penalties thereon, except for U.S. taxes
based on income earned by Supplier pursuant to this Agreement, which may be
imposed by any governmental authority upon use or sublicensing of the Software
or on this Agreement, except for any ten percent (10%) withholding tax levied on
the payment of NRE, royalties or license fees by the Japanese government ("W/H
Taxes"). If any W/H Taxes are required to be withheld, ODC will pay Supplier an
adjusted amount such that the net amount after withholding of such Taxes will
equal the amount that would have been otherwise payable under this Agreement
less five percent (5%). The sums shown in the Payment Schedule of Schedule D.5
hereof have already been adjusted for W/H Taxes in this manner and shall not be
subject to further adjustment.
C.7. MINIMUM COMMITMENT. In accordance with the Payment Schedule set forth in
Schedule D hereof, ODC shall pay to Supplier [*] For purposes of this Paragraph
C.7, the "first year" shall commence (i) upon first shipment of any model of the
ODC MFF Products; or, (ii) shipment of the first production version of the
Software with any model of the ODC MFF Products, whichever occurs later.
JetFax Company Confidential Page 47
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE D: CUSTOM MODIFICATIONS
D.1. LETTER OF INTENT. Pursuant to the terms of a Letter of Intent between the
parties dated April 11, 1996, in anticipation of the execution of this
Agreement, Supplier has been engaged in certain preliminary development and
engineering activities relating to the modification of its JetSuite software
programs to permit them to interoperate with the ODC MFF Products. Said Letter
of Intent is hereby superseded by the terms of this Agreement.
D.2. STATEMENT OF WORK. Supplier shall customize its JetSuite software programs
to perform those functions and provide those features described in Schedule A
which is attached hereto and incorporated herein.
D.3. SCHEDULE. The dates for certain milestones in Supplier's customization
effort set forth in Section D.5 hereto shall be deemed target dates only and
Supplier makes and has made no representation that it will be able to complete
any of the enumerated tasks on its target date. Supplier will use its best
efforts to inform ODC of its progress and the parties intend to work together to
mutually determine modifications to the tasks and target dates should such
modifications become necessary.
D.4. DELIVERY. Deliverable items shall be furnished to ODC as described in
Schedule E.
D.5. COMPENSATION AND PAYMENT SCHEDULE. Supplier acknowledges receipt of the
sum of [*] from ODC in [*] representing the first increment of payment for NRE
effort expended in the customization effort. Further non-refundable payments,
which include compensation for this effort, for the minimum royalty commitment
described in Schedule C hereof, and for the first year annual maintenance fee
described in Schedule F hereof, shall be made as follows:
JetFax Company Confidential Page 48
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Payment Schedule
----------------
Event Amount Estimated Date
[*]
NOTE: The amounts shown are gross amounts prior to applying Japanese
withholding tax of 10%.
* Test criteria for these events are set forth in the ODC
Acceptance Criteria portion of the Specification.
D.6 MEDIUM OF PAYMENT. All payments are payable in U.S. dollars.
D.7 MAINTENANCE SOURCE CODE. The following items constitute the Maintenance
Source Code.
o [*]
o [*]
D.8 ODC-SUPPLIED SOFTWARE. The following items constitute the ODC-Supplied
Software:
o [*]
o [*]
o [*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 49
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE E: DELIVERY
E.1 DELIVERABLE ITEMS. The following shall be delivered by Supplier to ODC:
(i) Two copies of the Software in object code form;
(ii) One copy of the Maintenance Source Code; and
(iii) Two copies of the Supplier Documentation in machine-readable
form.
E.2 EXPORT CONTROLS. The Software and Documentation may be subject to export
controls under the U.S. Export Administration Regulations and related U.S. laws.
ODC shall (i) comply strictly with all legal requirements established under
these controls; (ii) cooperate fully with Supplier in any audit that relates to
these controls; and (iii) not export, re-export, divert, transfer or disclose,
directly or indirectly ("Export"), the Software or Documentation to any country,
or any national or resident thereof, with the U.S. Government determines from
time to time is a country (or End User) to which such Export is restricted
without obtaining the prior written authorization of Supplier and the applicable
U.S. Government agency.
JetFax Company Confidential Page 50
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE F: MAINTENANCE
F.1. MAINTENANCE. For so long as maintenance is paid for under the terms of
this Agreement, Supplier shall: (i) perform Maintenance Modifications, including
the correction of Errors called to Supplier's attention by ODC, as soon as
commercially reasonable, and shall promptly thereafter furnish to ODC such
modifications and corrections, and, (ii) following delivery of the [*] respond
fully and in writing, with reasonable promptness, to questions posed by a
limited number (no more than six) of ODC personnel in engineering and/or
marketing, designated by ODC, regarding design and operation of the Software and
content of the Supplier Documentation.
F.2. COMPENSATION. The annual maintenance fee covering both JetSuite Lite
and Pro versions shall be [*]
F.3. PAYMENT. The maintenance fee shall be prepaid annually. Payment for the
first year of maintenance is included in the sums set forth in the Payment
Schedule of Schedule D.5. Subsequent payments shall be made on the anniversary
date of the actual Production Release date identified in said Payment Schedule
as estimated to take place in [*]
JetFax Company Confidential Page 51
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE G: CONFIDENTIALITY
The "Proprietary Rights and Non-Disclosure Agreement", effective March 25,
1996, between the parties is attached hereto.
JetFax Company Confidential Page 52
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE H: TRADEMARK USAGE
H.1 Intellectual Property
H1.1 Trade Name and Trademarks. The trade name and trademarks of Supplier
that may be used by ODC in connection with the Agreement include:
JetFax
JetSuite
JetSuite Lite
JetSuite Pro
H1.2 Logos. The logos of Supplier that may be used by ODC in connection with
this Agreement are represented by artwork shown in Appendix I attached hereto
and incorporated herein.
H.2 Screen Appearance
H2.1 Splash Screen. The "Splash Screen" depicted in Appendix I shall be
displayed momentarily in response to user selection of the JetSuite application.
H.2.2 About Box. The "About Box" depicted in Appendix I shall be displayed
when selected by the user. It shall be located in the introductory screen for
the main MFF application, as well as in connection with the printer drivers.
H3 No Modification. The appearance and placement of any of Supplier's
logos, trademarks, trademark and copyright notices, and the screen and boxes
shown in Appendix I shall not be removed or modified by ODC or its sublicensees
without the prior written consent of Supplier.
JetFax Company Confidential Page 53
<PAGE>
SCHEDULE H
APPENDIX I
[LOGO OF JETFAX]
[COMPUTER SCREEN SHOTS OF JETSUITE]
JetFax Company Confidential Page 54
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE I: ODC MFF PRODUCTS
I. The ODC MFF Products include the following:
A. Present Models:
[*]
B. Future Models:
o [*]
o [*]
[*]
II.
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JetFax Company Confidential Page 55
<PAGE>
EXHIBIT 10.33
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
REDACTED
[EXECUTION COPY]
SUPPLY AND LICENSE AGREEMENT
This SUPPLY AND LICENSE AGREEMENT ("Agreement") is made as of the 1st day
of November, 1996, by and between Pixel Magic, Inc. ("Supplier"), a
Massachusetts corporation and wholly-owned subsidiary of Oak Technology, Inc.,
having its principal offices at 300 Brickstone Drive, Andover, MA 01810, and fax
number 508-470-8892, and JetFax, Inc. ("Buyer"), a Delaware corporation having
its principal offices at 1376 Willow Road, Menlo Park, California 94025 USA, and
fax number 415-326-6003.
WHEREAS, Supplier is in the business of developing and marketing
compression and image processing chips and technology; and
WHEREAS, Buyer is in the business of developing and marketing fax, multi-
function and other machines and related technology;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings indicated:
1.1 Buyer's Products. [*].
----------------
1.2 Licensed Technology. [*].
-------------------
1.3 Products. The term "Products" shall mean the products set forth on
--------
Schedule 1 hereto with the characteristics and functionality as set forth in the
- ----------
Specifications.
1.4 Purchase Orders. The term "Purchase Orders" shall have the meaning
---------------
assigned to it in Section 2.2.
1.5 Specifications. The term "Specifications" shall mean the engineering,
--------------
operational and/or functional descriptions, details
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
and requirements for the Products as set forth on Schedule 2 hereto.
----------
1.6 Other Definitions; Schedules. Certain other words and phrases are
----------------------------
defined or described elsewhere in this Agreement and/or the Schedules hereto.
Wherever used in this Agreement (a) the words "include" or "including" shall be
construed as incorporating, also, "but not limited to" or "without limitation"
and (b) the word "day" means a calendar day unless otherwise specified. Unless
the context otherwise requires, words in the singular include the plural and
vice versa. All Schedules hereto are hereby incorporated herein and made a part
hereof.
2. PURCHASES; SALES
2.1 Purchases, Sales and Resale. Subject to the provisions of this
---------------------------
Agreement, Supplier agrees to sell and deliver to Buyer and Buyer agrees to
purchase the Products. Supplier agrees to use its best efforts to satisfy
Buyer's requirements for the Products. Subject to Supplier's ability to meet
Buyer's requirements, Buyer agrees to use its best efforts to purchase all of
its requirements for the Products for use in current (as of the date of this
Agreement) Buyer's Products [*] from Supplier. Subject to the terms and
conditions hereof, Supplier hereby grants to Buyer the right to incorporate the
Products into the Buyer's Products and to market, distribute and resell the
Products with such Buyer's Products on a worldwide basis under Buyer's name
and/or other names as Buyer may choose, including through Value Added Reseller
("VAR") and Original Equipment Manufacturer ("OEM") arrangements. Buyer and
Buyer's VAR's and OEM's rights to purchase are non-exclusive, and Supplier shall
have the right to sell Products to other OEMs, VARs, distributors, resellers and
others, alone or with products, in any location worldwide. Buyer shall have no
right to modify the Products or to sell the Products as stand-alone products or
otherwise than as part of the Buyer's Products.
2.2 Purchase Orders. Buyer shall place written orders ("Purchase Orders")
---------------
for units of Products in accordance with the terms and conditions of this
Agreement. Without limitation to the obligation of Supplier to sell to Buyer
hereunder, orders will be effective upon acceptance thereof by delivery of
Supplier's order acknowledgement, such acceptance not to be unreasonably
withheld. Each Purchase Order shall be deemed to incorporate the terms and
-2-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
conditions of this Agreement. All Purchase Orders shall be governed exclusively
by the terms and conditions of this Agreement, and any terms or provisions on
Buyer's Purchase Order forms or any Supplier's acknowledgments thereof that are
inconsistent with those contained in this Agreement shall have no force or
effect whatsoever as between the parties hereto. Neither Supplier's
commencement of performance nor delivery shall be deemed or construed as
acceptance of Buyer's additional or different terms and conditions. Purchase
Orders may be sent by facsimile transmission or other electronic media approved
by Buyer and shall specify: (a) that the Purchase Order is being placed under
this Agreement, (b) Buyer's Purchase Order number, (c) product number and
description, (d) ordered quantities, (e) purchase price; (f) tax status,
including exemption certificate number, if applicable, (g) scheduled ship dates,
(h) preferred shipping method, if any, and (i) "bill to" and "ship to"
addresses.
2.3 Lead Times. Scheduled delivery dates in Buyer's Purchase Orders for
----------
Products purchased hereunder shall be no sooner than ninety (90) days after the
date of issuance of a Purchase Order therefor; provided, however, that Supplier
shall use commercially reasonable efforts to meet shorter lead times (earlier
delivery dates) if requested in writing by Buyer.
2.4 Cancellation; Rescheduling. Buyer may cancel or reschedule all or a
--------------------------
portion of the Products to be purchased under any Purchase Order at no charge
(and with no penalty) by giving notice of such cancellation or rescheduling to
Supplier in accordance with the following schedules:
Cancellations:
Interval Between Percentage
Notice Date of Purchase Order
and Scheduled Quantity that May
Shipment Date Be Cancelled
----------------- -----------------
[*] [*]
-3-
<PAGE>
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Reschedulings:
Interval Between Percentage
Notice Date of Purchase Order
and Scheduled Quantity that May
Shipment Date Be Rescheduled
----------------- -----------------
[*] [*]
Products to be purchased under any particular Purchase Order may be
rescheduled as provided herein only once. Such rescheduled orders may not be
cancelled as provided hereunder.
2.5 Future Buyer's Products. Subject to the condition that the Products
-----------------------
sold pursuant to this Agreement meet the Specifications, and function in
accordance therewith, Buyer agrees to use reasonable efforts, consistent with
prudent commercial practices, to incorporate the Products into future Buyer's
Products [*] requiring components with functionality substantially similar to
that of the Products. Buyer shall give Supplier reasonable opportunity to
demonstrate the competitiveness of the Products and the feasibility of
incorporating the Products into any such future Buyer's Products requiring such
components.
2.6 Direct Sales to VAR and OEM Customers. Supplier agrees to negotiate
-------------------------------------
in good faith with Buyer's current and future VAR and OEM customers a supply
agreement or agreements for the sale and purchase of units of the Products for
use and resale in Buyer's Products. Supplier agrees to offer such VAR and OEM
customers terms no less favorable to such VAR and OEM customers than those
provided to Buyer in this Agreement, except with respect to Product price. All
sales to such VAR and OEM customers shall be at per unit prices as set by
Supplier and such VAR and OEM customers, provided that such per unit prices
shall be no less than [*]. All sales and deliveries pursuant to this Section
2.6 shall be made directly to Buyer's VAR and OEM customers. Upon Supplier's
request, Buyer shall provide Supplier with a list of Buyer's then current VAR
and OEM customers. Buyer shall not in any way be responsible or liable for the
performance or any nonperformance of
-4-
<PAGE>
Supplier or Buyer's VAR or OEM customers pursuant to this Section 2.6 or
otherwise.
3. DELIVERY
3.1 Delivery Terms. Supplier shall pack the Products for shipment and
--------------
shall externally label each package to indicate the description and quantity
contained therein. Risk of loss of the Products shall pass from Supplier to
Buyer upon delivery of the Products to Buyer, which shall be F.O.B. Sunnyvale,
CA, U.S.A. (F.O.B. meaning F.O.B. according to "Incoterms" as last published by
the International Chamber of Commerce). Supplier will ship in accordance with
Buyer's shipping instructions. In the absence of specific instructions or if
Supplier, in its reasonable discretion, deems Buyer's instructions unsuitable,
Supplier reserves the right to ship by the most appropriate method. Buyer shall
be responsible for all freight, handling, insurance and other transportation
charges from the F.O.B. point. All insurance for the Products shall name
Supplier as a beneficiary to the extent that Supplier retains an interest in the
Products. Without prejudice, Supplier waives in favor of Buyer its rights to
claims for any damage to the Products shipped; Buyer shall make all claims for
any damage directly to the freight or insurance carrier.
3.2 Delivery Delays. Supplier shall use best efforts to deliver Products
---------------
to Buyer on or prior to the scheduled delivery date specified on accepted
Purchase Orders. In the event that Supplier is unable to deliver any Products
within thirty (30) days of the scheduled delivery date, without limitation to
any other rights or remedy Buyer may have under law or this Agreement, Buyer
shall have the right to cancel that portion of the Purchase Order relating to
the delayed Products at no charge (and with no penalty) upon written notice to
Supplier. In the event that Buyer does not exercise its cancellation rights
with respect to any Products pursuant to this Section 3.2, Supplier shall
deliver such to Buyer and Buyer shall be obligated to purchase such products on
the terms specified in this Agreement.
3.3 Acceptance by Buyer. Buyer shall have 10 business days following
-------------------
receipt of the Products in which to notify Supplier of any discrepancies as to
number, type and condition of Products with respect thereto. Supplier will
promptly correct such discrepancies after being so notified.
-5-
<PAGE>
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
4. PRICE; PAYMENT
4.1 Prices. The prices per unit at which Buyer may purchase Products are
------
as set forth on Schedule 1 hereto. All prices are in United States Dollars.
----------
The prices in Schedule 1 may be revised at any time upon written agreement by
----------
Supplier and Buyer, and each of Supplier and Buyer agree to negotiate in good
faith regarding requests for such revisions. [*].
4.2 Taxes. All United States federal and state taxes based upon Buyer's
-----
use, sale, license or possession of the Products, other than income or franchise
taxes payable by Supplier, will be borne and paid by Buyer. Supplier agrees to
furnish any documents to taxing authorities if requested to do so by Buyer.
4.3 Payment. Buyer shall pay Supplier for all Products purchased
-------
hereunder, in full, within thirty (30) days of the receipt of such Products by
Buyer. All payments due hereunder shall be made by Buyer in United States
Dollars in the form, at the option of Buyer, of cash, check, wire transfer or
such other means as may be agreed upon between the parties. Past due balances
shall be subject to an interest charge of [*] per month computed from the
payment due date, or the maximum rate legally permitted, whichever is less.
4.4 Buyer To Determine Its Own Resale Prices. Without limitation to the
----------------------------------------
provisions of the last sentence of Section 2.1, Buyer is free to determine its
own prices for Buyer's Products (and the Products incorporated therein).
5. FORECASTS; ORDER SIZE
5.1 Purchasing Forecasts. Buyer shall provide Supplier with non-binding
--------------------
six (6) month rolling forecasts of Buyer's purchases of Products thirty (30)
days in advance of such six (6) month period updated on a monthly basis. Buyer
shall include in such forecasts any purchases by Buyer's VAR and OEM customers
that are purchasing Products from Buyer, but need not include any purchases by
Buyer's VAR and OEM customers that are purchasing Products directly from
Supplier pursuant to Section 2.6 of this Agreement.
5.2 Minimum Order Size. Buyer's orders for the Products must be for
------------------
quantities of not less than [*] for any single shipment.
-6-
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
5.3 Supplier Report. Upon Buyer's request, Supplier shall provide Buyer
---------------
with periodic reports of all orders for Products placed by Buyer's VAR and OEM
customers that are purchasing Products directly from Supplier pursuant to the
provisions of Section 2.6 of this Agreement.
6. WARRANTY
6.1 Warranty. Supplier warrants to Buyer that all Products sold pursuant
--------
to this Agreement shall substantially conform to the Specifications, shall
function in accordance therewith and shall be free from defects in materials and
workmanship for a period of [*]from and after the date of delivery to Buyer.
6.2 Epidemic Warranty. In addition to the provisions of Section 6.1,
-----------------
Supplier warrants for the benefit of Buyer, and covenants, that Supplier will
replace (pursuant to the terms of Section 6.3), at Supplier's expense, Defective
Products (as defined below) for a period of [*] following delivery thereof to
Buyer. "Defective Products" shall be defined as limited to Products that fail to
substantially conform to the Specifications, or function properly or in
accordance therewith, provided that such failure, or any combination of such
failures, occurs in more than [*] of such Products in any lot or batch delivered
to Buyer.
6.3 Remedy. Subject to the limitations set forth in this Section 6, upon
------
discovery of any defect in material or workmanship or failure of any Products to
substantially conform to the Specifications, or function in accordance
therewith, pursuant to this Section 6, Buyer shall promptly contact Supplier,
and Supplier shall promptly repair or replace such Products at Supplier's
expense or credit Buyer's account with an amount equal to the price paid for
such Products. Supplier shall be responsible for all freight and insurance
charges associated with any such replacement. If Supplier's inspection discloses
that the returned Products are not defective within the terms of the warranty
provided by this Section 6, then Buyer shall pay such freight and insurance
charges associated with such replacement. Supplier shall not be liable under
any warranty set forth in this Section 6 with respect to any Products that fail
to substantially conform to the Specifications or function properly or in
accordance therewith if, and to the extent, such failure would have been avoided
but for misuse, neglect, alteration, repair, improper installation or improper
-7-
<PAGE>
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
testing of the Products by Buyer. Supplier shall not be liable hereunder for
any labor or other costs incurred by Buyer related to the removal of any Product
permanently affixed to any printed circuit board.
6.4 DISCLAIMER OF OTHER WARRANTIES. THE WARRANTY SET FORTH IN THIS
------------------------------
SECTION 6 IS THE ONLY WARRANTY, EXPRESS OR IMPLIED, THAT SUPPLIER MAKES WITH
RESPECT TO THE PRODUCTS. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 6, ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, ARISING BY LAW, CUSTOM, PRIOR ORAL OR
WRITTEN STATEMENTS BY SUPPLIER OR OTHERWISE (INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OF
UNINTERRUPTED USE OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OTHER THAN AS SET
FORTH IN SECTION 9) ARE HEREBY OVERRIDDEN, EXCLUDED AND DISCLAIMED.
7. LICENSES; SUPPORT
7.1 License of Resolution Enhancement Technology. Supplier grants a
--------------------------------------------
fully-paid, perpetual, and non-exclusive license, with right to sublicense, to
Buyer to use Supplier's Resolution Enhancement Technology as described in
Schedule 3 hereto (the "RET"), with the right to use, modify, incorporate in
- ----------
other products, and distribute the RET with the following restriction: Buyer,
and Buyer's sublicensees, shall use the RET only in connection with Buyer's
Products that contain Products. In the event that Buyer wish to use the RET in
Buyer's Products that do not contain Products, Buyer and Supplier agree to
negotiate in good faith a license agreement for such use of the RET.
7.2 License of JBIG Software. Supplier grants a fully-paid, perpetual and
------------------------
non-exclusive license, with right to sublicense, to Buyer to use the source code
and object code of Supplier's JBIG software as described in Schedule 4 hereto
----------
(the "JBIG"), with the right to use, modify, incorporate in other products, and
distribute the JBIG (such right to sublicense and distribute to apply to the
object code form only except as set forth below) with the following restriction:
Buyer, and Buyer's sublicensees, shall not distribute the JBIG as a stand-alone
product or otherwise than as part of Buyer's Products that contain significant
additional functionality. Supplier shall deliver to Buyer the JBIG source code
and object code immediately upon execution of this Agreement. Buyer agrees to
pay to Supplier the amount of [*], as a one-time license fee for
-8-
<PAGE>
the JBIG, upon delivery of the JBIG source code and object code. Buyer may
sublicense and distribute source code of the JBIG, for maintenance purposes
only, as required pursuant to the terms of any source code escrow agreements to
which Buyer is, or may become, a party. Buyer shall provide Supplier with notice
of any such sublicense and distribution.
7.3 Integration Support Provided by Supplier. Supplier shall provide all
----------------------------------------
reasonable assistance to Buyer in support of Buyer's efforts to modify Buyer's
product designs and software to facilitate and expedite Buyer's use of the
Products in Buyer's Products. In addition, Supplier shall provide all
reasonable assistance to Buyer in support of Buyer's integration of the Licensed
Technology into Buyer's Products. In the event that Buyer requests that
Supplier's engineers travel to provide such support, Buyer shall bear the
reasonable direct costs associated with such travel, including
transportation,lodging and meal expenses. Supplier shall have no obligation
under this Section to provide any support to Buyer's OEMs and VARs or to any
distributors or end users of Buyer's Products.
7.4 Enhancements.
------------
(a) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, the definition of RET shall include any and all improvements,
bug fixes, patches, corrections, updates, modifications, additions and new
releases to and of the algorithms described in Schedule 3 which Supplier
----------
generally makes available to its other licensees (any and all of the foregoing,
the "RET Enhancements") developed or obtained by Supplier prior to the
expiration of this Agreement, and Supplier shall promptly deliver all such RET
Enhancements to Buyer as they become available. In the event that such RET
Enhancements are obtained by Supplier from a third party source, Supplier will
ensure that Buyer shall have the right to use such RET Enhancements, subject
only to the same fees or per unit royalties as apply to Supplier with respect
thereto.
(b) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, the definition of JBIG shall include any and all improvements,
bug fixes, patches, corrections, updates, modifications, additions and new
releases to and of any implementation of JBIG as defined in the "International
Standards" in connection therewith which Supplier generally makes available to
its other licensees (any and all of the foregoing, the "JBIG Enhancements")
developed or obtained by Supplier prior to the
-9-
<PAGE>
expiration of this Agreement, and Supplier shall promptly deliver all such JBIG
Enhancements to Buyer (in object code and source code form) as they become
available. In the event that such JBIG Enhancements are obtained by Supplier
from a third party source, Supplier will ensure that Buyer shall have the right
to use such JBIG Enhancements, subject only to the same fees or per unit
royalties as apply to Supplier with respect thereto.
8. PROPRIETARY RIGHTS
8.1 Subject to the terms of this Agreement and the rights granted herein,
Supplier retains all copyright, patent, trade secret, trademark rights and other
intellectual property rights in and to the Products and the Licensed Technology.
Buyer retains all copyright, patent, trade secret, trademark rights and other
intellectual property rights in and to any products designed and sold by Buyer,
including any modifications made by or for Buyer (other than by Supplier
pursuant to Section 7 hereof) pursuant to the rights granted in Section 7.
Nothing in this Agreement is intended to create ownership by Buyer in the
intellectual property rights of Supplier, nor of Supplier in the intellectual
property rights of Buyer.
8.2 Each of Supplier and Buyer shall keep confidential and not disclose to
any third party or use for its own benefit or for the benefit of any third
party, except as expressly permitted herein, any information provided to it by
the other (a) that is marked with a proprietary, confidential or other similar
notice, (b) if not so marked, that is reasonably understood by recipient to be
confidential (including all source code) or (c) that is orally disclosed to it
by the other and followed by a writing within thirty (30) days of such oral
disclosure indicating said information was confidential (collectively,
"Confidential Information"). The term "Confidential Information" shall not
include information that (i) is or becomes generally known or available through
no act or failure to act by recipient; (ii) is already known by recipient at the
time of receipt as evidenced by its written records; (iii) is hereafter
furnished to recipient by a third party, as a matter of right and without
restriction on disclosure; (iv) is disclosed by recipient with written
permission of the other party hereto or (v) is required to be disclosed by court
order or law. A party receiving Confidential Information shall take the same
measures to prevent unauthorized disclosure and maintain the confidentiality of
such Confidential Information as it takes with respect to its own confidential
information of similar importance, but shall in no event take less than
reasonable
-10-
<PAGE>
measures. A party receiving Confidential Information shall limit dissemination
of and access to any Confidential Information to those personnel of the
receiving party who have a good faith need for such dissemination or access to
effectuate the purposes of this Agreement.
8.3 Each of Supplier and Buyer acknowledge that it will be impossible to
measure in money the damages that would be suffered in the event of a material
breach of the obligations imposed on them by this Section 8 and that in the
event of any such material breach an aggrieved party will be irreparably damaged
and will not have an adequate remedy at law. Any such party shall, therefore,
be entitled to injunctive relief and/or specific performance to enforce such
obligations, and if any action should be brought in equity to enforce any of the
provisions of this Section 8, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
9. INDEMNITY
9.1 Indemnity. Supplier agrees, at Supplier's sole expense, to indemnify,
---------
defend and hold Buyer harmless from and against any claim, suit or proceeding
alleging that any of the Products or the JBIG, or any components or parts
thereof, including the JBIG compression and decompression techniques, infringes
any patent right, trademark right, copyright, mask work right, trade secret or
other intellectual property right of any third party. Buyer shall (a) give
Supplier prompt notice of any such claim, suit or proceeding, (b) permit
Supplier, through counsel of its choice, to answer the charge of infringement
and defend or settle such claim, suit or proceeding and (c) provide Supplier
with reasonable cooperation and assistance as Supplier may request in the
defense of such claim, suit or proceeding.
9.2 Limitation. Supplier shall have no liability under this Section 9 for
----------
any claim of infringement if, and to the extent, such infringement arises out of
(a) any modification to the Products or the JBIG by Buyer, if such infringement
would have been avoided by the use of the Products or the JBIG without such
modification or (b) any combination of the Products or the JBIG with hardware or
software not supplied by Supplier, if such infringement would have been avoided
by the use of the Products or the JBIG without such combination.
9.3 Remediation. In the event that any of the Products or the JBIG, or
-----------
any components or parts thereof, including the JBIG
-11-
<PAGE>
compression and decompression techniques, becomes the subject of a claim, suit
or proceeding alleging infringement of any intellectual property rights of any
third party, without limitation to its obligations under Section 9.1, Supplier
may, at its option and expense: (a) procure for Buyer and its customers the
right to use such Products or the JBIG (with any royalties or other payments
required to obtain such rights to be born by Supplier) or (b) replace or modify
such Products or the JBIG so as to be non-infringing (provided that such
replacement or modified Products or the JBIG are functionally and commercially
equivalent).
9.4 Exclusive Remedy. This Section 9 sets forth the sole obligations of
----------------
Supplier and the exclusive remedies of Buyer under this Agreement for any
alleged infringement by the Products or the JBIG of the intellectual property
rights of any third party.
10. TERM; TERMINATION
10.1 Term; Renewal. The term of this Agreement shall commence upon the
-------------
date first written above and shall continue, unless terminated in accordance
with the terms hereof, until December 31, 2000, after which this Agreement shall
be renewable by written agreement of the parties. Except as expressly set
forth, this Agreement may not be terminated by either party hereto except in
accordance with this Section 10.
10.2 Termination For Cause; Bankruptcy.
---------------------------------
(a) Either party hereto may terminate this Agreement for any material
breach of this Agreement by the other party hereto upon 30 days written notice
to the breaching party. Such notice shall identify with particularity the
alleged breach. If the breaching party shall not cure the breach within such
30-day period, this Agreement shall automatically terminate.
(b) Either party hereto may terminate this Agreement upon written
notice to the other party hereto in the event a petition for relief under any
bankruptcy law or legislation is filed by or against such other party, or such
other party makes an assignment for the benefit of creditors or a receiver is
appointed for all or a substantial portion of such other party's assets, and
such petition, assignment or appointment is not dismissed or vacated within
thirty (30) days.
10.3 Rights upon Termination or Expiration. Notwithstanding any
-------------------------------------
termination or expiration of this Agreement for any reason
-12-
<PAGE>
whatsoever, Buyer shall have the continuing right to market, distribute and
resell units of the Products until Buyer's inventory is exhausted. The terms and
conditions of this Agreement shall apply to such marketing and distribution as
though this Agreement were still in force. Upon expiration of this Agreement or
in the event this Agreement is terminated by Buyer for any breach by Supplier,
Supplier shall fulfill all Purchase Orders received by Supplier from Buyer prior
to such expiration or termination and Buyer shall pay for all Products delivered
thereunder, notwithstanding such expiration or termination. The terms and
conditions of this Agreement shall apply to such Purchase Orders and the
Products purchased thereby as though this Agreement were still in force.
10.4 Survival. Sections 6, 7.1, 7.2, 8, 9 and the relevant provisions of
--------
Section 12 shall survive the expiration or any termination of this Agreement for
any reason whatsoever.
11. NOTICES
All notices required hereunder shall be in writing and shall be given by
personal delivery, by recognized overnight courier service, by confirmed
facsimile or by mail (certified or registered, postage prepaid, return receipt
requested) to the parties at their respective addresses as set forth below, or
to any party hereto at such other addresses as shall be specified in writing by
such party to the other parties in accordance with the terms and conditions of
this Section 11. All notices shall be deemed effective upon personal delivery
or sending of confirmed facsimile, or five (5) days following deposit in the
mail in accordance with this Section 11, or one (1) business day following
deposit with any recognized overnight courier service in accordance with this
Section 11.
For notice to Supplier:
Pixel Magic, Inc.
300 Brickstone Drive
Andover, MA 01810
Fax number 508-470-8892
Attention: Don Shulsinger
With a copy to:
Oak Technology, Inc.
139 Kifer Court
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<PAGE>
Sunnyvale, CA 94086
Fax number 408-737-3838
Attention: General Counsel
For notice to Buyer:
JetFax, Inc.
1376 Willow Road
Menlo Park, California 94025
Fax number 415-326-6003
Attention: President
12. MISCELLANEOUS
12.1 Entire Agreement. This Agreement constitutes the entire understanding
----------------
and agreement between the parties hereto and supersedes any and all prior or
contemporaneous representations, understandings and agreements between the
parties with respect to the subject matter hereof, including the Letter of
Understanding (the "LOU") dated September 22, 1995, and the Non-Disclosure
Agreement (the "NDA") dated August 24, 1995, and such LOU and NDA shall herewith
terminate and be of no further force or effect.
12.2 Amendments. All amendments or modifications of this Agreement shall
----------
be binding upon the parties despite any lack of consideration so long as the
same shall be in writing and executed by both parties hereto.
12.3 Assignment; Successors. No party hereto may assign this Agreement
----------------------
without the prior written consent of the other party; provided, however, that
either party may, without the other party's consent, assign this Agreement and
its rights and obligations hereunder to any successor in interest to it in
connection with any sale or transfer of all or substantially all of its assets
or upon any merger, consolidation or dissolution. This Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective legal successors and permitted assigns. In the event that Supplier
files for protection from creditors under bankruptcy laws, this Agreement shall
automatically be assigned to Supplier's parent, Oak Technology, Inc.
12.4 Performance. Certain of Supplier's obligations hereunder may be
-----------
performed by Supplier's parent corporation, Oak Technology, Inc., or by its
affiliates, provided that, notwithstanding the foregoing, Supplier shall remain
fully liable at all times for the performance of all of its obligations under
this Agreement.
-14-
<PAGE>
12.5 Independent Parties. Nothing contained herein shall be deemed to
-------------------
create or construed as creating a joint venture, partnership or agency
relationship between Supplier and Buyer.
12.6 Waiver. No waiver of any provision of this Agreement shall be
------
effective, except pursuant to a written instrument signed by the party or
parties hereto waiving compliance, and any such waiver shall be effective only
in the specific instance and for the specific purpose stated in such writing.
12.7 Severability of Provisions. In the event that any provision hereof is
--------------------------
found invalid or unenforceable pursuant to judicial decree or decision, the
remainder of this Agreement shall remain valid and enforceable according to its
terms.
12.8 Choice of Law. This Agreement shall be governed by the laws of the
-------------
State of California, irrespective of its choice of law rules.
12.9 Arbitration and Fees. All disputes, controversies or differences
--------------------
arising from or in relation to or in connection with this Agreement, including
issues relating to the interpretation, performance or breach of this Agreement,
shall be settled by mutual consultation between the parties hereto in good faith
as promptly as possible, but failing an amicable settlement shall be decided by
binding arbitration before an arbitrator affiliated with the Judicial
Arbitration and Mediation Service. The arbitrator shall render a final opinion
and award in writing, stating the reasons therefor, and the award shall be final
and binding upon the parties hereto and judgment may be entered thereon in a
court of appropriate jurisdiction. The prevailing party in such an arbitration
shall be entitled to recover all costs associated with the arbitration,
including its share of the arbitration fees. In the event that any action is
brought to interpret or enforce the terms of this Agreement, the prevailing
party shall be entitled to recover its expenses and costs, including reasonable
attorneys' fees.
12.10 Headings. The headings and titles used in this Agreement are for
--------
convenience only and are not to be considered in construing or interpreting this
Agreement.
12.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
-15-
<PAGE>
12.12 FOREIGN RESHIPMENT LIABILITY. THIS AGREEMENT IS EXPRESSLY MADE
----------------------------
SUBJECT TO ANY LAWS, REGULATIONS, ORDERS OR OTHER RESTRICTIONS ON THE EXPORT
FROM THE UNITED STATES OF AMERICA OF ANY LICENSED TECHNOLOGY, PRODUCTS
INCORPORATING LICENSED TECHNOLOGY OR OF INFORMATION ABOUT ANY LICENSED
TECHNOLOGY OR SUCH PRODUCTS THAT MAY BE IMPOSED FROM TIME TO TIME BY THE
GOVERNMENT OF THE UNITED STATES OF AMERICA. NOTWITHSTANDING ANYTHING CONTAINED
IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL EXPORT OR REEXPORT,
DIRECTLY OR INDIRECTLY, ANY LICENSED TECHNOLOGY, PRODUCTS INCORPORATING LICENSED
TECHNOLOGY OR OF INFORMATION PERTAINING THERETO TO ANY COUNTRY FOR WHICH SUCH
GOVERNMENT TO ANY AGENCY THEREOF REQUIRES AN EXPORT LICENSE OR OTHER
GOVERNMENTAL APPROVAL AT THE TIME OF EXPORT OR REEXPORT WITHOUT FIRST OBTAINING
SUCH LICENSE OR APPROVAL.
12.13 Force Majeure. Neither party shall be responsible or liable to
-------------
the other party for nonperformance or delay in performance of any terms or
conditions of this Agreement due to acts of God, acts of governments, wars,
riots, or other causes beyond the reasonable control of the nonperforming or
delayed party, provided, however, that nonperformance or delay in excess of one
hundred eighty (180) days shall constitute cause for termination of this
Agreement by the party not failing to perform pursuant to Section 10.2 above.
12.14 Intellectual Property Notices. Buyer shall not remove any of
-----------------------------
Supplier's copyright notices or proprietary legends applied to the Products or
the Licensed Technology.
12.15 NO CONSEQUENTIAL DAMAGES. EXCEPT WITH RESPECT TO A PARTY'S
------------------------
BREACH OF SECTION 8.2, IN NO EVENT SHALL EITHER SUPPLIER OR BUYER BE LIABLE TO
THE OTHER FOR ANY CONSEQUENTIAL, INDIRECT, PUNITIVE, SPECIAL OR INCIDENTAL
DAMAGES, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF SUCH PARTY OR
ITS CUSTOMERS (INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR LOSS OF GOOD WILL,
PROFITS, INVESTMENTS, USE OF MONEY OR USE OF PRODUCTS, INTERRUPTION IN USE,
STOPPAGE OF OTHER WORK OR IMPAIRMENT OF OTHER ASSETS, OR LABOR CLAIMS), ARISING
OUT OF BREACH OF EXPRESSED OR IMPLIED WARRANTY, BREACH OF CONTRACT,
MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first set forth above.
PIXEL MAGIC, INC. JETFAX, INC.
By: /s/ Don Shulsinger By: /s/ Edward R. Prince III
-------------------- ------------------------
Name: DON SHULSINGER Name: EDWARD R. PRINCE
Title: EXEC VP Title: PRESIDENT
-17-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Schedule 1
----------
Products Price per unit
- -------- --------------
[*] [*]
-18-
<PAGE>
Schedule 2
----------
Specifications
- --------------
-19-
<PAGE>
Information May Change Without Notice - Subject to Non-Disclosure
Agreement - Copying Prohibited PM-2mc
- --------------------------------------------------------------------------------
PIXEL MAGIC HARDWARE SPECIFICATION
INCORPORATED
PM-2MC HIGH SPEED HIGH INTEGRATION IMAGE PROCESSOR
GENERAL DESCRIPTION FEATURES
Pages 1-64, which comprise schedule 2 are redacted.
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
- --------------------------------------------------------------------------------
Copyright (C) 1993, 1994, 1995, 1996 Pixel Magic Inc. All Rights Reserved
Confidential Information 1
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Schedule 3
----------
Description of Resolution Enhancement Technology
- ------------------------------------------------
[*]
[*]
[*]
-20-
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Schedule 4
----------
Description of JBIG Software
- ----------------------------
[*]
-21-
<PAGE>
EXHIBIT 10.34
REDACTED
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
FACSIMILE PRODUCT DEVELOPMENT AGREEMENT
BY AND BETWEEN
JETFAX, INC. AND XEROX CORPORATION
This Facsimile Product Development Agreement (the "Agreement") is entered into
and is effective as of June 9, 1994 (the "Effective Date"), by and between
JetFax, Inc., a Delaware Corporation having its principal place of business at
1376 Willow Road, Menlo Park, California 94025 ("JetFax"), and Xerox
Corporation, a New York corporation having its principal place of business at
800 Long Ridge Road, Stamford, Connecticut 06904-1600 ('Xerox").
WHEREAS, JetFax desires, upon the terms and conditions set forth in this
Agreement, to perform certain Services and provide certain Hardware Designs,
Mechanical Designs, Bill of Materials and Source List and Software (as
hereinafter defined) for purposes of enabling the integration of that certain
Xerox printer product known by the name "Personal Printer 4004" (as hereinafter
defined, the "Printer Mechanism") into the Product (as, hereinafter defined);
and
WHEREAS, Xerox desires to perform certain Services and manufacture the Product
for itself and the JetFax Product (as hereinafter defined) as more fully set
forth herein; and
WHEREAS, JetFax wishes to purchase the JetFax Product and certain replacement
thermal ink jet printing cartridges from Xerox;
NOW, THEREFORE, it is agreed by and between the parties as follows:
1 DEFINITIONS
1.1 "Bill of Materials and Source List" shall mean the identification by
manufacturer and model of certain components and subsystems (such as, by way of
example and not limitation, a modem, an integrated circuit, or a scanner) and
the source from which such materials compliant with the Specifications may be
obtained.
1.2 "Documentation" shall mean the customer and service documentation specified
in Exhibit E.
1.3 "Errors" shall mean: (i) reproducible defects in any Deliverable which
causes it not to function in conformance with the Specifications, (ii) Software
miscoding which results in the Software failing to function in conformance with
the Specifications, if such failure is reproducible, and (iii) defects in the
Documentation which render it inaccurate, erroneous or otherwise unreliable.
1.4 "Hardware Designs" shall mean [*].
1.5 "JetFax Cartridge" shall mean that [*].
1.6 "JetFax Deliverables" shall mean, collectively or individually, JetFax
developed Software, Hardware Designs, Mechanical Designs and Bill of Materials
and Source List. A more detailed description of the JetFax Deliverables and the
requirements for same are set forth in Exhibit A to this Agreement.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1.7 "Mechanical Designs" shall mean those [*].
1.8 "Printer Mechanism" shall mean [*].
1.9 "Product" shall mean the facsimile transceiver device ' based upon the
Printer Mechanism and the JetFax Deliverables, as more fully described in
Exhibit C to this Agreement.
1.10 "Product Acceptance" shall mean the date of acceptance of the Product
pursuant to Section 4.2(c) hereof.
1.11 "Project Schedule" shall mean the schedule of events and coordinate time
for the parties' performance under this Agreement, as set forth in Exhibit D.
1.12 "Prototype Units" shall mean initial working development units of the
Product as specified on Exhibit C. The parties acknowledge that Prototype Units
are intended to but may not fully comply with the applicable Specifications.
1.13 "Services" shall mean the work and labor necessary for the performance of
the respective obligations of the parties to this Agreement.
1.14 "Software" shall mean [*]
1.15 "Specifications" shall mean the mechanical, engineering, operational
and/or functional descriptions, details and requirements for the Product and the
Software, Hardware Designs, Printer Mechanism, JetFax Cartridge and externally
procured components (such as required modems, scanners, etc.) as set forth in
Exhibits A, B and C as the same may be modified as provided herein. Included
are any standards for performance or operation of the item to which such
Specifications pertain.
1.16 "User Interface" shall mean [*].
1.17 "Xerox Affiliates" shall mean Xerox Canada, Inc., Rank Xerox Ltd.,
Fuji Xerox Ltd., and any subsidiary or affiliate at least 40% of the ownership
of which is held directly or indirectly by Xerox, Xerox Canada Inc., Rank Xerox
Ltd., or Fuji Xerox Ltd.
1.18 "Xerox Deliverables" shall mean units of the Printer Mechanism; units
of the JetFax Cartridge; overall industrial designs of the Product; design of
the control panel and User Interface and a fully functional pre-feed roller
attachment for the automatic document feeder (ADF); and the customer and service
Documentation; all in accordance with the Specifications and as more fully set
forth in Exhibit B to this Agreement.
1.19 "Fax Boards" shall mean any circuit board assemblies which are
designed by or for JetFax for use in the JetFax Product or any Derivative
Product, which such Fax Boards shall be made by or for Xerox.
2. SCOPE OF WORK
2.1 Services. Upon the terms and conditions set forth in this Agreement,
--------
JetFax and Xerox agree to perform the Services in accordance with Exhibits A and
B, respectively. Each party will be responsible for obtaining all the
technology, labor, material, tooling and facilities necessary for the completion
of its portion of the Services, except as otherwise set forth in this Agreement.
2.2 Progress Reports. Each party hereto shall provide the other party with
----------------
progress reports, as reasonably requested by the other party, starting after the
Effective Date and ending on the date of Product Acceptance. Each report shall
be in such form and contain such information as may be mutually agreed by the
parties, including but
<PAGE>
not limited to, progress to current scheduled milestones, description of any
problems in meeting milestone, and if problems, proposed recovery methods, and
changes in party's estimate of key purchased component and JetFax Product
differentiation costs.
2.3 Agency Approvals. The parties agree that JetFax shall be responsible
----------------
for any and all engineering and development work with respect to the JetFax
Deliverables
3
<PAGE>
necessary for obtaining any required governmental or necessary private
agency approvals or certifications for the Product (such as, by way of example
and not limitation, Underwriter's Laboratories, CSA, U.S. F.C.C. regulations
parts 15 and 68) in the United States and Canada. The actual costs (including
protesting consultant fees and expenses and testing costs and expenses) and
filing fees for the submission for such approvals in the United States and
Canada and such other jurisdictions as the parties mutually agree in writing
they shall enter are to be borne by Xerox. In addition to the foregoing,
for the period ending on the date that is 24 months from the Effective Date,
JetFax agrees to use its reasonable efforts to design the JetFax Deliverables to
meet the agency approval requirements of other jurisdictions. JetFax further
agrees to use its reasonable efforts to provide design services with respect to
the JetFax Deliverables, after such 24 month period, if necessary in conjunction
with any changes required by jurisdictions in which agency approvals have been
obtained during such 24 month period. In order for JetFax to perform its
reasonable efforts obligations hereunder, Xerox shall provide JetFax with
customary English language summaries of the specifications of each individual
jurisdiction's requirements where agency approval is to be sought. Xerox shall
provide all reasonable assistance to JetFax for obtaining approvals and
certifications for the JetFax Product, including use by JetFax of any relevant
testing, test results, documents, applications and approvals and certificates
with regard to the Product. Xerox shall bear the cost of any JetFax travel,
lodging and related expenses incurred in support of approval activities in
connection with the Product. Except as set forth above, all costs for agency
approvals for other jurisdictions shall be borne fully by the party seeking such
approvals, unless otherwise mutually agreed. It is further agreed that after
such 24 month period, JetFax agrees to provide such design services as may be
requested by Xerox to meet the requirements of any jurisdiction. Xerox agrees
to compensate JetFax at customary rates for such design services rendered after
the end of such 24 month period.
2.4 Bill of Materials and Source List Approval. The Bill of Materials and
------------------------------------------
Source List shall be subject to review and approval by Xerox, and all component
vendors providing materials set forth on the Bill of Materials shall be subject
to qualification as a vendor to Xerox under Xerox standards for vendor
certification then in effect. Such approval shall not be unreasonably withheld.
Subject to the terms of Section 5.1 (d), Xerox reserves the right to make final
selection of component vendors. Notwithstanding anything to the contrary
contained herein, neither such Xerox approval nor such vendor qualification
shall be a basis for any rejection pursuant to Section 4.2(a) or Section 4.3, or
condition precedent to, or a basis for any delay in, Product Acceptance
hereunder.
2.5 Software, Etc. Escrow. Promptly after the Effective Date, JetFax
----------------------
shall place with an independent third party escrow agent acceptable to Xerox one
complete set, under seal, of source code, object code and supporting
documentation for any and all Software, ASICS, FPGAS, and any other programmable
devices (including their schematic capture and VHDL files, their ACTEL files,
test patterns and test parameters and timing diagrams, to the extent available
to JetFax, used to confirm the design) included in the JetFax Deliverables (the
"Escrowed Materials"). The Escrowed Materials shall be retained in strict
confidence by the chosen escrow agent under the terms of the escrow agreement
(which escrow agreement shall be mutually acceptable to both JetFax and Xerox
and consistent
4
<PAGE>
with the terms of this Section 2-5) and the escrow agent shall not disclose the
Escrowed Materials to Xerox except pursuant to this Section 2.5. All costs
associated with the escrow, including any fees of the escrow agent, shall be
borne by Xerox. In the event one of the events set forth below occurs, Xerox
may, at its option, notify the escrow agent of such event and request the
release of the Escrowed Materials to Xerox. Xerox shall simultaneously notify
JetFax pursuant to Section 14.1 1 of this Agreement of such notification to the
escrow agent, specifying the basis upon which such request for the release of
the Escrowed Materials is based. In addition, the escrow agent shall notify
JetFax of the Xerox request for the release of the Escrowed Materials. The
escrow agent shall, only after ten (1 0) calendar days have passed from the date
Xerox' notice to JetFax hereunder is given (pursuant' to Section 14.11 of this
Agreement), release the Escrowed Materials to Xerox unless such action is
prohibited by order of a court of competent jurisdiction. The only events which
shall entitle Xerox to request the release of the Escrowed Materials are as
follows: (i) JetFax ceases to support and maintain the Software and Hardware
Designs as required pursuant to the terms of Section 4.4 of this Agreement and
such failure remains uncured for a period of sixty (60) days after written
notice thereof from Xerox, or (ii) the specified items of the Software or
Hardware Designs listed on the Project Schedule to be performed by JetFax fail
to be accepted pursuant to Section 4.2(a) and (b) within 90 days of the
applicable due date therefor set forth in the Project Schedule due primarily to
the failure of JetFax to perform its obligations under this Agreement, or (iii)
JetFax grants its prior written consent to such release, or (iv) if a Petition
is filed by or against JetFax under Chapter 7 of the Bankruptcy Act of the
United States and such Petition is not discontinued, vacated or terminated
within sixty (60) days. Xerox shall use such released Escrowed Materials solely
for the purpose of maintenance, support and production of the Product, or, in
the event subparagraph (ii) of this Section 2.5 shall occur, for the purpose of
maintenance, support and production and Xerox completion of development (with or
without the assistance of other parties) of a replacement product for the
partially completed Product and for the uses stated in the second paragraph of
Section 5.1 (b). Any Xerox use of the Escrowed Materials will be subject at all
times to the terms and conditions of this Agreement. JetFax agrees to update and
maintain monthly the Escrowed Materials held in safekeeping by the selected
Escrow Agent to reflect all changes made to the Escrowed Materials pursuant to
the terms of this Agreement.
2.6 Marketing. Except as expressly set forth in this Agreement, or in the
---------
Supply Agreement of even date herewith by and between Xerox and JetFax (the
"Supply Agreement"), both parties shall be free to market their own respective
versions of the Product (or permitted private label versions of same) through
such marketing channels and in such countries as each party shall independently
determine.
3. DESIGN REVIEW AND SPECIFICATION CHANGES
3.1 Design Review. The parties agree to conduct regular program reviews as
-------------
shown on the agreed Project Schedule set forth on Exhibit D to this Agreement,
to ensure their mutual satisfaction with the performance under the Agreement.
Upon reasonable notice, the parties agree to meet at a mutually agreeable time
and
5
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location to review and discuss the status of the development of the Product.
The parties further agree to promptly meet at the request of either party with
respect to any material issues a party may have with the performance of the
other party of its obligations under this Agreement.
3.2 Changes to the Specification. Each party is entitled to request
----------------------------
modifications in the form of changes or additions to the Specifications at any
time during the term of this Agreement. Such requests shall be submitted in
writing, and shall not be deemed or considered binding unless accepted by the
other party in writing. If any such modification of the Specifications is
agreed, the parties will negotiate an equitable adjustment to the Agreement,
including the apportionment of any additional development, testing or tooling
costs. Upon mutual agreement to any change to the Specifications, both parties
will proceed with the implementation of the prescribed changes, and the
Specifications and other Exhibits to the Agreement shall be modified accordingly
to reflect such agreed upon changes. Notwithstanding the foregoing, if the
JetFax requested changes to the Specifications involve any change to the Printer
Mechanism, the design responsibility for which is with third parties under
contract with Xerox, Xerox shall use reasonable efforts to effect such
Specification change provided that the same does not increase the cost of such
Printer Mechanism or component thereof, or adversely and materially affect the
Project Schedule or function of the Printer Mechanism, the Product or components
thereof. In such event JetFax shall be responsible for the payment of all
nonrecurring expenses involved in such change (or such pro rata portion thereof,
in the further event Xerox elects to incorporate the same in its version of the
Product). Notwithstanding the foregoing, JetFax shall not be responsible for
any such nonrecurring expenses if JetFax requested changes are necessary for the
Product to achieve Product Acceptance or to meet the Specification as changed at
the request of Xerox. In the event such third party will not agree to such
Specification change, Xerox shall so notify JetFax and Xerox shall have no other
or further liability to JetFax as a result of such request.
3.3 Modification to Specifications. JetFax and Xerox agree that upon
------------------------------
acceptance of each Deliverable pursuant to Section 4.2 and upon Product
Acceptance the Specifications shall be modified as necessary to conform to the
Deliverables and the Product, as applicable, as accepted, excepting mutually
agreed (in writing) deviations from the Specification which require additional
development work to achieve conformance to the Specification. After and upon
acceptance of each Deliverable pursuant to Section 4.2 and after and upon
Product Acceptance, the term "Specifications" as used herein shall refer in all
cases to the Specifications as so modified.
4. DELIVERABLES AND DELIVERY; ACCEPTANCE; AND REJECTION
4.1 Deliverables. Xerox and JetFax agree to use reasonable efforts to
------------
perform their respective Services and deliver their respective Deliverables in
accordance with the Project Schedule (Exhibit D). Each party's obligation shall
be contingent upon the other party successfully providing any prerequisite
Deliverable in a timely fashion in accordance with the Specifications for same.
All Deliverables shall be delivered by the times set forth in the Project
Schedule and stated dates are date of delivery unless otherwise specified. The
parties shall use such Deliverables for testing and acceptance and marketing
purposes only and shall not sell, lease
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or transfer the same to any third party.
4.2 Acceptance.
----------
(a) Each party, with the reasonable assistance of the other party if requested,
will examine and test each respective Deliverable (and/or item thereof as
specified on the Project Schedule) of the other party upon delivery. Each
receiving party shall, as soon as reasonably practicable following the delivery
of same, but in no event later than fifteen (I 5) business days after receipt of
notice of delivery: (i) accept the Deliverable (or item thereof and so inform
the other party in writing; or (ii) if the Deliverable (or item thereof contains
material Errors, reject the Deliverable (or item thereof and provide the other
party with a written statement of such material Errors. The failure of a party
to respond within the specified fifteen (15) day period shall be deemed
acceptance of the Deliverable (or item thereof, but shall not limit the
provisions of Section 4.4 hereof. Either party may request a reasonable
extension in the time to complete such testing if the same is required under the
circumstances, and both parties shall reasonably consider such requests,
provided that no such extension shall be effective unless in writing and signed
by a duly authorized representative of the party granting such extension.
(b) The developing party will promptly correct the material Errors set forth in
the statement of material Errors with respect to any Deliverable (or item
thereof and redeliver the Deliverable (or item thereof to the receiving party
within such reasonable period of time as may be agreed upon by JetFax and Xerox
with regard to all circumstances affecting the Product or the Deliverables. The
receiving party shall, as soon as reasonably practicable after such redelivery
but in no event later than fifteen (1 5) business days thereafter, accept or
reject the redelivery in accordance with the procedure set forth in Section
4.2(a), which procedure shall be repeated until the Deliverables are accepted or
the receiving party invokes the provisions of Section 4.3 hereof.
(c) "Product Acceptance" shall be deemed to occur upon the earlier of (i)
acceptance, pursuant to this Section 4.2, of all JetFax and Xerox Deliverables
and successful completion of the acceptance test procedures with regard to the
Product as set forth in Exhibit F or (ii) the first sale, lease, license or
other distribution or transfer of a unit of Product (not including any Xerox
replacement product as referred to in Section 5.1(a) second paragraph) by Xerox
to a customer or other third party other than solely for test purposes. The date
of such Product Acceptance shall be deemed the "date of Product Acceptance."
Notwithstanding anything to the contrary contained herein, Product Acceptance
shall not be conditioned upon any design or development of the JetFax
Deliverables to meet any criteria of any agency approvals other than those of
the United States or Canada.
(d) The parties further agree that in the event a dispute arises as to whether
any Deliverable (or item thereof is acceptable under the procedure set forth in
Sections 4.2(a) and 4.2(b), and the parties are unable after good faith
negotiation to resolve such dispute, the parties agree to submit the
acceptability of any such Deliverable (or item thereof to Genoa Technology,
Inc., or other independent third party-mutually acceptable to the parties, who
shall test such Deliverable (or
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item thereof and determine if such Deliverable (or item thereof is acceptable as
set forth in Sections 4.2(a) and 4.2(b). The determination of such independent
third party shall as to the acceptance or rejection of any Deliverable (or item
thereof, be deemed final. The cost, if any, of employing such independent third
party shall be borne by the losing party.
4.3 Rejection. Should any Deliverable fail to be accepted after the third
---------
delivery of that Deliverable pursuant to Section 4.2(b) then the parties shall
promptly meet in accordance with Section 3.1 to resolve the problem. Any
subsequent rejection of the same Deliverable (unless otherwise resolved pursuant
to Section 4.2(d)) shall be deemed a breach of this Agreement by such delivering
party, and the non-breaching party may elect to terminate this Agreement
pursuant to Section 1 1.1 (a) hereof, or may elect to accept further
resubmission of the applicable Deliverable.
4.4 Error Fixes. JetFax shall at its expense, from the Effective Date
-----------
until the date that is eighteen (18) months from the date of Product Acceptance,
use its reasonable efforts promptly to correct documented and reproducible
material Errors in the Software and Hardware Designs which are reported in
writing by Xerox to JetFax. Provided, however, that prior to Product
Acceptance, this obligation shall apply only to Deliverables (or items thereof
that have been delivered by JetFax in accordance with the Project Schedule.
Xerox shall provide such assistance in correction as JetFax may reasonably
request. All such corrections to the Software and Hardware Designs shall be
deemed to be included in the licenses granted under section 5,1 hereof, and
copies of any such corrections shall be promptly furnished in source code to the
escrow agent set forth in section 2.5 of this Agreement. JetFax will have no
obligation under this Section 4.4 with respect to any Error in the Software or
Hardware Designs caused by any person or entity other than JetFax or its sources
identified on the Bill of Materials and Source List and JetFax is not obligated
to correct any Errors in the Software unless such Error or defect causes the
Software to fail to function in conformance with the Specifications as defined
injection 3.3 herein.
4.5 JetFax Support. JetFax further acknowledges and agrees that, for a
--------------
period of one (1) year following Product Acceptance and subject to the
provisions of this Section 4.5, it shall provide Xerox with such reasonable
field and engineering support as Xerox shall reasonably request, necessary for
the manufacture and field support of the Product as more fully set forth in
Exhibit E to the Supply Agreement. All travel, lodging and associated expenses
(save salary and benefits of JetFax employees) shall be borne by Xerox. In
addition, after the one (1) year period following Product Acceptance, Xerox
shall pay JetFax the reasonable and customary personnel, service and related
charges for any such support provided by JetFax.
6. OWNERSHIP RIGHTS AND LICENSES
5.1 Software and Hardware Designs, Etc.
----------------------------------
(a) Subject to the terms and conditions of this Agreement and the Supply
Agreement, JetFax hereby grants to Xerox, effective only upon and after the date
of Product Acceptance, a nonexclusive, perpetual (except if terminated pursuant
to Section
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<PAGE>
11.1 herein), worldwide license to the Software, the Hardware Designs, the
Mechanical Designs, and any other JetFax confidential information disclosed to
Xerox and necessary or useful for the following licensed activities (and JetFax
intellectual property corresponding to the above recited items), to manufacture
or have manufactured, the Product (including any enhancements and modifications
as set forth in Sections 3.3 and 8.1 of the Supply Agreement), the Product as
defined in the Supply Agreement (i.e., the "JetFax Product"), and any Derivative
Products (as defined in the Supply Agreement), and to use and distribute and
sell and service the Product, the JetFax Product and any Derivative Products.
Provided however, if the Escrowed Materials are released to Xerox pursuant to
Section 2.5 of this Agreement, the above license as it applies to the Product
shall automatically extend, if and only if there has not been Product
Acceptance, to a Xerox replacement product (and variants thereof for the
partially completed Product and shall automatically encompass all of the
Escrowed Materials. In such event, the royalty set forth in Section 6.2(a) of
this Agreement in the sum of [*] (reduced, if applicable as set forth in such
Section 6.2(a)) shall also apply to such replacement product license. In such
event, JetFax shall promptly and fully disclose the fully or partially completed
JetFax Deliverables to Xerox, but shall have no further obligations under
Sections 2.1, 2.3, 2.5, 4.1, 4.4 and 4.5 of this, Agreement and Section 3.1 of
the Supply Agreement.
(b) The Software, the Hardware Designs, and the Mechanical Designs are
confidential information of JetFax, subject to the CDA defined in Section 8.1 of
this Agreement and shall be used by Xerox solely in connection with the Product,
the JetFax Product, and any Derivative Products (as defined in the Supply
Agreement) in accordance with the terms of this Agreement and the Supply
Agreement or as provided in this Article 5. Subject to the terms and conditions
of this Agreement and the Supply Agreement, JetFax hereby grants to Xerox a
nonexclusive, perpetual (except if terminated pursuant to Section 1 1.2(a) of
this Agreement), worldwide license (with the Xerox right to sublicense Xerox
Affiliates) to the Mechanical Designs, the Hardware Designs (excluding the ASICs
and the Field Programmable Gate Arrays (FPGAS) themselves and a majority of the
designs of each such ASIC or FPGA), and any other confidential information of
JetFax disclosed to Xerox (excluding the Software and the above excluded items)
and necessary or useful for the following licensed activities (and JetFax
intellectual property corresponding to the above recited licensed items) to
manufacture or have manufactured any other products (i.e., products other than
the Product (but including any products related to the Product if there is no
Product Acceptance), the JetFax Product, and Derivative Products (as defined in
the Supply Agreement)), and to use and distribute and sell and service such
other products. Provided, however, notwithstanding any sublicense made pursuant
to the above right to sublicense, Xerox shall remain fully liable for compliance
with all of its obligations under this Agreement, including without limitation
the payment of all royalties.
Provided however, if the Escrowed Materials are released to Xerox pursuant to
Section 2.5 of this Agreement, the above license of this Section 5.1(b) shall
automatically extend, if and only if there has not been Product Acceptance, to
include all fully or partially completed JetFax Deliverables including Software,
ASICS,, and FPGAs and shall automatically encompass all of the Escrowed
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<PAGE>
Material. To the extent Xerox uses a material amount of such extended materials
(not already included in the license in the immediately preceding paragraph)
under this extended license, Xerox shall be obligated to pay the royalty as set
forth in the last sentence of Section 6.2(b) of this Agreement.
(c) Xerox may distribute and sell the JetFax Product and any Derivative Product
only to JetFax and in accordance with the Supply Agreement. For the confidence
period of the CDA defined in Section 8.1 of this Agreement, Xerox shall not
alter (but subject to the provisions of Section 2.5 of this Agreement and the
licenses granted in the second paragraphs of Sections 5.1(a) and 5.1(b)),
reverse engineer, decompile or disassemble the Software or the ASICs and the
FPGAs Included in the Hardware Designs, and Xerox may copy the Software, the
Hardware Designs, the Mechanical Designs and any other confidential information
of JetFax which is disclosed to Xerox only as necessary for the exercise of the
licenses granted in Sections 5.1 (a) and 5.1 (b) and/or the provisions of
Section 2.5. JetFax retains its ownership rights in and to the Software,
Hardware Designs, Mechanical Designs and corresponding intellectual property.
(d) Subject to the terms and conditions of this Agreement and the Supply
Agreement, Xerox hereby grants JetFax a nonexclusive, perpetual (except if
terminated pursuant to Section I 1. 1 of this Agreement), royalty free and paid
up, worldwide (other than as to the manufacture and have manufactured rights and
units, which are territorially limited below in this Section 5.1(d)) license to
the Xerox Deliverables (excluding the Printer Mechanism, Cartridges, and Printer
Mechanism and/or Cartridge intellectual property) and any other Xerox
confidential information disclosed to JetFax and necessary or useful for the
following licensed activities (and Xerox intellectual property corresponding to
the above recited items) to manufacture and have manufactured and use and
distribute and sell and service the JetFax Product and any Derivative Products.
Provided, however, the manufacture and have manufactured activities of such
license are territorially limited to the People's Republic of China and Hong
Kong, and such activities are limited to assembling Fax Boards with or into
units of JetFax Products (minus Fax Boards) and/or Derivative Products (minus
Fax Boards) (as those terms are defined in the Supply Agreement) made by Xerox
or by a Xerox Affiliate and disassembling and reassembling such units..
Provided, further, however, the use, distribute, and sell activities of such
license with respect to units of JetFax Product and Derivative Product
manufactured pursuant to the foregoing manufacture and have manufactured license
are territorially limited to the People's Republic of China, Hong Kong, Macao,
Singapore, Malaysia, Thailand, Brunei, Indonesia and Philippines, and also
provided that the distribute and sell activities with respect to such units are
for end use only in the People's Republic of China, Hong Kong, Macao, Singapore,
Malaysia, Thailand, Brunei, Indonesia and Philippines. This Section 5.1 (d) does
not grant any license to Printer Mechanisms and Cartridges, n6r Xerox Printer
Mechanism and/or Cartridge intellectual property. For the confidence period of
the CDA defined in Section 8.1 of this Agreement, JetFax shall not alter,
reverse engineer, decompile or disassemble any software provided by Xerox, and
JetFax may copy such software only as necessary for use, distribution, sale, and
service as herein provided.
JetFax has the right to sublicense only to Ailicec the manufacture and have
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
manufactured license granted to JetFax in the immediately preceding paragraph
and the use, distribute, sell and service license granted to JetFax in the
immediately preceding paragraph with respect to units manufactured pursuant to
such manufacture and have manufactured license.
Any JetFax sublicense pursuant to the immediately preceding paragraph shall: (i)
be in writing; (ii) be nonexclusive, nontransferable, and nonsublicenseable and
subject to termination as provided in the immediately following paragraph; (iii)
be subject to all the limitations of the Section 5.1(d) license to JetFax; (iv)
subject Ailicec to obligations to JetFax no less protective of Xerox' rights
than JetFax's obligations to Xerox in Section 5.1 (d), Article 8, and Articles I
1, 12, and 13; and (v) include agreement by the sublicensee Ailicec for the
third party benefit of Xerox, (1) that sublicensee Ailicec receives no warranty
of any kind from Xerox, and (2) that sublicensee agrees not to refer to its
sublicense of rights pursuant to Section 5.1(d) or refer to any provision of or
rights contained in such sublicense or the Xerox name in any publicity,
advertising, or public promotional activity without the express written approval
of Xerox. Provided, nothing herein shall prohibit sublicensee from exercising
its distribute, sell and service rights through agents or distributors.
Upon the uncured (after 30 days notice) failure of any of the conditions of the
immediately preceding paragraph or sublicensee Ailicec's uncured (after 30 days
notice) failure to perform its obligations contained in such conditions, the
JetFax sublicense to Ailicec shall immediately terminate upon written notice of
Xerox to JetFax (and JetFax shall immediately inform Ailicec of such terminated
rights) and Xerox shall stop supplying JetFax Products (minus Fax Boards) and/or
Derivative Products (minus Fax Boards) to JetFax. No such termination shall
limit or impair in any way any other rights of JetFax under this Agreement or
the Supply Agreement, including the right to purchase JetFax Products and
Derivative Products from Xerox.
(e) Notwithstanding Xerox' ownership of certain tools for production of common
parts, Xerox hereby grants to JetFax the right to acquire such common parts,
subject to the applicable terms and provisions of the Supply Agreement.
5.2 Product. Xerox retains its ownership rights in and to any and all
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intellectual property contained in the Xerox Deliverables.
6. PAYMENTS
6.1 Advance Royalty.
---------------
(a) In consideration for certain of the Services to be performed by JetFax
hereunder, Xerox has heretofore paid to JetFax the sum of [*]. Such sum shall be
treated by the parties as payment by Xerox to JetFax for the Services performed
by JetFax with respect to the Product connectivity option as described in the
Specifications.
(b) In further consideration for certain of the Services to be performed by
JetFax hereunder, Xerox agrees to pay to JetFax a nonrefundable advance royalty
payment of [*], payable as follows:
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<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
The sum of [*] heretofore paid
by Xerox to JetFax.
The sum of [*] to be paid by Xerox in those increments as set forth in
the Milestone Schedule of Exhibit A-2, the payment associated on
Exhibit A-2 with each such Milestone to be made to JetFax upon the
successful completion of the specified Milestone.
(c) JetFax agrees to provide to Xerox, upon request, audited financial
statements for the JetFax accounting year of 1992 as well as quarterly financial
statements (audited if available) for each accounting quarter of 1993 and 1994.
In addition, JetFax shall provide Xerox, upon request, detailed manpower and
cost plans for the development effort. Any and all such information provided to
Xerox is subject to the CDA defined in Section 8.1 of this Agreement.
6.2 Royalty Payments.
----------------
(a) In further consideration of the Services performed hereunder and the
licenses granted herein by JetFax, Xerox shall pay JetFax a royalty, with
respect to each and any sale, lease, license or other distribution or transfer
of a unit of Product (and/or a unit of replacement product as described in the
second paragraph of Section 5.1(a) and/or a unit of product described in Section
5.1(b) if such paragraph of Section 5.1(a) or the second paragraph of Section
5.1(b) is applicable) to a customer or other third party (other than JetFax, but
including any Xerox Affiliates) (and excluding up to [*] production units of
Product to be internally used by Xerox , which units shall be without royalty),
in an amount equal to [*] for each such unit sold, leased, licensed or otherwise
distributed or transferred. [*].
(b) In further consideration of the Services performed hereunder and the
licenses granted herein, Xerox shall pay JetFax a royalty, with respect to each
and any sale, lease, license or other distribution or transfer to a customer or
other third party (other than JetFax but including Xerox Affiliates) of a unit
of any product (other than the Product or the JetFax Product or Derivative
Products (as defined in the Supply Agreement)) with respect to the design or
manufacture of which: (i) all or part of the Mechanical Designs and/or any
corresponding JetFax intellectual property have been used, in an amount equal to
[*]
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
for each such unit sold, leased, licensed or otherwise distributed or
transferred; (ii) all or part of that portion of the Hardware Designs licensed
to Xerox pursuant to Section 5.1 (b) and/or any corresponding JetFax
intellectual property, or any other JetFax confidential information disclosed to
Xerox and/or any corresponding JetFax intellectual property have been used, in
an amount equal to [*] for each such unit sold, leased, licensed or otherwise
distributed or transferred. The above royalty(s) shall be payable for JetFax
information only if the information used was subject to Clause 2. of the CDA
defined in Section 8.1 of this Agreement when suc6 information was first
communicated to Xerox by JetFax (provided, however, all parts drawings and
schematics for circuit boards are, and shall be, deemed to have been subject to
Clause 2 of the CDA when first communicated to Xerox by JetFax), and only for
units sold, leased, licensed or otherwise distributed or transferred within five
(5) years after the Effective Date of this Agreement. The above royalties
described in clauses (i) and (ii) are not exclusive of each other and a total
royalty of [*] per unit will apply with respect to any product to which both
clauses (i) and (ii) above apply. [*]. When the Section 6.2(b) royalties paid to
JetFax reach the sum of [*], the license set forth in Section 5.1(b) to Xerox
shall automatically become royalty free and paid up. For units sold, leased,
licensed or otherwise distributed or transferred after the five (5) year period
referred to above in this Section 6.2(b), the license to Xerox set forth in
Section 5.1(b) shall automatically become royalty free and paid up. No royalties
payable pursuant to Section 6.2(a) shall be subject to, nor included in the
calculation of, the royalty cap of this Section 6.2(b). Provided, further, in
the event Xerox shall use a material amount of any of the Escrowed Materials not
included in the license under the first paragraph of Section 5.1 (b) in products
under the license set forth in the second paragraph of Section 5.1 (b) of this
Agreement, Xerox shall pay to JetFax the royalty amount set forth in Section
6.2(a) and not the royalty set forth in this Section 6.2(b) provided however,
that for uncopyrighted and unpatented such materials the sentence 'The above
royalty(s) . . . of this Agreement.' above in this Section 6.2(b) shall apply.
(c) All royalty payments as specified in Sections 6.2(a) and (b) shall be paid
by Xerox to JetFax monthly until such time as the prepaid royalty is totally
offset pursuant to Section 6.2(a), and quarterly thereafter (beginning with the
first full calendar quarter) within thirty (30) days after the end of each month
or calendar quarter, as applicable and shall be due and payable with respect to
each and all units sold, leased, licensed, or otherwise distributed or
transferred, without regard to whether or not Xerox shall have received payment
with respect thereto.
(d) Any amounts owed by JetFax to Xerox which are past due may, at Xerox'
option, be deducted from the royalty due JetFax from Xerox.
(e) JetFax acknowledges and agrees that Xerox shall have the right, without the
payment of any additional royalty, to remanufacture units of the Product
returned from its customers for, any reason, and to resell or release the same
to its
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customers.
6.3 Nonrecurring Engineering (NRE) Costs for ASICS. Xerox shall pay all
----------------------------------------------
nonrecurring engineering costs associated with the conversion of the FPGAs to
ASICs and shall pay all consulting fees for test vector generation.
7. REPRESENTATIONS AND INDEMNIFICATION
7.1 Representations Each party represents that:
--------------------
(a) it has full right and authority to enter into this Agreement and
the Supply Agreement, to perform its obligations hereunder;
(b) and it has full right and authority to grant the rights granted to
the other party herein.
7.2 Xerox' Infringement Indemnity.
-----------------------------
(a) Subject to the terms hereof, Xerox agrees to indemnify, defend and
hold JetFax and its customers harmless from and against any claim or suit
alleging that the Xerox Deliverables (excluding the Printer Mechanism and the
JetFax Cartridge, the indemnity for which is set forth exclusively in the Supply
Agreement) infringes any patent rights, copyrights or other proprietary rights
of any third party when used for its intended purposes in conjunction with the
Product or the JetFax Product or any Derivative Product; provided that: (i)
JetFax gives Xerox prompt notice in writing of any such suit and permits Xerox,
through counsel of its choice, to answer the charge of infringement and defend
such claim or suit, (ii) Xerox has sole control of the defense and all related
settlement negotiations, (iii) JetFax has not further modified or altered the
Xerox Deliverables following their delivery to JetFax if such claim or suit
would have been avoided if such modification or alteration had not been made,
and (iv) JetFax provides Xerox with the assistance, information and authority to
perform the above. In the event Xerox agrees to settle the suit, both Xerox and
JetFax agree not to publicize the settlement nor to permit the party claiming
infringement to publicize the settlement without first obtaining the other
party's written permission.
(b) Duty to Correct. Notwithstanding Section 7.2 (a), should the
---------------
Xerox Deliverables become the subject of a claim of infringement of a third
party's patent right, copyright or other proprietary rights, Xerox shall, at its
option and expense: (i) procure for JetFax the right to use! the applicable
Xerox Deliverable and sell the JetFax Product and any Derivative Product (and
any royalties or other payments required to obtain such rights shall be paid by
Xerox) or (ii) replace or modify the Xerox Deliverable to make it non-
infringing, provided that the. same function is performed by the replacement or
modified Xerox Deliverable.
(c) Right to Use Study. Xerox may conduct a right to use study with
------------------
respect to the Xerox Deliverables (excluding the Printer Mechanism and the
JetFax Cartridge) when used in conjunction with the JetFax Product or any
Derivative
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<PAGE>
Product. If:
(I) prior to one (1) month after the design of the JetFax Product or
any Derivative Product is fixed by JetFax and that fact is disclosed by JetFax
to Xerox (and JetFax shall promptly disclose such fact to Xerox) along with
JetFax Product or any Derivative Product information reasonably needed by Xerox
to conduct its right to use study (and JetFax shall promptly disclose such
information to Xerox after such design is fixed);
(II) Xerox identifies unlicensed third party patent(s) which Xerox
reasonably believes will be infringed by use by or for JetFax or its customers
of the Xerox Deliverables (excluding the Printer Mechanism and the JetFax
Cartridge) when used in conjunction with the JetFax Product or any Derivative
Product and Xerox clearly identifies in writing (including patent or application
numbers and issue or filing dates respectively) to JetFax any such patent(s);
then the parties agree as follows. If Xerox is unable to promptly obtain a
license under such patents on reasonable terms (and any royalties or other
payments required to obtain such license shall be paid by Xerox) and the parties
are unable to reasonably design around such patent(s);
then the parties shall meet to further work in good faith to resolve this
problem. In the event such resolution cannot be achieved within one (1) month
after the parties first met to further work to try to resolve the problem, such
patent(s) shall be excluded from the indemnity provided by Xerox in this Section
7.2 as it applies to the JetFax Product; however, in such event JetFax shall
have the option to negotiate with Xerox (and Xerox will negotiate in good faith)
for a lower Supply Agreement Article 4 price and/or cancel its JetFax Product
activities.
7.3 (a) JetFax Indemnity. Subject to the terms hereof, JetFax agrees to
----------------
indemnify, defend and hold Xerox harmless from and against any claim or suit
alleging that the Software and/or the Hardware Designs provided by JetFax
pursuant to this Agreement when used for their intended purposes in conjunction
with any of the following items made by or for, Xerox: the Product, the JetFax
Product, or any Derivative Product, infringes the patent rights, copyrights or
other proprietary rights of any third party ; provided that (i) Xerox notifies
JetFax in writing within fifteen (1 5) business days of any claim, (ii) JetFax
has sole control of the defense and all related settlement negotiations and
(iii) Xerox provides JetFax with the assistance, information and authority
necessary to perform the above. Notwithstanding the foregoing, JetFax shall
have no liability hereunder for any claim or suit based on (i) modifications or
other alterations made to the Software or the Hardware Designs by a party other
than by or for JetFax (other than by Xerox or Xerox Affiliates) or the
combination, operation or use of the Software or the Hardware Designs with other
hardware or software not furnished or developed by or for JetFax (other than by
Xerox or Xerox Affiliates) if such infringement would have been avoided by the
use of the Software and the Hardware Designs without such modification or
alteration or without such other hardware or software or (ii) any Software
related to the User Interface (as included in the Xerox Deliverables) or (iii)
infringement of any proprietary rights of third parties to the extent and for
the time period and activities such proprietary rights are licensed to Xerox
(but JetFax shall reimburse Xerox for any reasonable per unit royalties Xerox is
obligated to pay and does pay for such license(s) to the
15
<PAGE>
extent Xerox incurs greater cost under such license(s) dub to purchase of units
by JetFax under the Supply Agreement). In the event that the Software or the
Hardware Designs are the subject of a claim of infringement, JetFax may at its
option and expense (i) modify the same to be non-infringing or (ii) obtain for
Xerox a license (and any royalties required to obtain such license shall be paid
by JetFax) to continue using the same. The provisions of this Section 7.3 state
the entire liability and obligations of JetFax and the exclusive remedy of Xerox
with respect to any infringement or alleged infringement of proprietary rights
by the Software or the Hardware Designs. Except as set forth herein, JetFax
assumes no liability for, and expressly disclaim,.,, any liability with respect
to, any infringement or alleged infringement of any proprietary rights by the
Software or the Hardware Designs.
(b) JetFax Right to Use Study. JetFax may conduct a right to use study with
respect to the JetFax Deliverables when used in conjunction with the Product.
If:
(i) prior to one (1) month after the design of the Product is fixed by
Xerox and that fact is disclosed by Xerox to JetFax (and Xerox
shall promptly disclose such fact to JetFax) along with Product
information reasonably needed by JetFax to conduct its right to
use study (and Xerox shall promptly disclose such information to
JetFax);
(ii) JetFax identifies unlicensed third party patent(s) which JetFax
reasonably believes will be infringed by use by or for Xerox or
its customers of the JetFax Deliverables when used in conjunction
with the Product and JetFax clearly identifies in writing
(including patent or application numbers and issue or filing
dates respectively) to Xerox any such patent(s);
then the parties agree as follows. If JetFax is unable to promptly obtain a
license under such patents on reasonable terms (and any royalties or other
payments required to obtain such license shall be paid by JetFax) and the
parties are unable to reasonably design around such patent(s); then the parties
shall meet to further work in good faith to resolve this problem. In the event
such resolution cannot be achieved within one (1) month after the parties first
met to further work to try to resolve the problem, such patent(s) shall be
excluded from the indemnity provided by JetFax in this Section 7.3 as it applies
to the Product; however in such event Xerox shall have the option to negotiate
with JetFax (and JetFax will negotiate in good faith) for a lower Section 6.2
royalty and/or cancel its Product activities.
7.4 Xerox for the Xerox Deliverables (excluding the Printer Mechanism and
the JetFax Cartridge), and JetFax for the JetFax Deliverables, shall promptly
identify to the other party any third party patents known by Xerox for its
Deliverables and known by the President and/or CEO of JetFax for its
Deliverables to cover such Deliverables. Each party has disclosed to the other
prior to the Effective Date all such patents known prior to the Effective Date.
8. CONFIDENTIALITY
8.1 Each party's information disclosed to the other party pursuant to this
Agreement shall be governed by the terms of the "CONFIDENTIAL DISCLOSURE
AGREEMENT" (the "CDA") between the parties attached as Exhibit G and
16
<PAGE>
which is entered into and effective as of the Effective Date of this Agreement.
8.2 The provisions of the CDA are hereby adopted by the parties and shall
remain in full force and effect as a part of this Agreement as though fully set
forth herein.
8.3 Without limitation to any other provision of this Agreement, the CDA
referred to in Section 8.1 applies to all source code and supporting
documentation including concepts and algorithms embedded in the source code. In
addition, Xerox agrees not to make available any part of any program listing
obtained pursuant to Section 2.5 of this Agreement to a third party within the
meaning of the CDA unless that part of the program listing is subject to one or
more provisions of CDA clause 3. (a) - (0, notwithstanding the fact that the
period for this obligation may extend beyond the 3.5 years of the CDA.
8.4 This Agreement shall be deemed Confidential Information and shall not
be disclosed to third parties other than as provided in Section 14.18 of this
Agreement.
9. PROPRIETARY RIGHTS NOTICES
The Product shall bear any and all reasonable and customary proprietary rights
notices associated with or carried by any of the Deliverables. Neither party
will remove, cover or deface any such proprietary rights notices.
10 TERM
This Agreement will commence on the Effective Date and will continue to be in
force and effect until such time as it is otherwise terminated as herein
provided.
II. TERMINATION
11.1 Termination for Cause By Either Party. Either party may terminate
-------------------------------------
this Agreement:
(a) Upon sixty (60) days written notice to the other party in the event the
other party breaches any of its material obligations hereunder and fails to cure
same during the notice period, or if it is not reasonable to expect such a cure
within that period, does not take effective action within such period to
promptly cure the material breach; or
(b) Upon sixty (60) days written notice to the other party in the event a
petition in bankruptcy or similar debtor protection law is filed by or against
the other party, or if the other party makes an assignment for the benefit of
creditors, or a receiver is appointed, and such events are not discontinued,
vacated or terminated during the notice period;
11.2 Effect of Termination.
---------------------
(a) The licenses set forth in Section 5.1 (t)) hereof are perpetual (and shall
survive a termination under Section 11.1 of this Agreement), subject, however,
to the royalty obligations of Section 6.2 hereof and all title and
confidentiality provisions of this Agreement, provided, however, that the
licenses set forth in
17
<PAGE>
Section 5.1 (b) are subject to termination upon sixty (60) days written notice
from JetFax to Xerox in the event Xerox breaches any of its material obligations
with respect to such royalty, title or confidentiality provisions as they apply
to such licenses and fails to cure the same during such sixty (60) day notice
period, or if it is not reasonable to expect such a cure within that period,
does not take effective action within such period to promptly cure the material
breach.
(b) Upon termination of this Agreement each party shall return to the other
party all unlicensed confidential or proprietary information of the other party
and shall make no other or further use of such unlicensed information.
12. RIGHT TO DEVELOP INDEPENDENTLY
Nothing in this Agreement will impair either party's right to acquire, license,
develop, manufacture or distribute for itself, or have others develop,
manufacture or distribute for it, similar technology performing the same or
similar functions as the technology contemplated by this Agreement except as
provided in Sections 5 and 8, or to market and distribute such similar
technology or products.
13. DISCLAIMER OF CONSEQUENTIAL DAMAGES AND IMPLIED WARRANTIES
In no event shall either party be liable to the other for any indirect, special,
incidental or consequential damages for breach of or failure to perform under
this Agreement, even if that party has been advised of the possibility of such
damages. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 7.1 OR IN THE SUPPLY
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY DELIVERABLE OR OTHERWISE, INCLUDINIG WITHOUT
LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, TECHNICAL PERFORMANCE, OR COMMERCIAL SUCCESS AND HEREBY DISCLAIMS ALL
SUCH OTHER WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED EITHER IN THIS AGREEMENT OR
THE SUPPLY AGREEMENT, NEITHER PARTY ASSUMES ANY RESPONSIBILITIES WHATEVER WITH
RESPECTTOTHE DEVELOPMENT, MANUFACTURE , USE, SALE, LEASE, OR OTHER DISPOSITION
BY THE OTHER PARTY OR ITS VENDEES OF PRODUCTS INCORPORATING DELIVERABLES
LICENSED OR PROVIDED UNDER THIS AGREEMENT OR THE SUPPLY AGREEMENT.
14. GENERAL
14.1 Force Majeure. Neither party shall be liable for any failure or
-------------
delay in its performance under this Agreement due to causes which are beyond its
reasonable control, including, but not limited to, acts of God, acts of civil or
military authority, fires, epidemics, floods, earthquakes, riots, wars,
sabotage, labor shortages or disputes, and governmental actions; provided that
(a) the delayed party: (i) gives the other party written notice of such cause
promptly, and in any event within fifteen (15) days of discovery thereof; and
(II) uses its reasonable efforts to correct such failure or delay in its
performance, and (b) the delayed party's time for performance or cure under
this Agreement shall be
18
<PAGE>
extended for a period equal to the duration of the cause or sixty (60) days,
whichever is less.
14.2 Relationship of Parties. Xerox and JetFax are independent
-----------------------
contractors. Neither company nor its respective employees, consultants,
contractors or agents are agents, employees or joint venturers of the other, nor
do they have any authority to bind the other by contract or otherwise to any
obligation. They will not represent to the contrary, either expressly,
implicitly, by appearance or otherwise. Each party will determine, in its sole
discretion, the manner and means by which the Services are accomplished, subject
to the express condition that each party will at all times comply with
applicable law.
14.3 Use of Name. Neither party will, without first obtaining the others
-----------
prior written consent, be entitled to use the name of the other party in
promotional, advertising and other materials other than as provided in Section
14.18 of this Agreement.
14.4 Personnel. The respective employees, consultants, contractors and
---------
agents of each party will observe the working hours, working rules and holiday
schedule of the other while working on the other's premises.
Notwithstanding the foregoing, employees of a party shall be and remain
employees of that party and shall not be deemed or claim to be employees of the
other party even when working on such other party's premises.
14.5 Employment Taxes and Benefits. Each party shall be responsible for
-----------------------------
any and all employment taxes and benefits payable to its employees,
representatives, contractors, subcontractors and other engaged by it to perform
Services hereunder and in no event shall either party look to the other for such
payments.
14.6 Other Tax Implications. The purpose of development of the
----------------------
Deliverables under this Agreement is to demonstrate that the Product developed
hereunder will conform to the Specifications. The Deliverables have no
intrinsic value as an item. As such, no value added, sales, or use taxes have
been assessed or are anticipated to be required as a result of the Services
performed under this Agreement.
14.7 Export Controls. Both parties shall comply with all applicable United
---------------
States laws and regulations respecting the export, directly or indirectly, of
any technical data acquired from the other under this Agreement or any Product
or Deliverables utilizing any such data.
14.8 Assignment. Except as expressly provided herein, neither party may
----------
assign or delegate this Agreement, or any of its respective rights or
obligations hereunder without the prior written consent of the other party
hereto; PROVIDED, however, that JetFax may, without Xerox' consent, assign or
delegate this Agreement and JetFax's rights and obligations hereunder to any
successor in interest to JetFax in connection with any sale or transfer of all
or substantially all of its assets or upon any merger, consolidation, or
dissolution. Either party may, from time to time and upon prior written notice
to the other party, subcontract with one of its subsidiaries for the performance
of certain obligations under this Agreement, provided that-the party so
subcontracting shall remain fully liable for
19
<PAGE>
performance of its obligations hereunder. Any attempted assignment in violation
of the provisions of this Section 14.8 shall be void and without force or
effect. In the event of a permitted assignment hereunder, this Agreement or the
applicable provisions shall be binding upon the successors, executors, and
assigns of the parties hereto.
14.9 Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York, U.S.A. without giving effect
to the principles of conflicts of law thereunder.
14.10 Severability. If for any reason a court of competent jurisdiction
------------
finds any provision of this Agreement, or portion thereof, to be unenforceable,
that provision of the Agreement shall he enforced to the maximum extent
permissible so as to effect the intent of the parties, and the remainder of
this Agreement shall continue in full force and effect.
14.11 Notices. All notices required or permitted under this Agreement shall
-------
be in writing, reference this Agreement and be deemed given when: (i) delivered
personally; (ii) when sent by confirmed telex or facsimile; (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a commercial
overnight carrier, with written verification of receipt. All communications
will be sent to the addresses set forth below. Either party may change its
address by giving notice pursuant to this Section 14.1 1.
JetFax: Xerox:
- ------- -------
Mr. Rudy Prince Richard D. Bliss
President, Jet Fax, Inc. Manager, Facsimile Products
1376 Willow Road 1301 Plideview Drive
Menlo Park, California 94025 Building 100, Lewisville, Texas 75075
With a copy to:
Clifford S. Robbins, Esq.
General Counsel Associates 1891 Landings Drive
Mountain View, California 94043
With a copy to:
Louis Faber, Esq.
Xerox Corp. Office of General Counsel
Xerox Square 21 D
Rochester, New York 14644
14.12 No Waiver. Failure by either party to enforce any provision of this
---------
Agreement shall not be deemed a waiver of future enforcement of that or any
other provision.
14.13 No Rights in Third Parties. This Agreement is made for the benefit of
--------------------------
Xerox and JetFax and not for the benefit of any third parties.
14.14 Counterparts. This Agreement may be executed in one or more
------------
countereach of which shall be deemed an original, but collectively shall
constitute but one and the same instrument.
14.15 Headings and References. The headings and captions used in this
-----------------------
Agreement are used for convenience only and. are not to be considered in
construing or
20
<PAGE>
interpreting this Agreement.
14.16 Construction. This Agreement has been negotiated by the parties and
------------
their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
14.17 Trademark Usage. Neither party shall make any use of any trademark,
---------------
service mark or trade name of the other in connection with its advertising,
promotional material or packaging for the Product without first obtaining the
other party's written consent.
14.18 Non-Publicity. Neither party shall directly or indirectly, without
-------------
the prior written consent of the other party, such consent not to be
unreasonably withheld, make any news release or public announcement or other
public disclosure regarding this Agreement or the existence thereof.
Notwithstanding the foregoing, JetFax shall be free to make disclosures to its
shareholders, directors, officers, employees, attorneys, accountants and other
professional representatives of JetFax and to Ailicec and as necessary or
appropriate for compliance with federal or state securities laws and
regulations. It is JetFax's intent to make confidential factual disclosures, in
accordance with the terms and conditions of this Section 14.18, to, a limited
number of potential lenders, investors and underwriters. Neither party shall
disclose information with respect to the other's confidential business plans.
14.19 Complete Agreement. This Agreement, including all Exhibits, together
------------------
with the Supply Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and supersedes and replaces all prior
or contemporaneous understandings or agreements, written or oral, regarding such
subject matter. No amendment to or modification of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of both
parties. To the extent any terms and conditions of this Agreement conflict with
the terms and conditions of any invoice, purchase order or purchase order
acknowledgement placed hereunder, the terms and conditions of this Agreement
shall govern and control.
14.20 Survival. The provisions of Sections 5.1(b) (first sentence only),
--------
5.1(c), 5.1(d) (last sentence of the first paragraph only), 5.2, 8, 11.2, 12 and
13 shall survive the expiration or termination of this Agreement for any reason.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
JETFAX, INC.
BY: /s/ Rudy Prince
NAME: Rudy Prince
TITLE: President
XEROX CORPORATION
BY: /s/ Richard Bliss
NAME: Richard Bliss
TITLE: Manager, Facsimile Products
21
<PAGE>
DEVELOPMENT AGREEMENT
LIST OF EXHIBITS
- ----------------
A JetFax Deliverables
A - 2 Milestone Schedule
B Xerox Deliverables
C Xerox Product Performance Specification
D Project Schedule
E Customer and Service Documentation Deliverables
F Acceptance Test Procedures
G Confidential Disclosure Agreement
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Exhibit A
Development Agreement
JetFax Deliverables
- -------------------
JetFax shall provide the following deliverables in accordance with the defined
parameters for quality.
[*- 3 pages redacted]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Exhibit A-2
Development Agreement
Milestone Schedule
- ------------------
[*- 4 pages redacted]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Exhibit B
Development Agreement
Xerox Deliverables
- ------------------
Xerox shall provide the following deliverables:
[* - the page following this is also redacted]
<PAGE>
EXHIBIT C
DEVELOPMENT AGREEMENT
XEROX PRODUCT PERFORMANCE SPECIFICATION
- ---------------------------------------
Because of its size this exhibit is not included with each copy. Please see
Xerox specification 156PO6328.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Exhibit D
Development Agreement
Project Schedule
- ----------------
Item Date[*]
- ---- -------
[* - the page following this is also redacted]
<PAGE>
Exhibit E
Development Agreement
Customer and Service Documentation Deliverables
- -----------------------------------------------
Xerox will provide a Globalview electronic version and one set of repro masters
for the Xerox HQ 310 multifunction device. The electronic data base will be
developed on the 6085 and 6540 using Xerox Globalview. Electronic art will be
generated using Pro Illustrator and scanned (XPIW) documents. Deliverables will
include the following items. Exceptions to the following deliverables will be
considered billable activities and will be charged on a time and material basis.
INSTALLATION INSTRUCTIONS
- -------------------------
The Xerox HQ 310 Installation instructions will step the user through the
procedure to unpack and connect the Xerox HQ 310 to a computer to function as a
printer and to a telephone line to function as a Fax machine.
USER GUIDE
- ----------
The Xerox HQ 310 user guide will provide step by step procedures on the machine
operation both as a printer and a Fax machine.
QUICK REFERENCE GUIDE
- ---------------------
A Quick Reference guide will provide abbreviated procedures on the commonly used
features. It is designed for the user that is familiar with the machine. The
Quick Reference Guide may be part of the user guide or may be a separate item.
SERVICE MANUAL
- --------------
The Xerox HQ 310 Service Manual is a multinational document designed to support
Xerox Operating Companies and their target population. Fault isolation
procedures in the form of System Checks and Raps provide step by step procedures
to isolate a faulty component at the spared level. Removal and replacement
procedures give detailed instruction as to spared level parts replacement.
Adjustment, procedures, if required, will follow the removal and replacement
procedures. Parts identification to the spared level is provided by exploded
view drawings. Connector and wiring information is also contained in the
service manual. The service manual is designed for use by a Xerox trained
Service Representative.
STUDENT GUIDE
- -------------
The Xerox HQ 310 Student guide consists of several training modules written in
the Criterion Referenced Instruction format. The student guide provides
specific product training on the HQ 310. The Student Guide is self paced with
typically only minor intervention required of the Instructor or course monitor.
INSTRUCTORS GUIDE
- -----------------
The Xerox HQ 31 0 Instructor Guide provides direction to the instructor or
course monitor as to the activities and interaction required during the training
session.
TRANSLATIONS
- ------------
Xerox will make available to JetFax all translations which have been
accomplished. The translations will be in either hard copy or in electronic
form using Xerox Global View.
<PAGE>
EXHIBIT F
Developement Agreement
Acceptance Testing
- ------------------
Xerox shall conduct acceptance testing of Tejas in accordance with the
following.
[*- 3 PAGES REDACTED]
- ---------------------
<PAGE>
EXHIBIT G
DEVELOPMENT AGREEMENT
CONFIDENTIAL DISCLOSURE AGREEMENT
- ---------------------------------
Xerox Corporation (Xerox) of Stamford, Connecticut. and JetFax, Inc. (JetFax),
of Menlo Park, CA, the parties to this Agreement, hereby agree as follows:
1. To further the business relationship between the parties, and to
enable the parties to jointly develop a new facsimile product, HQ31 0, it is
necessary and desirable that each party disclose to the other Confidential
Information relating to this project.
2. The receiving party shall not communicate the disclosing party's
Confidential Information'(all information relating to this project and disclosed
to the receiving party for which the obligations of this Paragraph 2 have not
been terminated by operation of Paragraph 3 hereof to any third party and shall
neither, use the disclosing party's Confidential Information nor circulate it
within its own organization except to the extent necessary for the joint
development of the HQ310 or for any purpose the disclosing party may hereafter
authorize in writing or authorizes pursuant to the terms of a Development
Agreement or a Supply Agreement to which this Confidential Disclosure Agreement
is an Exhibit. Disclosures to the receiving party's subsidiaries and affiliates
and consultants and suppliers and software developers so long as these entities
are similarly bound shall not be considered disclosure to a third party within
the meaning of the previous sentence.
3. The obligations of Paragraph 2 hereof shall terminate with respect to
any particular portion of the disclosing party's Confidential Information that:
(a) was in the public domain at the time of disclosing party's communication
thereof to receiving party,
(b) entered the public domain through no fault of receiving party subsequent to
the time of disclosing party's communication thereof to receiving party,
(c) was in receiving party's possession free of any obligation of confidence at
the time of disclosing party's communication thereof to receiving party,
<PAGE>
(d) was rightfully communicated to receiving party free of any obligation of
confidence subsequent to the time of disclosing party's communication thereof to
receiving party,
(e) was developed by employees or agents of receiving party independently of
and without reference to any disclosing party Confidential Information,
when it is communicated by disclosing party to a third party free of any
obligation of confidence; or,
(g) in any event, 3.5 years after the Effective Date as defined in the parties'
Development Agreement.
When and to the extent the obligations of Paragraph 2 shall not apply to a
particular portion of Information because of the operation of Paragraph 3
hereof, such Information is no longer Confidential Information hereunder.
4. All materials including, without limitation, documents, specifications,
drawings, software, models, apparatus, sketches, designs, and lists furnished to
receiving party by disclosing party and which are designated in writing to be
the property of the disclosing party shall remain the property of disclosing
party and shall be returned to disclosing party promptly at its request with all
copies made thereof except as disclosing party may otherwise agree in writing or
has otherwise agreed pursuant to the terms of the Development Agreement or
Supply Agreement to which this CDA is an exhibit.
5. This Agreement shall govern all communications between the parties,
relating to the subject matter of this Agreement that are made from July 7th,
1993.
6. Communications from disclosing party to personnel and authorized
representatives of receiving party shall not be in violation of' the proprietary
rights of any third party.
7. This Agreement shall be construed in accordance with the laws of the State
of New York.
8. This Agreement replaces the CONFIDENTIAL DISCLOSURE AGREEMENT between
the parties signed by Xerox on 7/15/93 and BY JetFax on 7/19/93.
<PAGE>
Xerox Corporation JetFax, Inc.
By /s/ Richard Bliss By /s/ Rudy Prince
Richard Bliss Rudy Prince
Manager, Facsimile Products President
<PAGE>
EXHIBIT 10.35
REDACTED
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
FACSIMILE PRODUCT DEVELOPMENT AGREEMENT
BY AND BETWEEN
JETFAX, INC. AND XEROX CORPORATION
This Facsimile Product Development Agreement (the "Agreement") is entered into
and is effective as of November 23, 1994 (the "Effective Date"), by and between
JetFax, Inc., a Delaware Corporation having its principal place of business at
1376 Willow Road, Menlo Park, California 94025 ("JetFax"), and Xerox
Corporation, a New York corporation having its principal place of business at
800 Long Ridge Road, Stamford, Connecticut 06904-1600 ("Xerox").
WHEREAS, JetFax desires, upon the terms and conditions set forth in this
Agreement, to perform certain Services and provide certain Hardware Designs,
Bill of Materials and Source List and Software (as hereinafter defined); and
WHEREAS, Xerox desires to perform certain Services as more fully set forth
herein;
NOW, THEREFORE, it is agreed by and between the parties as follows:
AGREEMENT
1. DEFINITIONS
1.1 "Acceptance" shall mean the date of acceptance pursuant to Section
4.2(c) hereof.
1.2 "Bill of Materials and Source List" shall mean the identification by
manufacturer and model of certain components and the source from which such
components compliant with the Specifications may be obtained.
1.3 "Errors" shall mean: (i) reproducible defects in any Deliverable which
causes it not to function in conformance with the Specifications, and (ii)
Software miscoding which results in the Software failing to function in
conformance with the Specifications, if such failure is reproducible.
1.4 "Hardware Designs" shall mean those [*].
1.5 "JetFax Deliverables" shall mean, collectively or individually, JetFax
developed Software, Hardware Designs, and Bill of Materials and Source List. A
more detailed description of the JetFax Deliverables and the requirements for
same are set forth in Exhibit A to this Agreement.
1
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1.6 "Product" shall mean the [*].
1.7 "Project Schedule" shall mean the schedule of events and coordinate
time for the parties' performance under this Agreement, as set forth in Exhibit
D.
1.8 "Services" shall mean the work and labor necessary for the performance
of the respective obligations of the parties to this Agreement.
1.9 "Software" shall mean software object code, as set forth in Exhibit A,
designed in accordance with the Specifications.
1.10 "Specifications" shall mean the engineering, operational and/or
functional descriptions, details and requirements for the Product and the
Software and Hardware Designs, as set forth in Exhibits A and B as the same may
be modified as provided herein. Included are any standards for performance or
operation of the item to which such Specifications pertain.
1.11 "User Interface" shall mean a [*].
1.12 "Xerox Affiliates" shall mean Xerox Canada, Inc., Rank Xerox Ltd.,
Fuji Xerox Ltd., and any subsidiary or affiliate at least 40% of the ownership
of which is held directly or indirectly by Xerox, Xerox Canada Inc., Rank Xerox
Ltd., or Fuji Xerox Ltd.
1.13 "Xerox Deliverables" shall mean [*].
2. SCOPE OF WORK
2.1 Services. Upon the terms and conditions set forth in this
Agreement, jetfax and Xerox agree to perform the Services in
accordance with Exhibits A and B, respectively. Each party will
be responsible for obtaining all the technology, labor, material,
tooling and facilities necessary for the completion of its
portion of the Services, except as otherwise set forth in this
Agreement.
2.2 Progress Reports.
Each party hereto shall provide the other
party with progress reports, as reasonably requested by the other
party, starting after the Effective Date and ending on the date
of
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Acceptance. Each report shall be in such form and contain such information as
may be mutually agreed by the parties, including but not limited to, progress to
current scheduled milestones, description of any problems in meeting milestone,
and if problems, proposed recovery methods.
2.3 Agency Approvals. The parties agree that JetFax shall be
----------------
responsible for any and all engineering and development work with respect to the
JetFax Deliverables necessary for obtaining any required governmental or
necessary private agency approvals or certifications for the Product (such as,
by way of example and not limitation, Underwriter's Laboratories, CSA, U.S.
F.C.C. regulations parts 15 and 68) in the United States and Canada. The actual
costs (including protesting consultant fees and expenses and testing costs and
expenses) and filing fees for the submission for such approvals in the United
States and Canada and such other jurisdictions as the parties mutually agree in
writing they shall enter are to be borne by Xerox. In addition to the
foregoing, for the period ending on the date that is 24 months from the
Effective Date, JetFax agrees to use its reasonable efforts to design the JetFax
Deliverables to meet the agency approval requirements of other jurisdictions.
JetFax further agrees to use its reasonable efforts to provide design services
with respect to the JetFax Deliverables, after such 24 month period, if
necessary in conjunction with any changes required by jurisdictions in which
agency approvals have been obtained during such 24 month period. In order for
JetFax to perform its reasonable efforts obligations hereunder, Xerox shall
provide JetFax with customary English language summaries of the specifications
of each individual jurisdiction's requirements where agency approval is to be
sought. Xerox shall provide all reasonable assistance to Jet Fax for obtaining
approvals and certifications, including use by JetFax of any relevant testing,
test results, documents, applications and approvals and certificates with regard
to the Product. Xerox shall bear f he cost of any JetFax travel, lodging and
related expenses incurred in support of approval activities in connection with
the Product. Except as set forth above, all costs for agency approvals for
other jurisdictions shall be borne fully by the party seeking such approvals,
unless otherwise mutually agreed. If is further agreed that after such 24 month
period, JetFax agrees to provide such design services as may be requested by
Xerox to meet the requirements of any jurisdiction. Xerox agrees to compensate
JetFax at customary rates for such design services rendered after the end of
such 24 month period.
2.4 Bill of Materials and Source List Approval. The Bill of Materials and
------------------------------------------
Source List shall be subject to review and approval by Xerox, and all component
vendors providing materials set forth on the Bill of Materials shall be subject
to qualification as a vendor to Xerox under Xerox standards for vendor
certification then in effect. Such approval shall not be unreasonably withheld.
Xerox reserves the right to make final selection of component vendors.
Notwithstanding anything to the contrary contained herein, neither
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such Xerox approval nor such vendor qualification shall be a basis for any
rejection pursuant to Section 4.2(a) or Section 4.3, or condition precedent to,
or a basis for any delay in, Acceptance hereunder and any component vendor
approved and/or qualified by Xerox under or in connection with the Facsimile
Product Development Agreement between the parties dated as of June 9, 1994 shall
be deemed to be approved and qualified by Xerox hereunder.
2.5 Software.Etc. Escrow. Promptly after the Effective Date, JetFax shall
--------------------
place with an independent third party escrow agent acceptable to Xerox one
complete set, under seal, of source code, object code and supporting
documentation for any and all Software, ASICS, FPGAS, and any other programmable
devices (including their schematic capture and VHDL files, their ACTEL files,
test patterns and test parameters and timing diagrams, to the extent available
to JetFax, used to confirm the d6sign) included in the JetFax Deliverables (the
"Escrowed Materials"). The Escrowed Materials shall be retained in strict
confidence by the chosen escrow agent under the terms of the escrow agreement
(which escrow agreement shall be mutually acceptable to both JetFax and Xerox
and consistent with the terms of this Section 2.5) and the escrow agent shall
not disclose the Escrowed Materials to Xerox except pursuant to this Section
2.5. All costs associated with the escrow, including any fees of the escrow
agent, shall be borne by Xerox. In the event one of f he events set forth below
occurs, Xerox may, at its option, notify the escrow agent of such event and
request the release of the Escrowed Materials to Xerox. Xerox shall
simultaneously notify JetFax pursuant to Section 14.11 of this Agreement of such
notification to the escrow agent, specifying the basis upon which such request
for the release of the Escrowed Materials is based. In addition, the escrow
agent shall notify JetFax of the Xerox request for the release of the Escrowed
Materials. The escrow agent shall, only after fen (10) calendar days have
passed from the date Xerox' notice to JetFax hereunder is given (pursuant to
Section 14.11 of this Agreement), release the Escrowed Materials to Xerox unless
such action is prohibited by order of a court of competent jurisdiction. The
only events which shall entitle Xerox to request the release of the Escrowed
Materials are as follows: (i) JetFax ceases to support and maintain the Software
and Hardware Designs as required pursuant to the terms of Section 4.4 of this
Agreement and such failure remains uncured for a period of sixty (CO) days offer
written notice thereof from Xerox, or (ii) the specified items of the Software
or Hardware Designs listed on the Project Schedule to be performed by JetFax
fail to be accepted pursuant to Section 4.2(a) and (b) within ninety (90) days
of the applicable Milestone Dates therefore set forth in the Project Schedule
due primarily to the failure of JetFax to perform its obligations under this
Agreement, or (iii)JetFax grants its prior written consent to such release, or
(iv) a Petition is filed by or against JetFax under Chapter 7 of the Bankruptcy
Act of the United States and such Petition is not discontinued, vacated or
terminated within sixty (60) days. Xerox
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shall use such released Escrowed Materials solely for the purpose of
maintenance and support of the Product or, in the event subparagraph (ii) of
this Section 2.5 shall occur, for the purpose of maintenance, support and
production and Xerox completion of development of the Product and for the uses
stated in the second paragraph of Section 5.1 (b). Any Xerox use of the Escrowed
Materials will be subject at all times to the terms and conditions of this
Agreement. JetFax agrees to update and maintain monthly the Escrowed Materials
held in safekeeping by the selected Escrow Agent to reflect all changes made to
the Escrowed Materials pursuant to the terms of this Agreement.
3. DESIGN REVIEW AND SPECIFICATION CHANGES
3.1 Design Review. The parties agree to promptly meet at the request of
-------------
either party with respect to any material issues a party may have with the
performance of the other party of its obligations under this Agreement.
3.2 Changes to the Specification. Each party is entitled to request
----------------------------
modifications in the form of changes or additions to the Specifications at any
time during the term of this Agreement. Such requests shall be submitted in
writing, and shall not be deemed or considered binding unless accepted by the
other party in writing. If any such modification of the Specifications is
agreed, the parties will negotiate an equitable adjustment to the Agreement,
including the apportionment of any additional development, testing or tooling
costs. Upon mutual agreement to any change to the Specifications, both parties
will proceed with the implementation of the prescribed changes, and the
Specifications and other Exhibits to the Agreement shall be modified accordingly
to reflect such agreed upon changes.
3.3 Modification to Specifications. JetFax and Xerox agree that upon
------------------------------
acceptance of each Deliverable pursuant to Section 4.2 and upon Acceptance the
Specifications shall be modified as necessary to conform to the Deliverables, as
accepted, excepting mutually agreed (in writing) deviations from the
Specification which require additional development work to achieve conformance
to the Specification. After and upon acceptance of each Deliverable pursuant to
Section 4.2 and after and upon Acceptance, the term "Specifications" as used
herein shall refer in all cases to the Specifications as so modified.
4. DELIVERABLES AND DELIVERY; ACCEPTANCE; AND REJECTION
4.1 Deliverables.. Xerox and JetFax agree to use reasonable
-------------
efforts to perform their respective Services and deliver their respective
Deliverables in accordance with the Project Schedule (Exhibit D). Each party's
obligation shall be contingent
5
<PAGE>
upon the other party successfully providing any prerequisite Deliverable (as
specified in the Project Schedule) in a timely fashion in accordance with the
Specifications for same. All Deliverables shall be delivered by the times set
forth in the Project Schedule and stated dates are date of delivery unless
otherwise specified. The parties shall use such Deliverables for testing and
acceptance and marketing purposes only and shall not sell, lease or transfer the
same to any third party.
4.2 Acceptance.
----------
(a) Each party, with the reasonable assistance of the other party if requested,
will examine and test each respective Deliverable (and/or item thereof) as
specified on the Project Schedule of the other party upon delivery. Each
receiving party shall, as soon as reasonably practicable following the
delivery of same, but in no event later than fifteen (15) business days
offer receipt of notice of delivery: (i) accept the Deliverable (or item
thereof) and so inform the other party in writing; or (ii) if the
Deliverable (or item thereof) contains material Errors, reject f he
Deliverable (or item thereof) and provide the other party with a written
statement of such material Errors. The failure of a party to respond
within the specified fifteen (15) day period shall be deemed acceptance of
the Deliverable (or item thereof), but shall not limit the provisions of
Section 4.4 hereof. Either party may request a reasonable extension in the
time to complete such testing if the same is required under the
circumstances, and both parties shall reasonably consider such requests,
provided that no such extension shall be effective unless in writing and
signed by a duly authorized representative of the party granting such
extension.
(b) The developing party will promptly correct the material Errors set forth in
the statement of material Errors with respect to any Deliverable (or item
thereof) and redeliver the Deliverable (or item thereof) to the receiving
party within such reasonable period of time as may be agreed upon by JetFax
and Xerox with regard to all circumstances affecting the Product or the
Deliverables. The receiving party shall, as soon as reasonably practicable
after such redelivery but in no event later than fifteen (15) business days
thereafter, accept or reject the redelivery in accordance with the
procedure set forth in Section 4.2(a), which procedure shall be repeated
until the Deliverables are accepted or the receiving party invokes the
provisions of Section 4.3 hereof.
(c) "Acceptance" shall be deemed to occur upon the earlier of (i) acceptance,
pursuant to this Section 4.2, of all JetFax and Xerox Deliverables (as
specified in the Project Schedule) or (ii) the first sale, lease, license
or other distribution or transfer of a unit of Product by Xerox to a
customer or other third party other than solely for test purposes. The
date of such Acceptance shall be deemed the "date of Acceptance."
Notwithstanding anything to the contrary contained herein, Acceptance shall
not be conditioned upon any
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design or development of the JetFax Deliverables to meet any criteria of any
agency approvals other than those of the United States or Canada.
(d) The parties further agree that in the event a dispute arises as to whether
any Deliverable (or item thereof) is acceptable under the procedure set
forth in Sections 4.2(a) and 4.2(b), and the parties are unable after good
----
faith negotiation to resolve such dispute, the parties agree to submit the
acceptability of any such Deliverable (or item thereof) to Genoa
Technology, Inc., or other independent third party mutually acceptable to
the parties, who shall test such Deliverable (or item thereof) and
determine if such Deliverable (or item thereof) is acceptable as set forth
in Sections 4.2(a) and 4.2(b). The determination of such independent third
party shall as to the acceptance or rejection of any Deliverable (or item
thereof), be deemed final. The cost, if any, of employing such independent
third party shall be borne by f he losing party.
4.3 Rejection. Should any Deliverable fail to be accepted after the final
delivery of that Deliverable pursuant to Section 4.2(b) then the parties shall
promptly meet in accordance with Section 3.1 to resolve the problem. Any
subsequent rejection of the same Deliverable (unless otherwise resolved pursuant
to Section 4.2(d)) shall be deemed a breach of this Agreement by such delivering
party, and the non-breaching party may elect to terminate this Agreement
pursuant to Section ll.l(a) hereof, or may elect to accept further resubmission
of the applicable Deliverable.
4.4 Error Fixes. JetFax shall at its expense, from the Effective Date
until the date that is eighteen (18) months from the date of Acceptance, use its
reasonable efforts promptly to correct documented and reproducible material
Errors in the Software and Hardware Designs which are reported in writing by
Xerox to JetFax. Provided, however, that prior to Acceptance, this obligation
shall apply only to Deliverables (or items thereof) that have been delivered by
JetFax in accordance with the Project Schedule. Xerox shall provide such
assistance in correction as JetFax may reasonably request. All such corrections
to the Software and Hardware Designs shall be deemed to be included in the
licenses granted under Section 5.1 hereof, and copies of any such corrections
shall be promptly furnished in source code to the escrow agent set forth in
Section 2.5 of this Agreement. JetFax will have no obligation under this
Section 4.4 with respect to any Error in the Software or Hardware Designs caused
by any person or entity other than JetFax or its sources identified on the Bill
of Materials and Source List and JetFax is not obligated to correct any Errors
in the Software unless such Error or defect causes the Software to fail to
function in conformance with the Specifications as defined in Section 3.3
herein.
4.5 JetFax Support. JetFax further acknowledges and agrees that, for a
--------------
period of one (1) year following Acceptance and subject to
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the provisions of this Section 4.5, it shall provide Xerox with such reasonable
engineering support as Xerox shall reasonably request, necessary for the
manufacture of the Product. All travel, lodging and associated expenses (save
salary and benefits of JetFax employees) shall be borne by Xerox. In addition,
after the one (1) year period following Acceptance, Xerox shall pay JetFax the
reasonable and customary personnel, service and related charges for any such
support provided by JetFax.
5 OWNERSHIP RIGHTS AND LICENSES
5.1 Software and Hardware Designs, Etc.
----------------------------------
(a) Subject to the terms and conditions of this Agreement, JetFax hereby grants
to Xerox, effective only upon and after the date of Acceptance, a
nonexclusive, perpetual (except if terminated pursuant to Section 11.1
herein), worldwide license to the Software, the Hardware Designs, and any
other JetFax confidential information disclosed to Xerox under this
Agreement and necessary or useful for the following licensed activities
(and JetFax intellectual property corresponding to the above recited
items), to manufacture or have manufactured, the Product and to use and
distribute and sell and service the Product.
Provided however, if the Escrowed Materials are released to Xerox pursuant to
Section 2.5 of this Agreement, the above license as it applies to the Product
shall automatically extend, if and only if there has not been Acceptance, to
enable Xerox to complete the Product and shall automatically encompass all of
the Escrowed Materials. In such event, the royalty set forth in Section 6.2(a)
of this Agreement in the sum of $21.00 (reduced, if applicable as set forth in
such Section 6.2(a)) shall also apply to such license. In such event, JetFax
shall promptly and fully disclose the fully or partially completed JetFax
Deliverables to Xerox, but shall have no further obligations under Sections 2.1,
2.3, 2.5, 4.1, 4.4 and 4.5 of this Agreement.
(b) The Software and the Hardware Designs are confidential information of
JetFax subject to the CDA defined in Section 8.1 of this Agreement and
shall be used by Xerox solely in connection with the Product in accordance
with the terms of this Agreement. Subject to the terms and conditions of
this Agreement, JetFax hereby grants to Xerox a nonexclusive, perpetual
(except if terminated pursuant to Section 11.2(a) of this Agreement),
worldwide license (with the Xerox right to sublicense Xerox Affiliates) to
the Hardware Designs (excluding the ASICs and the Field Programmable Gate
Arrays (FPGAS) themselves and a majority of the designs of each such ASIC
or FPGA), and any other confidential information of JetFax disclosed to
Xerox under this Agreement (excluding the Software and the above excluded
items) and necessary or useful for the following licensed activities (and
JetFax intellectual property corresponding to the above recited licensed
8
<PAGE>
items) to manufacture or have manufactured any other products (i.e. products
other than the Product) and to use and distribute and sell and service such
other products. Provided, however, notwithstanding any sublicense made pursuant
to the above right to sublicense, Xerox shall remain fully liable for compliance
with all of its obligations under this Agreement, including without limitation
the payment of all royalties.
Provided however, if the Escrowed Materials are released to Xerox pursuant to
Section 2.5 of this Agreement, the above license of this Section 5.1 (b) shall
automatically extend, if and only if there has not been Acceptance, to include
all fully or partially completed JetFax Deliverables including Software, ASICS,
and FPGAs and shall automatically encompass all of the Escrowed Material. To
the extent that Xerox uses a material amount of such extended materials (not
already included in the license in the immediately preceding paragraph) under
this extended license, Xerox shall be obligated to pay the royalty as set forth
in the last sentence of Section 6.2(b) of this Agreement.
(c) For the confidence period of the CDA defined in Section 8.1 of this
Agreement, Xerox shall not alter, reverse engineer, decompile or
disassemble the Software or the ASICs and the FPGAs included in the
Hardware Designs, and Xerox may copy the Software, the Hardware Designs,
and any other confidential information of JetFax which is disclosed to
Xerox only as necessary for the exercise of the licenses granted in
Sections 5.1 (a) and 5.1 (b) and/or the provisions of Section 2.5. JetFax
retains its ownership rights in and to the Software, Hardware Designs, and
corresponding intellectual property.
(d) Subject to the terms and conditions and for the purposes of this Agreement,
Xerox hereby authorizes JetFax to use the Xerox Deliverables and any other
Xerox confidential information disclosed to JetFax under this Agreement and
necessary or useful for the following activity (and Xerox intellectual
property corresponding to the above recited items) to develop the JetFax
Deliverables. During the term of this Agreement, JetFax may reverse
engineer, decompile or disassemble any software provided by Xerox only as
necessary for f he development of the JetFax Deliverables.
5.2 Product. Xerox retains its ownership rights in and to any and all
intellectual property contained in the Xerox Deliverables.
5.3 Third Party Confidential Disclosure Agreements. Prior to
----------------------------------------------
disclosing any JetFax Deliverables to any third party (including Goldstar) in
connection with Xerox' "have manufactured" license pursuant to Section 5.1 (a),
Xerox shall procure from such third party a Confidential Disclosure Agreement
(substantially similar to the CDA as defined in Section 8.1) naming JetFax and
such third party as parties thereto.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
6. PAYMENTS
6.1 Advance Royalty.
---------------
(a) In consideration for the Services to be performed by JetFax hereunder,
Xerox agrees to pay to JetFax a nonrefundable advance royalty payment of
[*], payable in those increments and upon completion of the C1, C2, C3 and
C4 Milestones as set forth in the Project Schedule set forth in Exhibit D.
(b) JetFax agrees to provide to Xerox, upon request, audited financial
statements for the JetFax accounting year of 1993 as well as quarterly
financial statements (audited if available) for each accounting quarter of
1994 and 1995 (prior to the date of Acceptance). Any and all such
information provided to Xerox shall be deemed Confidential Information
subject to the provisions of the CDA as defined in Section 8.1.
(c) In the event that JetFax fails to meet any of the last three (3) Milestone
Dates set forth in the Project Schedule by more than fifteen (15) calendar
days and such failure is due primarily to the fault of JetFax, the amount
of the incremental advance royalty payment corresponding to such missed
Milestone Date shall be reduced by [*].
6.2 Royalty Payments.
----------------
(a) In further consideration of the Services performed hereunder and the
licenses granted herein by JetFax, Xerox shall pay JetFax a royalty, with
respect to each and any sale, lease, license or other distribution or
transfer of a unit of Product to a customer or other third party (including
any Xerox Affiliates) (and excluding up to [*] production units of Product
to be internally used by Xerox, which units shall be without royalty), in
an amount equal to [*] for each such unit sold, leased, licensed or
otherwise distributed or transferred. [*]
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(b) In further consideration of the Services performed hereunder and the
licenses granted herein, Xerox shall pay JetFax a royalty, with respect to
each and any sale, lease, license or other distribution or transfer to a
customer or other third party (including Xerox Affiliates) of a unit of any
product (other than the Product) with respect to the design or manufacture
of which all or part of that portion of the Hardware Designs licensed to
Xerox pursuant to Section 5.1 (b) and/or any corresponding JetFax
intellectual property, or any of her JetFax confidential information
disclosed to Xerox and/or any corresponding JetFax intellectual property
have been used, in an amount equal to [*] for each such unit sold, leased,
licensed or otherwise distributed or transferred. The above royalty shall
be payable, for JetFax information only if the information used was subject
to Clause 2 of the CDA defined in Section 8.1 of this Agreement when such
information was first communicated to Xerox by JetFax (provided, however,
all parts drawings and schematics for circuit boards are, and shall be,
deemed to have been subject to Clause 2 of the CDA when first communicated
to Xerox by JetFax), and only for units sold, leased, licensed or otherwise
distributed or transferred within five (5) years after the Effective Date
of this Agreement. Two-thirds of such royalties payable by Xerox under
this Section 6.2(b) shall be applied against the prepaid royalty set forth
in Section 6.1 (b) (and the remaining third of such payment shall be made
to JetFax) until such time as the prepaid royalty is fully offset. The
total of all royalties payable pursuant to this Section 6.2(b) shall not
exceed [*] in the aggregate. When the Section 6.2(b) royalties paid to
JetFax reach the sum of [*], the license set forth in Section 5.1 (b) to
Xerox shall automatically become royalty free and paid up. For units sold,
leased, licensed or otherwise distributed or transferred after the five (5)
year period referred to above in this Section 6.2(b), the license to Xerox
set forth in Section 5.1 (b) shall automatically become royalty free and
paid up. No royalties payable pursuant to Section 6.2(a) shall be subject
to, nor included in the calculation of, the royalty cap of this Section
6.2(b). Provided, further, in the event Xerox shall use a material amount
of any of the Escrowed Materials not included in the license under the
first paragraph of Section 5.1 (b) in products under the license set forth
in the second paragraph of Section 5.1(b) of this Agreement, Xerox shall
pay to JetFax the royalty amount set forth in Section 6.2(a) and not the
royalty set forth in this Section 6.2(b) provided however, that for
uncopyrighted and unpatented such materials the sentence "the above
royalty(s) ... of this Agreement," above in this Section 6.2(b) shall
apply.
(c) All royalty payments as specified in Sections 6.2(a) and (b) shall be paid
by Xerox to JetFax monthly until such time as the prepaid royalty is
totally offset pursuant to Section 6.2(a), and quarterly thereafter
(beginning with the first full calendar quarter) within thirty (30) days
after the end of each month or calendar quarter, as applicable and shall be
due and payable with respect to each and all units sold, leased, licensed,
or otherwise distributed or
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transferred, without regard to whether or not Xerox shall have received payment
with respect thereto.
(d) JetFax acknowledges and agrees that Xerox shall have the right, without the
payment of any additional royalty, to remanufacture units of the Product
returned from its customers for any reason, and to resell or release the
same to its customers.
(e) Xerox shall pay to JetFax interest (at the prime rate of interest as
published in the Wall Street Journal Eastern edition on the last business
day of each month plus five percentage points (prime% + 5%)) on any amounts
payable by Xerox to JetFax hereunder if such amounts are not paid within,
five (5) business days of the applicable due date thereof.
7. REPRESENTATIONS AND INDEMNIFICATION
7.1 Representations. Each party represents and warrants that:
---------------
(a) if has full right and authority to enter into this Agreement, to perform
its obligations hereunder; and
(b) if has full right and authority to grant the rights granted to the other
party herein.
7.2 Xerox' Infringement Indemnity.
-----------------------------
(a) Subject to the terms hereof, Xerox agrees to indemnify, defend and hold
JetFax harmless from and against any claim or suit alleging that the Xerox
Deliverables and/or the User Interface (including, without limitations the
interface to the User Interface software as set forth in Exhibit A)
infringes any patent rights, copyrights or other proprietary rights of any
third party when used for their intended purposes in conjunction with the
Product and/or development of the JetFax Deliverables; provided that: (i)
JetFax gives Xerox prompt notice in writing of any such suit and permits
Xerox, through counsel of its choice, to answer the charge of infringement
and defend such claim or suit, (ii) Xerox has sole control of the defense
and all related settlement negotiations, (iii) JetFax has not further
modified or altered the Xerox Deliverables'(other than the User Interface)
following their delivery to JetFax if such claim or suit would have been
avoided if such modification or alteration had not been made, and (iv)
JetFax provides Xerox with the assistance, information and authority to
perform the above. In the event Xerox agrees to settle the suit, both
Xerox and JetFax agree not to publicize the settlement nor to permit the
party claiming infringement to publicize. the settlement without first
obtaining the other party's written permission.
(b) Subject to the terms hereof, JetFax will deliver to Xerox, as developed,
source code of the interface layer between the User Interface software and
the JetFax firmware which implements the
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functionality as set forth in the Specification. Xerox shall use such source
code solely for purposes of conducting an intellectual property infringement
search, shall not disclose such source code to any third party and shall
promptly return such source code to JetFax immediately upon the conclusion of
such search.
7.3 JetFax Indemnify and Related Provisions
---------------------------------------
(a) JetFax Indemnity. Subject to the terms hereof, JetFax agrees
----------------
to indemnify, defend and hold Xerox harmless from and against any claim or suit
alleging that the Software and/or the Hardware Designs provided by JetFax
pursuant to this Agreement when used for their intended purposes in conjunction
with the Product, infringes the patent rights, copyrights or other proprietary
rights of any third party; provided that (i) Xerox notifies JetFax in writing
within fifteen (15) business days of any claim, (ii) JetFax has sole control of
the defense and all related settlement negotiations and (iii) Xerox provides
JetFax with the assistance, information and authority necessary to perform the
above. Notwithstanding the foregoing, JetFax shall have no liability hereunder
for any claim or suit based on (i) modifications or other alterations made to
the Software or the Hardware Designs by a party other than by or for JetFax or
the combination, operation or use of the Software or the Hardware Designs with
other hardware or software not furnished or developed by or for JetFax if such
infringement would have been avoided by the use of the Software and the Hardware
Designs without such modification or alteration or without such other hardware
or software or (ii) any infringement or alleged infringement related to or
arising out of the User Interface (including, without limitation, the interface
to the User Interface software as set forth in Exhibit A) or the Xerox
Deliverables, or (iii) any infringement or alleged infringement of any
proprietary rights of third parties to the extent and for the time period and
activities such proprietary rights are licensed to Xerox. In the event that the
Software or the Hardware Designs are the subject of a claim of infringement for
which JetFax is liable under this Section 7.3(a), JetFax may at its option and
expense (i) modify the same to be non-infringing or (ii) obtain for Xerox a
license (and any royalties required to obtain such license shall be paid by
JetFax) to continue using the same. The provisions of this Section 7.3 state the
entire liability and obligations of JetFax and the exclusive remedy of Xerox
with respect to any infringement or alleged infringement of proprietary rights
by the Software or the Hardware Designs. Except as set forth herein, JetFax
assumes no liability for, and expressly disclaims any liability with respect to,
any infringement or alleged infringement of any proprietary rights by the
Software or the Hardware Designs.
(b) JetFax Right to Use Study. JetFax may conduct a right to use
-------------------------
study with respect to the JetFax Deliverables when used in conjunction with
the Product. If:
(i) prior to one (1) month after the design of the Product is fixed by
Xerox and that fact is disclosed by Xerox to JetFax (and Xerox shall
promptly disclose such fact to JetFax) along
13
<PAGE>
with Product information reasonably needed by JetFax to conduct its right to use
study (and Xerox shall promptly disclose such information to Jet Fax);
(ii) JetFax identifies unlicensed third party patent(s) which JetFax
reasonably believes will be infringed by use by or for Xerox or its customers of
the Jet Fax Deliverables when used in conjunction with the Product and JetFax
clearly identifies in writing (including patent or application numbers and issue
or filing dates respectively) to Xerox any such patent(s); then the parties
agree as follows. If JetFax is unable to promptly obtain a license under such
patents on reasonable terms (and any royalties or other payments required to
obtain such license shall be paid by JetFax) and the parties are unable to
reasonably design around such patent(s); then the parties shall meet to further
work in good faith to resolve this problem. In the event such resolution cannot
be achieved within one (1) month after the parties first met to further work to
try to resolve the problem, such patent(s) shall be excluded from the indemnity
provided by JetFax in this Section 7.3; however, in such event Xerox shall have
the option to negotiate with JetFax (and JetFax will negotiate in good faith)
for a lower Section 6.2 royalty and/or cancel its Product activities.
7.4 Xerox for the Xerox Deliverables and JetFax for the JetFax
Deliverables, shall promptly identify to the other party any third party patents
known by Xerox for its Deliverables and known by the President and/or CEO of
JetFax for its Deliverables to cover such Deliverables. Each party has disclosed
to the other prior to the Effective Date all such patents known prior to the
Effective Date.
8. CONFIDENTIALITY
8.1 Each party's information disclosed to the other party pursuant to this
Agreement shall be governed by the terms of the "CONFIDENTIAL DISCLOSURE
AGREEMENT" (the "CDA") between the parties attached as Exhibit E and which is
entered into and effective as of the Effective Date of this Agreement.
8.2 The provisions of the CDA are hereby adopted by the parties and shall
remain in full force and effect as a part of this Agreement as though fully set
forth herein.
8.3 Without limitation to any other provision of this Agreement, the CDA
referred to in Section 8.1 applies to all source code and supporting
documentation including concepts and algorithms embedded in the source code. In
addition, Xerox agrees not to make available any part of any program listing
obtained pursuant to Section 2.5 of this Agreement to a third party within the
meaning of the CDA unless that part of the program listing is subject to one or
more provisions of CDA clause 3. (a)- (f), notwithstanding the fact that the
period for this obligation may extend beyond the 3.5 years of the CDA.
14
<PAGE>
8.4 This Agreement shall be deemed Confidential Information and shall not be
disclosed to third parties other than as provided in Section 14.18 of this
Agreement.
9. PROPRIETARY RIGHTS NOTICES
The Product shall bear any and all reasonable and customary proprietary rights
notices associated with or carried by any of the Deliverables. Neither party
will remove, cover or deface any such proprietary rights notices.
10 TERM
This Agreement will commence on the Effective Date and will continue to be in
force and effect until such time as it is otherwise terminated as herein
provided.
11. TERMINATION
11.1 Termination for Cause By Either Party. Either party may
-------------------------------------
terminate this Agreement:
(a) Upon sixty (60) days written notice to the other party in the event the
other party breaches any of its material obligations hereunder and fails to
cure same during the notice period, or if it is not reasonable to expect
such a cure within that period, does not fake effective action within such
period to promptly cure the material breach; or
(b) Upon sixty (60) days written notice to the other party in the event a
petition in bankruptcy or similar debtor protection law is filed by or
against the other party, or if the other party makes an assignment for the
benefit of creditors, or a receiver is appointed, and such events are not
discontinued, vacated or terminated during the notice period.
Xerox may terminate this Agreement in the event JetFax fails to meet any of the
Milestone Dates set forth in the Project Schedule by more than thirty (30)
calendar days and such failure is due primarily to the fault of Jet Fax.
11.2 Effect of Termination.
---------------------
(a) The license set forth in Section 5.1 (b) hereof is perpetual (and shall
survive a termination under Section 1 1.1 of this Agreement), subject, however,
to the royalty obligations of Section 6.2 hereof and all title and
confidentiality provisions of this Agreement, provided, however, that the
license set forth in Section 5.1 (b) is subject to termination upon sixty (60)
days written notice from JetFax to Xerox in the event Xerox breaches any of its
material obligations with respect to such royalty, title or confidentiality
provisions as they apply to such license and fails to cure the same during such
sixty (60) day notice period, or if it is not reasonable to expect such a
15
<PAGE>
cure within that period, does not take effective action within such period to
promptly cure the material breach.
(b) Upon termination of this Agreement each party shall return to the other
party all unlicensed confidential or proprietary information of the other
party and shall make no other or further use of such unlicensed
information. Upon termination of this Agreement pursuant to the second
sentence of Section I 1.1, Xerox shall pay JetFax advance royalty payments
in connection with any Milestones met by JetFax under the Project Schedule
for which JetFax has not yet been paid.
12. RIGHT TO DEVELOP INDEPENDENTLY
Nothing in this Agreement will impair either party's right to acquire, license,
develop, manufacture or distribute for itself, or have others develop,
manufacture or distribute for it, similar technology performing the same or
similar functions as the technology contemplated by this Agreement except as
provided in Sections 5 and 8, or to market and distribute such similar
technology or products.
13. DISCLAIMER OF CONSEQUENTIAL DAMAGES AND IMPLIED WARRANTIES
In no event shall either party be liable to the other for any indirect, special,
incidental or consequential damages for breach of or failure to perform under
this Agreement, even if that party has been advised of the possibility of such
damages. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 7.1, NEITHER PARTY MAKES ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ANY
DELIVERABLE OR OTHERWISE, INCLUDING WITHOUT LIMITATION, THE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TECHNICAL PERFORMANCE, OR
COMMERCIAL SUCCESS AND HEREBY DISCLAIMS ALL SUCH OTHER WARRANTIES. EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY ASSUMES ANY RESPONSIBILITIES
WHATEVER WITH RESPECT TO THE DEVELOPMENT, MANUFACTURE, USE, SALE, LEASE, OR
OTHER DISPOSITION BY THE OTHER PARTY OR ITS VENDEES OF PRODUCTS INCORPORATING
DELIVERABLES LICENSED OR PROVIDED UNDER THIS AGREEMENT.
14. GENERAL
14.1 Force Maieure Neither party shall be liable for any failure or
-------------
delay in its performance under this Agreement due to causes which are beyond its
reasonable control, including, but not limited to, acts of God, acts of civil or
military authority, fires, epidemics, floods, earthquakes, riots, wars,
sabotage, labor shortages or disputes, and governmental actions; provided that
(a) the delayed party: (i) gives
16
<PAGE>
the other party written notice of such cause promptly, and in any event within
fifteen (15) days of discovery thereof; and (ii) uses its reasonable efforts to
correct such failure or delay in its performance, and (b) the delayed party's
time for performance or cure under this Agreement shall be extended for a period
equal to the duration of the cause or sixty (60) days, whichever is less.
14.2 Relationship of Parties. Xerox and JetFax are independent
-----------------------
contractors. Neither company nor its respective employees, consultants,
contractors or agents are agents, employees or joint venturers of the other, nor
do they have any authority to bind the other by contract or otherwise to any
obligation. They will not represent to the contrary, either expressly,
implicitly, by appearance or otherwise. Each party will determine, in its sole
discretion, the manner and means by which the Services are accomplished, subject
to the express condition that each party will at all times comply with
applicable law.
14.3 Use of Name. Neither party will, without first obtaining the
-----------
other's prior written consent, be entitled to use the name of the other party in
promotional, advertising and other materials other than as provided in Section
14.18 of this Agreement.
14.4 Personnel. The respective employees, consultants, contractors
---------------
and agents of each party will observe the working hours, working rules and
holiday schedule of the other while working on the other's premises.
Notwithstanding the foregoing, employees of a party shall be and remain
employees of that party and shall not be deemed or claim to be employees of the
other party even when working on such other party's premises.
14.5 Employment Taxes and Benefits. Each party shall be responsible
-----------------------------
for any and all employment taxes and benefits payable to its employees,
representatives, contractors, subcontractors and other engaged by it to perform
Services hereunder and in no event shall either party look to the other for such
payments.
14.6 Other Tax Implications. The purpose of development of the
----------------------
Deliverables under this Agreement is to demonstrate that the Product developed
hereunder will conform to the Specifications. The Deliverables have no
intrinsic value as an item. As such, no value added, sales, or use taxes have
been assessed or are anticipated to be required as a result of the Services
performed under this Agreement.
14.7 Export Controls. Both parties shall comply with all
---------------
applicable United States laws and regulations respecting the export, directly or
indirectly, of any technical data acquired from the other under this Agreement
or any product or Deliverables utilizing any such data.
14.8 Assignment. Except as expressly provided herein, neither party
----------
may assign or delegate this Agreement, or any of its respective rights or
17
<PAGE>
obligations hereunder without the prior written consent of the other party
hereto; PROVIDED, however, that JetFax may, without Xerox' consent, assign or
delegate this Agreement and JetFax's rights and obligations hereunder to any
successor in interest to JetFax in connection with any sale or transfer of all
or substantially all of its assets or upon any merger, consolidation, or
dissolution. Either party may, from time to time and upon prior written notice
to the other party, subcontract with one of its subsidiaries for the
performance of certain obligations under this Agreement, provided that the
party so subcontracting shall remain fully liable for performance of its
obligations hereunder. Any attempted assignment in violation of the provisions
of this Section 14.8 shall be void and without force or effect. In the event of
a permitted assignment hereunder, this Agreement or the applicable provisions
shall be binding upon the successors, executors, and assigns of the parties
hereto.
14.9 Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York, U.S.A. without giving effect
to the principles of conflicts of law thereunder.
14.10 Severability. If for any reason a court of competent jurisdiction
------------
finds any provision of this Agreement, or portion thereof, to be unenforceable,
that provision of the Agreement shall he enforced to the maximum extent
permissible so as to effect the intent of the parties, and the remainder of this
Agreement shall continue in full force and effect.
14.11 Notices. All notices required or permitted under this Agreement shall
-------
be in writing, reference this Agreement and be deemed given when: (i) delivered
personally; (ii) when sent by confirmed telex or facsimile; (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a commercial
overnight carrier, with written verification of receipts All communications will
be sent to the addresses set forth below. Either party may change its address
by giving notice pursuant to this Section 14.1 1.
JetFax: Xerox:
Mr. Rudy Prince Fred Kiremidjian
President, Jet Fax, Inc. V. P., Engineering
1376 Willow Road 3400 Hillview Avenue
Menlo Park, California 94025 Building 3
Palo Alto, Calif. 94304
With a copy to:
Clifford S. Robbins, Esq.
General Counsel Associates
1891 Landings Drive
Mountain View, California 94043
With a copy to:
Louis S. Faber, Esq.
Xerox Corp. OGC
Xerox Square 21 D
Rochester, N. Y. 14644
18
<PAGE>
14.12 No Waiver. Failure by either party to enforce any provision of this
Agreement shall not be deemed a waiver of future enforcement of that or any
other provision.
14.13 No Rights in Third Parties. This Agreement is made for the benefit of
----------------
Xerox and JetFax and not for the benefit of any third parties.
14.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but collectively shall
constitute but one and the same instrument.
14.15 Headings and References. The headings and captions used in this
--------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
14.16 Construction. This Agreement has been negotiated by the parties and
------------
their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
14.17 Trademark Usage. Neither party shall make any use of any trademark,
---------------
service mark or trade name of the other in connection with its advertising,
promotional material or packaging for the Product without first obtaining the
other party's written consent.
14.18 Non-Publicity. Neither party shall directly or indirectly, without f
-------------
he prior written consent of the other party, such consent not to be unreasonably
withheld, make any news release or public announcement or other public
disclosure regarding this Agreement or the existence thereof. Notwithstanding
the foregoing, JetFax shall be free to make disclosures to its shareholders,
directors, officers, employees, attorneys, accountants and other professional
representatives of JetFax and to Ailicec and as necessary or appropriate for
compliance with federal or state securities laws and regulations. It is
JetFax's intent to make confidential factual disclosures, in accordance with the
terms and conditions of this Section 14.18, to a limited number of potential
lenders, investors and underwriters. Neither party shall disclose information
with respect to the other's confidential business plans.
14.19 Complete Agreement. This Agreement, including all Exhibits
------------------
constitutes the entire agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces all prior or contemporaneous
understandings or agreements, written or oral, regarding such subject matter.
No amendment to or modification of this Agreement shall be binding unless in
writing and signed by duly authorized representatives of both parties. To the
extent any terms and conditions of this Agreement conflict with the terms and
conditions of any invoice, purchase order or purchase order acknowledgement
placed hereunder, the terms and conditions of this Agreement shall govern and
control.
19
<PAGE>
14.20 Survival. The provisions of Sections 5.1 (b) (first sentence only),
--------
5.1 (c), 5.2, 8, 11.2, 12 and 13 shall survive the expiration or termination of
this Agreement for any reason.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
JETFAX, INC. XEROX CORPORATION
BY:/s/ Edward R. Prince III BY:/s/ Fred Kiremidjian
NAME: Rudy Prince NAME: Fred Kiremidjian
TITLE: President TITLE: Vice President,
Engineering
20
<PAGE>
A Jet Fax Deliverables
B Xerox Deliverables
C [INTENTIONALLY OMITTED]
D Project Schedule
E Confidential Disclosure Agreement
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A
DEVELOPMENT AGREEMENT BETWEEN XEROX CORPORATION AND JETFAX INC.
JETFAX DELIVERABLES
[*]
OTHER
[*]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT B
DEVELOPMENT AGREEMENT BETWEEN XEROX CORPORATION AND JETFAX INC.
XEROX DELIVERABLES
[*]
OTHER
Specification
- -------------
[*]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT D
DEVELOPMENT AGREEMENT BETWEEN XEROX CORP. AND JETFAX INC.
PROJECT SCHEDULE
C1 MILESTONE - [*]
Xerox Deliverables [*]
JetFax Deliverables [*]
PAYMENT DATE: [*]
C2 MILESTONE - [*]
. Xerox Deliverables: [*]
. JetFax Deliverables: [*]
C3 MILESTONE - [*]
Xerox Deliverables:
. [*]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Jet Fax Deliverables: [*]
C4 MILESTONE - [*]
Xerox Deliverables: [*]
JetFax Deliverables: [*]
[*]
<PAGE>
EXHIBIT E
DEVELOPMENT AGREEMENT BETWEEN XEROX CORP. AND JETFAX INC.
CONFIDENTIAL DISCLOSURE AGREEMENT
Dated: November 23, 1994
Xerox Corporation (Xerox) of Stamford, Connecticut and JetFax Inc. (JetFax) of
Menlo Park, California, the parties to this Agreement, hereby agree as follows:
1 . To further the business relationship between the parties, and to enable
JetFax to perform its development obligations pursuant to that certain
Development Agreement of even date herewith (the "Development Agreement"), it is
necessary and desirable that each party disclose to the other Confidential
Information relating to the project described in the Development Agreement.
Included within the definition of Confidential Information shall be all source
code provided by either party to the other.
2. The receiving party shall not communicate the disclosing party's
confidential information (all information relating to this project and disclosed
to the receiving party for which the obligations of this Paragraph 2 have not
been terminated by operation of Paragraph 3 hereof to any third party and shall
neither use the disclosing party's Confidential Information nor circulate it
within its own organization except to the extent necessary for the development
work set forth in the Development Agreement or for any purpose the disclosing
party may hereafter authorize in writing or authorizes pursuant to the terms of
the Development Agreement. Disclosures to the receiving party's
subsidiaries and affiliates and consultants and suppliers and software
developers so long as these entities are similarly bound shall not be considered
disclosure to a third party within the meaning of the previous sentence.
3. The obligations of Paragraph 2 hereof shall terminate with respect to
any particular portion of the disclosing party's Confidential Information that:
(a) was in the public domain at the time of disclosing party's communication
thereof to receiving party,
(b) entered the public domain through no fault of receiving party subsequent to
the time of disclosing party's communication thereof to receiving party,
(c) was in receiving party's possession free of. any obligation of confidence
at that time of disclosing party's communication thereof to receiving
party,
(d) was rightfully communicated to receiving party free of any obligation of
confidence subsequent to the time of disclosing party's communication
thereof to receiving party,
(e) was developed by employees or agents of receiving party independently of
and without reference to any disclosing party Confidential Information,
(f) when it is communicated by disclosing party to a third party free of any
obligation of confidence, or
(g) in any event, 3.5 years after the Effective Date as defined in the
Development Agreement.
When and to the extent the obligations of Paragraph 2 shall not apply to a
particular portion of Information because of the operation of Paragraph 3
hereof, such Information is no longer Confidential Information hereunder.
<PAGE>
4. All materials, including, without limitation, documents,
specifications, drawings, software, models, apparatus, sketches, designs, and
lists furnished to receiving party by disclosing party and which are designated
in writing to be the property of the disclosing party shall remain the property
of disclosing party and shall be returned to disclosing party promptly at its
request with all copies made thereof except as disclosing party may otherwise
agree in writing or has otherwise agreed pursuant to the terms of the
Development Agreement to which this CDA is an exhibit.
5. This Agreement shall govern all communications between the parties,
relating to the subject matter of this Agreement that are made from the 20th day
of October, 1994.
6. Communications from disclosing party to personnel and authorized
representatives of receiving party shall not be in violation of the proprietary
rights of any third party.
7. This Agreement shall be construed in accordance with the laws of the
State of New York.
XEROX CORPORATION JETFAX, INC.
By:/s/ Fred Kiremidjian By:/s/ Edward R. Prince III
Fred Kiremidjian Rudy Prince
Vice President, Engineering President
<PAGE>
CONFIDENTIAL DISCLOSURE AGREEMENT
Xerox Corporation (Xerox) of Stamford, Connecticut and JetFax Inc. (JetFax) of
Menlo Park, California, the parties to this Agreement, hereby agree as follows:
1 . To further the business relationship between the parties, and to enable
JetFax to perform its development obligations pursuant to that certain
Development Agreement of even date herewith (the "Development Agreement"), it is
necessary and desirable that each party disclose to the other Confidential
Information relating to this product. Included within the definition of
Confidential Information shall be all source code provided to JetFax by Xerox.
2. The receiving party shall not communicate the disclosing party's
confidential information (all information relating to this project and disclosed
to the receiving party for which the obligations of this Paragraph 2 have not
been terminated by operation of Paragraph 3 hereof to any third party and shall
neither use the disclosing party's Confidential Information nor circulate it
within its own organization except to the extent necessary for the development
work set forth in the Development Agreement or for any purpose the disclosing
party may hereafter authorize in writing or authorizes pursuant to the terms of
the Development Agreement to which this Confidential Disclosure Agreement is an
Exhibit. Disclosures to the receiving party's subsidiaries and affiliates and
consultants and suppliers and software developers so long as these entities are
similarly bound shall not be considered disclosure to a third party within the
meaning of the previous sentence.
3. The obligations of Paragraph 2 hereof shall terminate with respect to
any particular portion of the disclosing party's Confidential Information that:
(a) was in the public domain at the time of disclosing party's communication
thereof to receiving party,
(b) entered the public domain through no fault of receiving party subsequent to
the time of disclosing party's communication thereof to receiving party,
(c) was in receiving party's possession free of any obligation of confidence at
that time of disclosing party's communication thereof to receiving party,
(d) was rightfully communicated to receiving party free of any obligation of
confidence subsequent to the time of disclosing party's communication
thereof to receiving party,
(e) was developed by employees or agents of receiving party independently of
and without reference to any disclosing party Confidential Information,
(f) when it is communicated by disclosing party to a third party free of any
obligation of confidence, or
(g) in any event, 3.5 years after the Effective Date as defined in the
Development Agreement.
When and to the extent the obligations of Paragraph 2 shall not apply to a
particular portion of Information because of the operation of Paragraph 3
hereof, such Information is no longer Confidential Information hereunder.
4. All materials, including, without limitation, documents,
specifications, drawings, software, models, apparatus, sketches, designs, and
lists furnished to receiving party by disclosing party and which are designated
in writing to be the property of the disclosing party shall remain the
<PAGE>
property of disclosing party and shall be returned to disclosing party promptly
at its request with all copies made thereof except as disclosing party may
otherwise agree in writing or has otherwise agreed pursuant to the terms of the
Development Agreement to which this CDA is an exhibit.
5. This Agreement shall govern all communications between the parties,
relating to the subject matter of this Agreement that are made from the 20th day
of October, 1994.
6. Communications from disclosing party to personnel and authorized
representatives of receiving party shall not be in violation of the proprietary
rights of any third party.
7. This Agreement shall be construed in accordance with the laws of the State of
New York.
XEROX CORPORATION JETFAX, INC.
By:/s/ Fred Kiremidjian By:/s/ Edward R. Prince III
Fred Kiremidjian Rudy Prince
Vice President, Engineering President
<PAGE>
EXHIBIT 10.36
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
REDACTED
REV G (3/18/97)
MASTER DEVELOPMENT, PURCHASE AND DISTRIBUTION LICENSE AGREEMENT
THIS AGREEMENT is between JETFAX INC., a Delaware corporation having its
principal place of business at 1376 Willow Road, Menlo Park, California 94025
("JetFax"), and HEWLETT-PACKARD COMPANY, a California corporation with offices
at 3000 Hanover Street, Palo Alto, California 94304 ("HP"). This Agreement is
effective as of January 31, 1997 (the "Effective Date").
AGREEMENT
1. DEFINITIONS.
1.1 ACCEPTANCE CRITERIA means mutually acceptable final performance
criteria that the parties agree will be used to determine whether the JetFax
Software and Hardware Design Package performs at a level acceptable for
inclusion in the mass marketed HP Product.
1.2 DATE OF FIRST COMMERCIAL SHIPMENT means the date HP first ships a
Royalty Generating Unit.
1.3 DATE OF FIRST MASS PRODUCTION means the date of the first production
run of the HP Product whereby the result of such run is intended to be Royalty
Generating Units.
1.4 DEVELOPMENT PROJECT means JetFax's efforts to modify its existing
JetFax Software and JetFax Formatter along with JetFax's development of the HP
Exclusive Features all of which is more fully described in EXHIBIT A ("HP
Product Technical System Specification") and scheduled per EXHIBIT B
("Development Schedule") such that they can be integrated for use in the HP
Product.
1.5 DEVELOPMENT SCHEDULE means the list of JetFax milestones and targeted
delivery dates set forth in EXHIBIT B ("Development Schedule").
1.6 ERROR(S) means a defect in the JetFax Firmware, the [*] or the JetFax
Formatter which causes such JetFax Firmware, [*] or JetFax Formatter not to
operate substantially in accordance with the applicable Acceptance Criteria.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1.7 HARDWARE DESIGN PACKAGE means the schematics, bill of materials and
associated documentation for the JetFax Formatter (however, the Hardware Design
Package shall not include the design schematics for the JetFax ASICs). Any
modified version of a Hardware Design Package shall be handled in accordance
with the terms and conditions of this Agreement which apply to the Hardware
Design Package.
1.8 HP EXCLUSIVE FEATURE(S) shall mean those feature(s) identified as
exclusive to HP and listed in EXHIBIT A ("HP Product Technical System
Specifications") that are developed by JetFax at the request of HP and that the
parties have agreed will be exclusively licensed to HP while such feature(s)
continue to qualify as "HP Exclusive Feature(s)."
1.9 HP PRODUCT means the HP developed hardware product for which JetFax
undertakes the Development Project and that uses the JetFax Formatter
technology, JetFax ASICs, JetFax Firmware, [*] along with HP Exclusive Features
as described in EXHIBIT A ("HP Product Technical System Specification").
1.10 HP TRADEMARKS means (a) the HP-supplied trademarks, stylistic marks
and distinctive logotypes set forth in EXHIBIT E ("Trademarks") and (b) other
mutually agreed upon marks and logotypes as HP may from time to time designate
in writing during the term of this Agreement.
1.11 JETFAX ASICS means the Application Specific Integrated Circuits
designed by JetFax and made available to HP pursuant to this Agreement.
1.12 JETFAX DELIVERABLES means those items described in the Software
description section listed in EXHIBIT A ("HP Product Technical System
Specifications") that JetFax shall deliver to HP pursuant to this Agreement,
including but not limited to, the Hardware Design Package, the HP Exclusive
Features, the JetFax Formatter, the JetFax ASICs, and the JetFax Software and
Updates.
1.13 JETFAX DOCUMENTATION means the JetFax supplied online user manual for
the JetFax Software and JetFax ASICs.
1.14 JETFAX FORMATTER means the JetFax formatter (exclusive of the JetFax
ASICs), or any modified version thereof, which executes or operates with the
JetFax Firmware.
1.15 JETFAX SOFTWARE means (a) the JetFax Firmware, (b) [*] and (c) any
changes to the above listed software which JetFax may supply to HP.
2.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1.15.1 JETFAX FIRMWARE means (a) all or any portion of the JetFax
controller computer programs, compilations thereof, and all associated
documentation which functionality is described in EXHIBIT A ("HP Product
Technical System Specification"), ported by JetFax to the HP Product, and
provided by JetFax to HP pursuant to this Agreement and (b) any changes to such
firmware which JetFax may supply to HP.
1.15.2 [*] means (a) all or any portion of JetFax's computer
programs and all associated end user documentation commonly known as [*] listed
and described in the Software section of EXHIBIT A ("HP Product Technical System
Specification") provided by JetFax to HP and (b) any changes to such software
which JetFax may supply to HP.
1.16 JETFAX TRADEMARKS means (a) the JetFax-supplied trademarks, stylistic
marks and distinctive logotypes set forth in EXHIBIT E ("Trademarks") and (b)
other mutually agreed upon marks and logotypes as JetFax may from time to time
designate in writing during the term of this Agreement.
1.17 ROYALTY GENERATING UNIT means [*]
1.18 TESTING CRITERIA means mutually acceptable working test plans and
procedures that the parties agree will be used to determine the acceptability of
the interim JetFax Deliverables upon delivery pursuant to the Development
Schedule.
1.19 UPDATES means updated versions of JetFax Software which include all
changes, alterations, corrections and enhancements to such JetFax Software which
JetFax makes generally available to its licensees and that are not provided to
any particular JetFax OEM customer as a feature exclusive to such OEM.
2. LICENSE GRANTS.
2.1 MANUFACTURE AND DISTRIBUTION OF JETFAX FORMATTER. Subject to HP's
compliance with the terms of this Agreement and effective upon HP's final
acceptance of the JetFax Deliverables, JetFax hereby grants to HP a worldwide,
non-exclusive, non-transferable license to (i) manufacture (and have
manufactured), and (ii) market, use, sell and otherwise distribute the JetFax
Formatter, directly and indirectly through HP's usual distribution channels.
The licenses granted above are only for use in connection with the HP Product
specified herein, for the purpose of interfacing the JetFax Firmware to the HP
Product, and to use the Hardware Design Package in connection with such
3.
<PAGE>
activities. HP agrees that it shall keep the Hardware Design Package
confidential and shall ensure that the same degree of care is used to prevent
the unauthorized use, dissemination or publication of the Hardware Design
Package as HP would use to protect similar information owned by HP.
2.2 PURCHASE AND DISTRIBUTION OF JETFAX ASICs.
2.2.1 THIRD-PARTY MANUFACTURER. JetFax shall enter into agreements
with certain HP-qualified ASIC manufacturers authorizing such manufacturers to
manufacture and sell JetFax ASICs directly to HP, and upon HP's request provide
documentation of such authorization. In addition, in connection with such
agreements, JetFax shall provide engineering support and documentation to such
HP-qualified ASIC manufacturers as reasonably required to enable such
manufacturers to meet their delivery requirements with HP. HP may purchase
JetFax ASICs only from such authorized HP-qualified ASIC manufacturers, and any
such purchases made by HP shall be subject to the terms and conditions agreed
upon by HP and such authorized HP-qualified ASIC manufacturer.
2.2.2 DISTRIBUTION. Subject to HP's compliance with the terms of
this Agreement, JetFax hereby grants HP the right to distribute the JetFax ASICs
as part of the HP Product described herein and to distribute the JetFax ASICs as
spare or replacement parts for the HP Product described herein. HP shall not
distribute JetFax ASICs in any other manner without JetFax's prior written
approval for such distribution.
2.2.3 ENGINEERING CHANGES. Subsequent to the acceptance of final
mask for first production, JetFax will not make changes to the ASICs without the
prior written consent of HP. In the event that circumstances beyond reasonable
control of the parties require changes after the acceptance date of final mask
for first production, the parties will promptly meet and determine, in good
faith, the appropriate changes and timing of such changes.
2.3 REPRODUCTION AND DISTRIBUTION OF JETFAX FIRMWARE. Subject to HP's
compliance with the terms of this Agreement, JetFax hereby grants to HP a
worldwide, non-exclusive, non-transferable license to use, reproduce and
distribute directly and indirectly, through HP's usual distribution channels,
the object code version of the JetFax Firmware and JetFax Firmware Updates as a
part of the HP Product or for repair and maintenance of such product.
2.4 REPRODUCTION AND DISTRIBUTION OF JETFAX DOCUMENTATION. Subject to
HP's compliance with the terms of this Agreement, JetFax hereby grants to HP a
worldwide, non-exclusive, non-transferable license to use, modify, reproduce and
distribute directly and indirectly, through HP's usual distribution channels,
the JetFax Documentation as a part of the HP Product or in conjunction with such
product.
4.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
2.5 DISTRIBUTION OF HP EXCLUSIVE FEATURES. Subject to HP's compliance
with the terms of this Agreement, JetFax hereby grants to HP, for a period of
one (1) year following the Date of First Commercial Shipment, a worldwide,
exclusive, non-transferable license to use, reproduce and distribute directly
and indirectly, through HP's usual distribution channels, the object code
version of the HP Exclusive Features. Notwithstanding the exclusive license
granted above, JetFax shall, at all times, have the right to include or
license the HP Exclusive Features in products that have a street price [*].
Notwithstanding the aforesaid distribution rights, JetFax will not obtain any
rights to HP drivers, help screens, driver menus, icons, etc. by virtue of
this agreement. Furthermore, nothing contained in this Agreement shall be
construed to grant JetFax any right, title or interest in or to any HP trade
secrets, copyrights, patents or trademarks.]
2.6 REPRODUCTION AND DISTRIBUTION OF [*] Subject to HP's compliance with
the terms of this Agreement, JetFax hereby grants to HP a worldwide, non-
exclusive, non-transferable license to, (a) use, reproduce and distribute,
directly and indirectly, through HP's usual distribution channels, the object
code version of the [*] and the [*] only as part of, or bundled with the HP
Product; and (b) sublicense the [*] to end users for installation with an
already installed HP Product.
2.7 END USER LICENSES. JetFax is responsible for embedding the HP
Standard Software License Terms as an essential step in the installation of the
Software to ensure end user receipt of the HP Standard Software License, such
license to include terms and conditions substantially equivalent to those set
forth in EXHIBIT F ("HP Software License Terms") to this Agreement. The terms
of such license will be drafted so as to apply to the JetFax Software.
3. DEVELOPMENT. Subject to the terms of this Agreement and the timely receipt
of all associated HP deliverables, JetFax will, in a timely and professional
manner, initiate the Development Project, staff the Development Project as
required, and use reasonable efforts to achieve the milestones listed in the
Development Schedule on or before the dates associated with each such milestone.
HP agrees to designate a technically qualified person to respond to information
requests by JetFax who, when so requested by JetFax, shall use his or her best
efforts to respond.
4. DELIVERY, TESTING AND ACCEPTANCE.
4.1 HP DELIVERABLES. HP shall promptly provide JetFax with an appropriate
number of development HP Products, and any additional software, equipment and
documentation, if any, as necessary for JetFax to complete the Development
Project and for testing and support of the JetFax Firmware in accordance with
Section 4.3 ("Testing")
5.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
below. All equipment loaned by HP to JetFax shall remain the property of HP and
shall be fully insured by JetFax. HP recognizes that an equipment failure could
result in a delay in the Development Schedule and, while such equipment is in
the possession of JetFax, HP shall assist in maintaining the same in good
working order. At JetFax's request during the term of JetFax's warranty and
continuing support activities hereunder, HP will continue to ensure that at
least one unit on loan to JetFax is the then current production unit of the HP
Product which HP is actually shipping.
4.2 JETFAX DELIVERABLES. JetFax will use commercially reasonable efforts
to provide HP with the JetFax Deliverables as described in EXHIBIT A ( "HP
Product Technical System Specification") in accordance with the Development
Schedule as detailed in EXHIBIT B ("Development Schedule"). At JetFax's option,
the JetFax Deliverables will be delivered telephonically from JetFax's place of
business to an HP server in California, provided that JetFax bears the costs of
such telephonic transmission to such server. For purposes of tax documentation,
coincident with the telephonic transmission of such deliverable items JetFax may
send to HP a certificate containing the date of transmission, the time of such
transmission, the name(s) of JetFax personnel who made the transmission, the
signature(s) of such personnel and a general description of the nature of the
item(s) transmitted sufficient to distinguish the transmission from other
transmissions. Within fifteen (15) days of receipt of the certificate, HP shall
return such certificate to JetFax, identifying the HP personnel who received
such transmission and, if the information on such certificate is true and
accurate, supply the signature of such receiving personnel verifying the
occurrence of the transmission.
4.3 TESTING.
4.3.1 DEVELOPMENT OF TEST PLAN. The parties will work in good faith
to develop the Testing Criteria. HP or its manufacturing partner will be
responsible for most of the hardware tests and design issues related to very
high-volume production, and for testing the mechanical performance of the HP
Product. In addition, HP or its manufacturing partner will also test
environmental and reliability standards of the HP Product.
4.3.2 INTERIM PERFORMANCE TESTING. Upon JetFax's delivery of each
interim JetFax Deliverable listed in the Development Schedule, HP [*] in
accordance with the applicable Testing Criteria, for conformity with the
applicable Acceptance Criteria and the Testing Criteria. HP shall inform JetFax
of the results of such testing and, if HP is unable to accept the interim JetFax
Deliverables, the basis for a finding of nonconformity or failure of such
interim JetFax Deliverables to conform to the Testing Criteria. JetFax shall use
reasonable efforts to promptly correct nonconformities and resubmit the same for
6.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
retesting by HP. This process shall continue until HP accepts such interim
JetFax Deliverable, or terminates under section 12.2.2.
4.4 FINAL ACCEPTANCE. The JetFax Deliverables shall conform to
specifications in EXHIBIT A ( "HP Product Technical System Specifications") and
meet the Acceptance Criteria. HP shall have [*]
4.5 COMPLIANCE AND CERTIFICATION. HP shall be responsible for all
compliance testing and certification, in the U.S. and internationally, for
safety, emissions, ESD and other required standards, including but not limited
to "Public Telephone and Telegraph" (PTT) testing and approvals.
Notwithstanding the above, JetFax shall be responsible for [*] JetFax and HP
will work together to take corrective actions required for problems found in
such testing and JetFax shall make reasonable changes to its designs and
software as required. All costs for compliance testing and certifications,
including
7.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
travel and other reasonable expenses of JetFax personnel requested by HP to
participate in such testing or certification, shall be paid by HP.
5. PAYMENTS.
5.1 NON-RECURRING ENGINEERING FEES. As and upon HP's acceptance of each
deliverable in accordance with the milestones listed in EXHIBIT B ("Development
Schedule"), HP shall pay JetFax a non-recurring engineering fee equal to the
amount associated with each such milestone. Notwithstanding the failure of
JetFax to meet such individual milestones, HP shall nonetheless be obligated to
pay to JetFax the associated non-recurring engineering milestone payments on the
targeted date of completion if JetFax's failure to complete the milestone by the
listed date is due to a failure by HP or its designated suppliers, to provide
material support, data and deliverables in a timely manner and HP has received
prompt written notice from JetFax upon JetFax's discovery that such failure by
HP would, in fact, result in JetFax's inability to complete the milestone by the
listed date.
5.2 ROYALTIES.
5.2.1 PREPAID ROYALTIES. HP shall pay to JetFax the following
refundable prepaid royalties in advance of actual sales of the HP Product
according to the following schedule:
Prepaid
Payment Targeted Date Royalty
Number Milestone of Completion Amount
- ------ --------- ------------- ------
[*] [*] [*] [*]
TOTAL PREPAID ROYALTIES [*]
[*]
8.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*]
The prepaid royalties shall be recovered by HP at the rate of [*]
5.2.2 ROYALTY RATE. HP shall pay JetFax a royalty of (i) [*]
5.2.3 WHEN ROYALTIES EARNED. Each royalty due hereunder shall be
earned on the date the Royalty Generating Unit is shipped.
5.3 TAXES. License fees and prices to HP do not include taxes of any
nature. HP will pay ordinary sales and property taxes where applicable when
invoiced by JetFax or will supply appropriate tax exemption certificates in a
form satisfactory to JetFax. Under no circumstances will either party be
responsible for the other parties' income tax, franchise tax or other similar
tax liability.
5.4 PAYMENT TERMS. All payments hereunder shall be in U.S. dollars and
shall be paid by HP's U.S. corporate entity. HP shall make payments required
hereunder, without deduction of any tax, duty, fee or commissions. All NRE
payments and prepaid royalties due in accordance with the terms of the Agreement
shall be paid [*] after the completion of the applicable milestone. All
royalties due in accordance with the terms of the Agreement shall be paid within
[*] after the end of each HP fiscal quarter in which they occur. With each
royalty payment HP shall include a written summary of the records described in
Section 6.1 ("Records") below, broken out by month of sale. [*] Such oral
communication shall be subject to final adjustment by HP at the end of each
accounting period.
9.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
6. RECORDS AND AUDIT.
6.1 RECORDS. HP shall maintain a complete, clear and accurate record of
the number of Royalty Bearing Units shipped during the fiscal quarter, and any
other information which may be required to determine whether HP is paying the
correct royalty amount hereunder.
6.2 RIGHT OF AUDIT. To ensure compliance with the terms of this
Agreement, JetFax shall have the right to have an inspection and audit of all
the relevant accounting and sales books and records of HP conducted by an
independent audit firm reasonably acceptable to both parties whose fee is paid
by JetFax, and shall be conducted during regular business hours at HP's offices
and in such a manner as not to interfere with HP's normal business activities.
In no event shall audits be made hereunder more frequently than every twelve
(12) months. If such inspections should disclose any underreporting, HP shall
promptly pay JetFax such underpayment amount, and if such inspections should
disclose any overreporting, JetFax shall promptly pay HP such overpayment
amount. In the event such auditor's inspection shows a five percent (5%) or
greater underreporting, HP shall pay such auditor's fees and expenses for such
audit.
7. TRAINING AND SUPPORT.
7.1 TRAINING AND SUPPORT. JetFax agrees to provide the training,
technical assistance and manufacturing support described in EXHIBIT C ("Training
and Support").
7.2 SUPPORT OF JETFAX FIRMWARE AND [*] HP shall be free, without
additional payments to JetFax, to distribute to existing customers using the HP
Product only, revisions to the [*] through its distribution channels, via its
websites or its other normal distribution methods. Following the expiration of
the relevant Warranty Period (as defined in Section 13.1 ("Performance
Warranty"), for up to [*] following the Date of First Commercial Shipment,
JetFax will provide to HP those Updates to the JetFax Software that HP requests
in accordance with the continuing support terms attached hereto as EXHIBIT C
("Training and Support"). HP agrees that all contact regarding continuing
support services shall be handled through up to three designated HP contacts to
be specified by HP.
7.3 END USER SUPPORT. HP will have the sole responsibility for supporting
its end users and will provide end users with reasonable end user documentation,
warranty service, and telephone support for the use of HP Product consistent
with HP's practice for supporting its other products.
8. MARKETING OBLIGATIONS.
10.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
8.1 PUBLICITY. Within [*] following the date HP first announces the HP
Product, the parties shall issue a press release, the terms of which are
mutually acceptable to both HP and JetFax.
8.2 JETFAX AFTER MARKET PRODUCTS. HP shall, in good faith, assist JetFax
in marketing certain JetFax after market products through [*]to end users of the
HP Product.
9. PROPRIETARY RIGHTS.
9.1 OWNERSHIP. The parties acknowledge that the other party and its
suppliers have and retain exclusive ownership of all their respective
trademarks, logos and product names, and all rights, title and interest,
including all trademarks, copyrights, patents, mask work rights, trade names,
trade secrets and other intellectual property rights to all of the documentation
and computer-recorded data comprising or included in the JetFax Deliverables
with respect to JetFax ownership and the HP Product other than the JetFax
Deliverables with respect to HP ownership. All related ideas, developments,
concepts, techniques, know-how, trade secrets and inventions which are conceived
or reduced to practice during the course of this Agreement shall belong
exclusively to the developing party. Except for the rights expressly enumerated
herein, HP is not granted any rights to patents, mask work rights, copyrights,
trade secrets, trade names, trademarks, or any other rights, franchises or
licenses with respect to the JetFax Deliverables. In the event that HP obtains
the source code versions of the JetFax Deliverables and related materials
pursuant to Section 10 ("Escrow"), HP agrees that such source code and related
materials will be protected as JetFax Deliverables hereunder and that it will
not publish, disclose or otherwise divulge such source code and related
materials to any person, except officers, employees and independent contractors
of HP who have entered into non-disclosure agreements at least as protective of
JetFax's proprietary rights as set forth herein and need access to such source
code or related materials to perform their duties, at any time, either during
the term or after the termination of this Agreement.
9.2 NO SOURCE CODE. HP specifically acknowledges that no rights, other
than those contained in Section 10 ("Escrow"), to the human readable, source
code versions of the JetFax Software are granted to it (except resource source
files and message string source files for both host based software and device
firmware for translation purposes only). HP agrees that it will not attempt to
reverse engineer, reverse compile, disassemble or otherwise attempt to create
source code which is derived from the JetFax Software provided to HP solely in
object code form during the term of this Agreement so long as this agreement
remains in force and for one year following termination. In addition, HP shall
not reverse engineer the JetFax ASICs or any portion thereof so long as this
agree-ment remains in force and for one year following termination.
Notwithstanding the above, the parties agree that HP will use, and it shall not
be considered a breach of this
11.
<PAGE>
Section 9.2 to employ, in conjunction with JetFax, ordinary techniques available
to debug and resolve problems with the JetFax Software.
9.3 PROPRIETARY NOTICES. HP agrees as a condition of its rights
hereunder, not to remove or deface appropriate proprietary JetFax notices
appearing on the JetFax Deliverables for all HP internal distribution
activities. HP further agrees, to reproduce, in accordance with EXHIBIT E
("Trademarks"), appropriate JetFax copyright notices on the JetFax Software, the
software media, and in any electronic distribution of software, such as drivers
or updates.
9.4 RESTRICTED RIGHTS. The JetFax Software is a "commercial item," as
that term is defined at 48 C.F.R. 2.101 (OCT 1995), consisting of "commercial
computer software" and "commercial computer software documentation," as such
terms are used in 48 C.F.R. 12.212 (SEPT 1995). Consistent with 48 C.F.R.
12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4 (JUNE 1995), HP will identify
and license the JetFax Software to U.S. Government end users (i) only as a
commercial end item and (ii) with only those rights as are granted to all other
end users pursuant to the terms and conditions herein. In the event that HP
receives a request from any agency of the U.S. Government to provide the JetFax
Software with rights beyond those set forth above, HP will notify JetFax of the
scope of rights requested and the agency making such request and JetFax will
have five (5) business days to, in its sole discretion, accept or reject such
request.
9.5 FOREIGN GOVERNMENT AGREEMENTS. HP will take commercially reasonable
steps in making proposals and agreements with foreign governments other than the
United States which involve the JetFax Software and related documentation to
strive for the objective that JetFax's proprietary rights in such JetFax
Software and related documentation receive the maximum protection available from
such foreign government for commercial computer software and related
documentation developed at private expense.
10. ESCROW. Concurrently with execution of this Agreement, JetFax , HP and an
escrow agent mutually acceptable to both parties (the "Escrow Agent") shall
enter into an escrow agreement (the "Escrow Agreement") which provides for
JetFax's delivery of the source code version of the JetFax Software and the
specifications of the JetFax ASICs (the "Escrowed Material") to the Escrow Agent
upon execution of this Agreement and periodically thereafter as JetFax provides
new releases of the JetFax Software to HP in accordance with the terms hereof
and release of the Escrowed Material upon the occurrence of release conditions
to be set forth in the Escrow Agreement. A copy of the Escrow Agreement is
attached hereto as EXHIBIT D ("Escrow Agreement").
12.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
11. LICENSE TO USE TRADEMARKS.
11.1 HP'S USE OF TRADEMARKS. HP agrees that it will permanently include
JetFax Trademarks, in a form similar to those included in EXHIBIT E
("Trademarks"), on all copies of the JetFax Software and JetFax ASICs. HP also
agrees that it will include the JetFax and JetSuite brand names, in a form
similar to those included in EXHIBIT E ("Trademarks"), along with HP logos in
splash screens, installation screens, about boxes, demo pages, help tutorials,
manuals, media labels and marketing collaterals.
11.2 OWNERSHIP OF TRADEMARKS. HP acknowledges the ownership of the JetFax
Trademarks in JetFax. HP agrees that it will do nothing inconsistent with such
ownership and that all use of JetFax Trademarks by HP shall inure to the benefit
of and be on behalf of JetFax. HP acknowledges that JetFax Trademarks are valid
under applicable law and that HP's utilization of such JetFax Trademarks will
not create any right, title or interest in or to such trademarks. HP
acknowledges JetFax's exclusive right to use of JetFax Trademarks and agrees not
to do anything contesting or impairing the trademark rights of JetFax. Any use
of JetFax trademarks must identify JetFax as the owner of such trademarks. HP
agrees that JetFax will use and reproduce the HP Trademarks for inclusion in the
JetFax Deliverables. JetFax acknowledges the validity of the HP Trademarks and
agrees the JetFax's utilization of such HP Trademarks will not create any right,
title or interest in or to such trademarks. JetFax and HP agree that no usage
of Trademarks or commitments in this section shall extend beyond the scope of
activity envisioned by this Agreement.
11.3 QUALITY STANDARDS. JetFax is familiar with and approves of the
quality of HP hardware products that are similar to the HP Product. The quality
of the HP Product sold in connection with the JetFax Trademarks shall be
substantially the same as the quality of such other HP hardware products.
12. TERM AND TERMINATION.
12.1 TERM. The initial term of this Agreement shall be five (5) years
from the Effective Date, unless this Agreement is earlier terminated pursuant
to Section 12.2.
12.2 TERMINATION.
12.2.1 TERMINATION FOR CAUSE. A party may terminate this Agreement
in the event of any material breach by the other party which continues uncured
after [*] written notice by the non-breaching party of said breach (which notice
shall, in reasonable detail, specify the nature of the breach) to the breaching
party.
13.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
12.2.2 TERMINATION FOR CONVENIENCE. Subject to the provisions of
Section 12.3.6, HP may terminate this Agreement without cause upon [*] written
notice to JetFax.
12.3 OBLIGATIONS ON TERMINATION OR EXPIRATION. Upon termination or
expiration of this Agreement:
12.3.1 LICENSES TERMINATED. The licenses granted pursuant to
Section 2 ("License Grants") shall terminate immediately.
12.3.2 CONTINUED SUPPORT; RETURN OR DESTRUCTION OF JETFAX
DELIVERABLES. Except in the case where this Agreement is terminated prior to
the Date of First Commercial Shipment, HP shall have the right to retain a
reasonable number of copies of the JetFax Software and use such JetFax Software
only to the extent required for support and maintenance purposes. HP will
immediately discontinue use (except as set forth in the preceding sentence) and
distribution of, and return or destroy all copies of the JetFax Deliverables in
its possession (including copies placed in any storage device under HP's
control). Upon JetFax's request, HP shall warrant in writing to JetFax its
return or destruction of all of JetFax's proprietary information within thirty
(30) days of termination or expiration.
12.3.3 CONTINUED USE BY END USERS. End users shall be permitted the
continued and uninterrupted use of the JetFax Software for the balance of the
term of their end user agreements, as specified in such agreements, provided
that and so long as the end users are not in default of their end user
agreements.
12.3.4 DEFAULT BY END USERS. HP's rights upon default of the end
users relating to the JetFax Software, as specified in the end user agreement,
shall automatically be assigned to JetFax to the extent relevant to the
enforcement by JetFax of the proprietary rights of JetFax and/or its suppliers
in the JetFax Software.
12.3.5 SURVIVAL OF TERMS. The parties' rights and obligations set
forth in Section 9 ("Proprietary Rights"), Section 12.3 ("Obligations on
Termination or Expiration"), Section 13.2 ("Limitation on Warranties"), Section
14 ("Indemnification"), Section 15 ("Limitation of Liability") and Section 16
("General") shall continue after the termination or expiration of this
Agreement.
12.3.6 LIQUIDATED DAMAGES. HP AND JETFAX HEREBY ACKNOWLEDGE AND
AGREE THAT IT WOULD BE IMPRACTICAL AND/OR EXTREMELY DIFFICULT TO FIX OR
ESTABLISH THE ACTUAL HARM SUSTAINED BY JETFAX AS A RESULT OF THE TERMINATION OF
THIS AGREEMENT DURING THE DEVELOPMENT PERIOD OR THEREAFTER, AND THAT THE DAMAGES
LISTED BELOW ARE A REASONABLE
14.
<PAGE>
APPROXIMATION THEREOF. IN THE EVENT THAT THIS AGREEMENT IS TERMINATED BY HP FOR
CONVENIENCE PURSUANT TO SECTION 12.2.2 ABOVE, HP SHALL PAY JETFAX THE FOLLOWING:
1) [*]
2) [*]
3) [*]
IN THE EVENT THAT THIS AGREEMENT IS TERMINATED BY HP FOR CAUSE UNDER SECTION
12.2.1, HP SHALL PAY THE FOLLOWING:
1) [*]
2) [*]
Milestone Targeted Date
Number Milestone of Completion Amount
- ------------ --------- ------------- ------
[*] [*] [*] [*]
IN THE EVENT THAT JETFAX TERMINATES THIS AGREEMENT FOR HP'S MATERIAL BREACH
PURSUANT TO SECTION 12.2.1, JETFAX SHALL, [*]
15.
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[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*] HP AND JETFAX AGREE THAT THE LIQUIDATED DAMAGES ARE A REASONABLE
APPROXIMATION OF JETFAX'S DAMAGES AS A RESULT OF ANY TERMINATION OF THIS
AGREEMENT DURING THE DEVELOPMENT PERIOD OR THEREAFTER. SUCH PAYMENTS SHALL NOT
SERVE TO WAIVE JETFAX'S RIGHTS TO SEEK INJUNCTIVE RELIEF PURSUANT TO SECTION
16.5 ("INJUNCTIVE RELIEF").
13. WARRANTIES.
13.1 PERFORMANCE WARRANTY. JetFax warrants that the JetFax Software and
the Hardware Design Package, for a period of [*] after the Date of First
Commercial Shipment (the "Warranty Period"), will perform substantially in
accordance with the applicable Acceptance Criteria when used in conjunction with
the HP Product. JetFax shall, at its expense, provide a correction or workaround
for any reproducible Errors which may be discovered in the JetFax Software or in
the Hardware Design Package if they are reported to JetFax by HP during the
Warranty Period and deliver an updated version of the JetFax Software or
Hardware Design Package to HP. This warranty shall not apply to such JetFax
Software or Hardware Design Package if it (i) has been modified by HP or any
third party (ii) is any version other than the most current version of such
JetFax Software or Hardware Design Package shipped by HP hereunder or the
version shipped by HP immediately preceding such current version. Also, this
warranty shall not apply to the Hardware Design Package if the resulting JetFax
Formatter is not assembled according to JetFax specifications.
13.2 LIMITATIONS ON WARRANTIES. HP acknowledges that JetFax does not
warrant that the JetFax Software will meet HP's requirements, that operation of
the JetFax Software will be uninterrupted or error free, or that all software
errors will be corrected. JetFax is not responsible for problems caused by
computer hardware or other computer operating systems (including those making up
other HP products) which are not compatible with the system specifications
required to run the JetFax Software as set forth in the applicable Acceptance
Criteria, or for problems in the interaction of the JetFax Software with non
JetFax software. HP acknowledges that the JetFax Software is of such complexity
that it may have inherent defects, and agrees that JetFax makes no other
warranty, either express or implied, as to any matter whatsoever. The foregoing
states JetFax's sole and exclusive warranty to HP concerning the JetFax software
and HP's sole and exclusive remedy for breach of warranty. EXCEPT AS EXPRESSLY
SET FORTH ABOVE, THE JETFAX DELIVERABLES ARE PROVIDED STRICTLY "AS IS". Except
for the express warranties stated in this agreement, JetFax makes no additional
16.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
warranties, express, implied, arising from course of dealing or usage of trade,
or statutory, as to the JetFax Deliverables or any matter whatsoever. IN
PARTICULAR, ANY AND ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NONINFRINGEMENT ARE EXPRESSLY EXCLUDED. HP shall not have the right
to make or pass on, and shall take all measures necessary to ensure that neither
it nor any of its agents or employees shall make or pass on, any express or
implied warranty or representation on behalf of JetFax to any HP customer, end
user, or third party.
14. INDEMNIFICATION.
14.1 BY JETFAX. Subject to Section 15, JetFax agrees to indemnify and
defend HP from any costs, damages, and reasonable attorneys' fees resulting from
any claims by third parties that the uses permitted hereunder of the JetFax
Deliverables infringe any (i) U.S. copyrights, or U.S. trademarks; or (ii)
patents issued in the Designated Countries provided that, HP gives JetFax prompt
written notice of any such claim, tenders to JetFax the defense or settlement of
such a claim at JetFax's expense, and cooperates with JetFax, at JetFax's
expense, in defending or settling such claim. If JetFax receives notice of an
alleged infringement or if HP's use of the JetFax Deliverables shall be
prevented by permanent injunction, JetFax may, at its sole option and expense,
procure for HP the right to continued use of the JetFax Deliverables as provided
hereunder, modify the JetFax Deliverables so that it is no longer infringing, or
replace the JetFax Deliverables with a deliverable of equal or superior
functional capability. The rights granted to HP under this section shall be HP's
sole and exclusive remedy and JetFax's sole obligation for any alleged
infringement of any patent, copyright, trademark, or other proprietary right.
JetFax will have no liability to HP [*]
14.2 BY HP. HP agrees to indemnify and defend JetFax from any costs,
damages, and reasonable attorneys' fees resulting from all claims by third
parties arising from the use, manufacture, and distribution of HP Products by HP
and its direct and indirect customers in [*] provided that JetFax gives HP
prompt written notice of any such claim, tenders to HP the defense or settlement
of any such claim at HP's expense, and cooperates with HP, at HP's expense, in
defending or settling
17.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
such claim. HP will have no liability to JetFax with respect to any claim as to
which JetFax is liable to HP pursuant to Section 14.1 ("By JetFax") above.
15. LIMITATION OF LIABILITY. Neither party will be liable to the other party
or any other party for any loss of use, interruption of business or any
indirect, special, incidental or consequential damages of any kind (including
lost profits) regardless of the form of action whether in contract, tort
(including negligence), strict product liability or otherwise, even if either
party has been advised of the possibility of such damages. The foregoing
limitation of liability is independent of any exclusive remedies for breach of
warranty set forth in this Agreement. The limitation above shall not apply and
shall be of no force and effect with regard to damages attributable to a breach
of the scope of the licenses granted in Section 2 ("License Grants") or a breach
of the protective provisions set forth in Section 9 ("Proprietary Rights") [*]
16. GENERAL.
16.1 DISPUTE RESOLUTION. In the event of disputes between the parties
arising from or concerning the subject matter of this Agreement, other than
disputes arising from or the protection of either party's proprietary
information, the parties will first attempt to resolve the dispute through good
faith negotiation: first among and between the program managers assigned to the
Development Project, and if the dispute is not resolved within 3 days,
negotiation between senior officers (having the necessary authority to resolve
the dispute on behalf of such party) of each party . In the event that the
dispute cannot be resolved through the good faith negotiation of such senior
officers, the parties, within 5 days after written notice, will refer the
dispute to a mutually acceptable mediator, skilled in the technology and
industry relating to the subject matter of this Agreement, for hearing in a
place to be agreed to by the parties. If a mutually acceptable mediator cannot
be selected by the parties, the parties agree to use a mediator, skilled in the
technology and industry relating to the subject matter of this Agreement,
selected by the American Arbitration Association.
16.2 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the United States of America and the State of California as such laws
are applied to agreements entered into and to be performed entirely within
California between California residents.
16.3 CHOICE OF FORUM AND VENUE. All disputes arising under this Agreement
not resolved in accordance with Section 16.1 ("Dispute Resolution") above, shall
be brought in Superior Court of the State of California in Santa Clara County or
the Federal District Court of San Jose, California, as permitted by law. The
Superior Court of Santa Clara
18.
<PAGE>
County and the Federal District Court of San Jose shall each have nonexclusive
jurisdiction over disputes under this Agreement. The parties consent to the
personal jurisdiction of the above courts.
16.4 NOTICES. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, telex, telecopier, facsimile transmission, or by certified or
registered mail, return receipt requested, and shall be deemed given upon
personal delivery, five (5) days after deposit in the mail, or upon
acknowledgment of receipt of electronic transmission. Notices shall be sent to
the signatory of this Agreement at the address set forth at the end of this
Agreement or such other address as either party may specify in writing.
16.5 INJUNCTIVE RELIEF. It is understood and agreed that, notwithstanding
any other provisions of this Agreement, breach of the provisions regarding the
Scope of the Licenses granted in Section 2 ("License Grants") or protection of
Proprietary Information set forth in Section 9 ("Proprietary Rights") of this
Agreement by either party will cause the other irreparable damage for which
recovery of money damages would be inadequate, and that the damaged party shall
therefore be entitled to seek injunctive relief to protect its rights under this
Agreement in addition to any and all remedies available at law.
16.6 NO AGENCY. Nothing contained herein shall be construed as creating any
agency, partnership, or other form of joint enterprise between the parties.
16.7 FORCE MAJEURE. Neither party shall be liable hereunder by reason of
any failure or delay in the performance of its obligations hereunder (except for
the payment of money) on account of strikes, shortages, riots, insurrection,
fires, flood, storm, explosions, acts of God, war, governmental action, labor
conditions, earthquakes, material shortages or any other cause which is beyond
the reasonable control of such party.
16.8 WAIVER. The failure of either party to require performance by the
other party of any provision hereof shall not affect the full right to require
such performance at any time thereafter; nor shall the waiver by either party of
a breach of any provision hereof be taken or held to be a waiver of the
provision itself.
16.9 SEVERABILITY. In the event that any provision of this Agreement shall
be unenforceable or invalid under any applicable law or be so held by applicable
court decision, such unenforceability or invalidity shall not render this
Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
19.
<PAGE>
16.10 HEADINGS. The section headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit, construe,
or describe the scope or extent of such section or in any way affect this
Agreement.
16.11 ASSIGNMENT. Either party shall have the right to assign its rights
and obligations pursuant to this Agreement to a successor entity in the event of
a merger or reorganization in which such party is not the surviving entity or to
a purchase of all or substantially all of its assets. Except as set forth
above, neither this Agreement nor any rights or obligations of either party
hereunder may be assigned in whole or in part without the prior written approval
of the non-assigning party.
16.12 EXPORT. HP acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the JetFax Deliverables. HP agrees that it will
not export or re-export the JetFax Deliverables in any form, without the
appropriate United States and foreign governmental licenses. HP agrees that its
obligations pursuant to this Section shall survive and continue after any
termination or expiration of rights under this Agreement.
16.13 FULL POWER. Each party represents and warrants that it has full
power to enter into and perform this Agreement, and the person signing this
Agreement on each party's behalf has been duly authorized and empowered to enter
into this Agreement. Both parties further acknowledge that each has read this
Agreement, understands it and agrees to be bound by it.
16.14 CONFIDENTIAL AGREEMENT. Neither party will disclose any terms or the
existence of this Agreement except pursuant to a mutually agreeable press
release, with written consent of the other party, or as otherwise required by
law. However, in no event will a party be responsible for confirming the
veracity of statements made by the other party. If required to disclose any
aspect of this agreement by legal requirement such as subpoena or other legal
mandate, each party agrees to use best efforts in each such circumstance to
provide to the other, prior to such party's initial disclosure pursuant to such
legal requirement, a copy of the proposed disclosure (such proposed disclosure
may be a redacted version of this Agreement) showing such party's attempt to
limit, redact, excise and otherwise restrict the disclosure of sensitive
portions of this Agreement. The nondisclosing party shall then have seven (7)
calendar days to provide its suggested limitations, redactions and restrictions
to the disclosing party's draft disclosure. The disclosing party shall then in
good faith attempt to include those suggested limitation, redactions and
restrictions, wherever possible in its submission of the disclosure as required
by law, and thereafter in subsequent negotiations with the agency or entity to
which disclosure is made. If such disclosing party does not receive comments
from the non-disclosing party within the seven (7) day period, such submission
shall be deemed approved by the non-disclosing party.
20.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
16.15 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which will be considered an original, but all of
which together will constitute one and the same instrument.
16.16 ENTIRE AGREEMENT. This Agreement together with the exhibits
completely and exclusively states the agreement of the parties regarding its
subject matter. It supersedes, and its terms govern, all prior proposals,
agreements, or other communications between the parties, oral or written,
regarding such subject matter. This Agreement shall not be changed or modified
except through written mutual agreement signed by officers or program managers
of the parties, and any provision or a purchase order purporting to supplement
or vary the provisions hereof shall be void. Notwithstanding the above, the
parties agree that the specifications described in EXHIBIT A ("HP Product
Technical System Specification") largely reflect the requirements as understood
by the parties on January 7, 1997. However, as the development project
progresses, the parties shall, from time to time and by written mutual agreement
signed by officers or program managers, update such specifications to reflect
any changes and shall consider the impact on cost, schedule and performance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the Effective Date by their duly authorized representatives.
JETFAX: HP:
JETFAX, INC. HEWLETT-PACKARD COMPANY
By:/s/ EDWARD R. PRINCE III By:[*]
------------------------
Print Print
Name: Edward R. Prince III Name:[*]
----------------------
Title: PRESIDENT Title:[*]
---------------------
Address for Notice: Address for Notice:
1376 Willow Road 3000 Hanover Street
Menlo Park, CA 94025 Palo Alto, CA 94304
21.
<PAGE>
EXHIBIT A
HP PRODUCT TECHNICAL SYSTEM SPECIFICATION
<PAGE>
HP Product STSS, Version 4.0 March 18, 1997
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HEWLETT-PACKARD LOGO
HP PRODUCT TECHNICAL SYSTEM SPECIFICATION
TABLE OF CONTENTS
SUMMARY 7
CHANGE PROCESS/LOG 7
SUBMITTAL PROCESS 7
APPROVAL PROCESS 7
COMMUNICATION PROCESS 7
GENERAL INFORMATION 7
PRODUCT SPECIFICATIONS 8
GENERAL SPECIFICATION 9
INTERCONNECTION OVERVIEW 9
CONFIGURATION USE MODEL 9
[*]
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[*]
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[*]
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HP Product STSS, Version 4.0 March 18, 1997
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[*]
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HP Product STSS, Version 4.0 March 18, 1997
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*]
SUMMARY 2
1 GENERAL INFORMATION 3
1.1 PRODUCT OVERVIEW 3
1.2 PROGRAM GOALS 5
[*]
1.3 HOST ENVIRONMENT 9
1.5 DOCUMENT SET 9
1.6 OTHER REFERENCES 9
2 INSTALLATION 11
2.1 GENERAL CHARACTERISTICS 11
2.2 INSTALLER DESIGN 11
2.3 UNINSTALLER DESIGN 12
3 USER INTERFACE TO FUNCTIONS 15
[*]
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[*]
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SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
SUMMARY
[*]
CHANGE PROCESS/LOG
[*]
SUBMITTAL PROCESS
[*]
APPROVAL PROCESS
[*]
COMMUNICATION PROCESS
[*]
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Hewlett-Packard Company Confidential Page 7
<PAGE>
HP Product STSS, Version 4.0 March 18, 1997
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HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
GENERAL INFORMATION
PRODUCT SPECIFICATIONS
[*]
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[*]
GENERAL SPECIFICATION
[*]
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[*]
MISCELLANEOUS
[*]
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ENVIRONMENTAL SPECIFICATIONS
[*]
REGULATORY REQUIREMENTS
[*]
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[*]
REGULATORY TEST SUPPORT REQUIREMENTS
[*]
SERVICE REQUIREMENTS
[*]
HP CUSTOMER SUPPORT
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[*]
MANUFACTURING SUPPORT REQUIREMENTS (TBD)
[*]
APPENDIXES
REPORTS
[*]
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HP PRODUCT SOFTWARE
TECHNICAL SYSTEM SPECIFICATION
Hewlett-Packard Logo
REVISION 2
MARCH 1997
HEWLETT-PACKARD LOGO COMPANY CONFIDENTIAL
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Hewlett-Packard Company Confidential Page i
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HP Product STSS, Version 2.0 March 18, 1997
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DOCUMENT IDENTIFICATION
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TITLE HP Product Software TSS
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- ------------------------------------ ------------------------------------------
AUTHORS HP Product Software Team
- ------------------------------------ ------------------------------------------
- ------------------------------------ ------------------------------------------
PRODUCT MODEL NUMBER TBD
- ------------------------------------ ------------------------------------------
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LAN LOCATION/FILE NAME c:\jfcontr\tss.doc
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MEDIA MS Word 7.0, Visio 4.0
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REVISION HISTORY
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REVISION REVISION DESCRIPTION
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-------------- ----------------------------
DRAFT Various Reviews, 11/96
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DRAFT Various Reviews, 12/96
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REV. 1 Initial Release
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Hewlett-Packard Company Confidential Page ii
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HP Product STSS, Version 2.0 March 18, 1997
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TABLE OF CONTENTS
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SUMMARY
[*]
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1 General Information
1.1 Product Overview
[*]
Components:
[*]
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[*]
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[*]
1.2 Program Goals
[*]
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[*]
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[*]
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1.2.6 Customer Usage Model
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[*]
1.3 Host Environment
[*]
1.5 Document Set
[*]
1.6 Other References
[*]
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[*]
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2 Installation
[*]
2.1 General Characteristics
[*]
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4 HELP SYSTEM
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4.1 HELP DURING INSTALLATION
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APPENDIX A FEATURES LIST
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Hewlett-Packard Company Confidential Page 30
<PAGE>
HP Product STSS, Version 2.0 March 18, 1997
- --------------------------------------------------------------------------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
APPENDIX B USER TASK LIST
[*]
================================================================================
Hewlett-Packard Company Confidential Page 36
<PAGE>
HP Product STSS, Version 2.0 March 18, 1997
- --------------------------------------------------------------------------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*] PAGES 37 AND 38 REDACTED
================================================================================
Hewlett-Packard Company Confidential Page 37
<PAGE>
HP Product STSS, Version 2.0 March 18, 1997
- --------------------------------------------------------------------------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
APPENDIX C [*]
================================================================================
Hewlett-Packard Company Confidential Page 39
<PAGE>
HP Product STSS, Version 2.0 March 18, 1997
- --------------------------------------------------------------------------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*] PAGES 40 AND 41 ARE REDACTED
================================================================================
Hewlett-Packard Company Confidential Page 40
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
APPENDIX D -- HP EXCLUSIVE FEATURES
[*]
================================================================================
Hewlett-Packard Company Confidential Page 42
<PAGE>
EXHIBIT B
DEVELOPMENT SCHEDULE
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
DEVELOPMENT SCHEDULE AND SCHEDULE OF NON-RECURRING ENGINEERING FEES
<TABLE>
<CAPTION>
Milestone Targeted Date NRE
ID Milestone of Completion Payment
--------- --------- ------------- -------
<C> <S> <C> <C>
1. [*] [*]
2. [*] [*]
3. [*] [*] [*]
4. [*] [*] [*]
5. [*] [*] [*]
6. [*] [*] [*]
7. [*] [*] [*]
8. [*] [*] [*]
9. [*] [*] [*]
10. [*] [*] [*]
11. [*] [*] [*]
</TABLE>
1.
<PAGE>
12. [*] [*] [*]
13. [*] [*]
14. [*] [*]
TOTAL NRE [*]
2.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT C
TRAINING AND SUPPORT
I. SOFTWARE/FIRMWARE
TRAINING:
o In-depth technical training covering software and firmware to be provided by
JetFax to HP Support Personnel. Classes to take place at a mutually agreed
upon location. JetFax will provide technical personnel to assist HP in
generating a Technical Support Guide, Service Manual, and related training
materials. HP shall have the right to use all training documentation when
training other HP support organizations.
[*]
TECHINCAL SUPPORT:
o Technical assistance in support of the product launch and ongoing sales shall
include:
A JetFax support line(s) for HP Technical Marketing. Contact may be via
telephone, fax, electronic or regular mail during regular business hours.
o Problem Severity will be established by consensus between JetFax and HP
Program Manager with input from the HP Technical Support Groups using the
following guidelines:
Severity 1: Product is unusable by the end user due to software/firmware
failure.
Severity 2: A major product feature is inoperative, output is grossly deviant
from expected output or there is a sensitive customer situation.
Severity 3: There is a software/firmware problem that is not inhibiting the
usage of the product, a request for information on product usage or other non-
product area.
Severity 4: Requests for enhancements.
JetFax will make every reasonable attempt to maintain the following response and
resolution criteria. This will include, but is not limited to, minimally
ensuring that a JetFax Service Representative will be available by phone at all
business hours 8:00 am - 5:00 pm PST, Monday-Friday, excepting standard US
holidays. In the event a JetFax Service Representative is not available by
phone, a voicemail system will be active which will, in every best effort, allow
for the following:
Hewlett-Packard Company Confidential Page 1
<PAGE>
JetFax/HP Contract Exhibit C - Training and Support
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<TABLE>
<CAPTION>
Problem Severity Response Time Resolution Time
- ------------------- ------------- ---------------
<S> <C> <C>
1 [*] [*]
2 [*] [*]
3 [*] [*]
4 [*] [*]
</TABLE>
Response time is defined as the time necessary to acknowledge the receipt of a
problem and request additional information that may be necessary to analyze the
problem. In the case of a problem submitted by telephone it is assumed that the
response is immediate in that the call is answered as soon as a JetFax technical
support representative is available to answer.
Resolution time is defined as the time necessary to provide a software fix
bypass explanation of functionality or other such item as to 1) resolve the
customer's problem where it is proven to be the fault of JetFax software or,
hardware 2) provide reasonable explanation or evidence that the problem is not
the result of JetFax hardware or software or 3) request any additional
information as is necessary for the JetFax technical support group to resolve
the customer's problem, or escalate the problem to the JetFax QA or engineering
groups for investigation and resolution. In the event of #3 above the JetFax
technical support group will be responsible for monitoring the timeliness of the
QA/Engineering response, as well as keeping the HP technical support group
updated as to the status of the problem.
HP RESPONSIBILITIES
- --------------------
HP Technical Support will be responsible for the following customer issues:
1) Serve as the sole customer contact point at all times during the sales and
product lifecycles.
2) Resolve all JetFax related issues that HP has the technical capacity to
resolve.
3) Reproduce and verify JetFax product problems that are reported by customers
in a controlled enviorment whenever possible.
4) Report verified product failures to JetFax technical support providing
JetFax technical support with a detailed description of the steps necessary
to reproduce a problem.
5) Provide JetFax technical support with any materials necessary to reproduce
the problem such as input or output materials, specialized software or other
computer files deemed necessary for problem resolution.
6) Provide JetFax technical support, when possible, with the following for each
problem when initially contacting JetFax about that problem:
- A chronology of the incident, data on problem volume, frequency, and on-
site meetings with JetFax if they would provide helpful
- Take action with customers at JetFax's request to aide in problem
investigation and resolution
- Attempt to download / fax information on device's status.
- Software applications in use at the time of the failure with associated
software version numbers
- The name, description, and release number of other software that was
resident in the computer's memory at the time that the suspected product
failure occurred.
- Hardware configuration of the machine which the error is occurring
including all steps to recreate name of brand of PC, video cards, video
drivers, relevant localization settings (US vs International), and other
connected and installed
3/27/97 Hewlett-Packard Company Confidential Page 2
<PAGE>
JetFax/HP Contract Exhibit C - Training and Support
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
peripherals and subsequent drivers
- A description of recent changes that have occurred to the hardware and
software of the machine where the failure is occurring.
- Complete text and identifying number of all error messages
- Any customer files necessary to reproduce the problem
JETFAX RESPONSIBILITIES
- -----------------------
JetFax Technical Support will be responsible when addressing the following
customer issues for HP:
1) Provide acknowledgment of the receipt of a problem report from HP in the
time frame outlined above.
2) Provide the HP representative that initiated the communication with a
JetFax problem number for tracking purposes at the time of the problem
report.
3) Perform analysis of reported product failures and unresolved problems and
undertake any efforts to develop solutions or bypasses within the time
frame outline above.
4) Provide to HP technical support any software fixes and documentation that
is developed by JetFax as a resolution to this problem.
5) Provide information, where such information is not clearly described in the
associated documentation, and consulting assistance regarding the operation
of the products in order to enable HP technical support personnel to
perform their related duties.
6) Maintain current updated master sets of all software for the product
including all programs and documentation.
7) Inform HP of any changes or updates to software or documentation.
8) Provide reports on a quarterly basis to HP on product problems communicated
to JetFax from HP as outlined below.
REPORTS AND TECHNICAL NOTES
- ---------------------------
JetFax technical support will make every reasonable effort to provide a
series of monthly reports to HP technical support
consisting of:
- JetFax cases logged for HP requests for the month
- JetFax software bugs reported by JetFax technical support for HP
- Monthly volumes of call received by JetFax technical support for HP
requests
- Technical notes related to HP product issues
- Release notes for products to be distributed by HP
- Any incidents of HP customers who have called JetFax technical support
directly
II. HARDWARE TRAINING AND SUPPORT
1. [*]
2. For HP's convenience, the design of the [*] will be done on HP's design
systems and source documentation will reside on those systems throughout
product life. Much of HP's manufacturing tooling and programming is based on
automated outputs from HP's design systems. JetFax agrees to cooperate with
HP in developing methods to make the transition of the design from JetFax's
design systems to HP's systems fast and reliable.
3/27/97 Hewlett-Packard Company Confidential Page 3
<PAGE>
JetFax/HP Contract Exhibit C - Training and Support
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
3. [*]
4. Suppliers for all components will be subject to HP's standard supplier review
and evaluation process. JetFax agrees to cooperate with HP in the supplier
evaluation process.
5. At the end of HP's [*] production process, HP will perform extensive
electrical tests (production tests) on each [*] manufactured. HP will create
the test architecture and test code capable of diagnosing failures to the
level of design detail available to HP. JetFax will supply test code
sufficient for HP to diagnose failures of any parts of the [*] which are
proprietary to JetFax including all of the proprietary ASICS. JetFax test
code will, where possible, conform to specifications on the test interface
provided by HP so that it can be easily integrated into the production test.
In the event that HP requests action from JetFax to diagnose failures of [*],
HP will supply JetFax with any diagnostic information generated by the
production tests on those [*].
6. At a separate location from [*] manufacture, HP will install the [*] in a
printer and may test operation of the printer (integration test). Software
for the integration test will be provided by HP but may incorporate any
portions of the production test software, or other JetFaxtest utilities.
7. [*]
8. [*]
9. HP and JetFax agree to establish an escalation process throughout the
production life of the [*] to resolve technical problems at three levels as
follows:
Level 1:
--------
HP will designate a product engineer who will be responsible for initial
troubleshooting of all technical problems both in the factory and in the
field. This engineer will have access to all technical information and
documentation on the [*] which is not proprietary to JetFax. JetFax will
designate a design engineer, knowledgeable on this product, who will be
available to the HP product engineer for non-emergency consultation about the
formatter design during business hours. JetFax and HP's contacts will have
phones with message capability which will be checked at least daily,
Level 2:
--------
In the event of an actionable problem under 8. above, escalation will be via
the contact established for Level 1.
3/27/97 Hewlett-Packard Company Confidential Page 4
<PAGE>
JetFax/HP Contract Exhibit C - Training and Support
Level 3:
---------
Events actionable under 7. above will be treated as production hold
emergencies. JetFax will provide a method for HP to contact a knowledgeable
engineer for consultation by phone within one hour at any time. In the event
that the problem cannot be resolved by electronic communication within 24
hours, JetFax will provide an engineer physically present in Boise within an
additional 24 hours to join with the HP product engineer in troubleshooting
the problem to root cause and restoring production.
10. JetFax agrees that all information and software including design
specifications and source code required to perform the testing and
troubleshooting described above is included in the documentation held in
escrow.
11. Technical training on the JetFax design will be provided by JetFax, at times
jointly agreed upon by HP and JetFax.
3/27/97 Hewlett-Packard Company Confidential Page 5
<PAGE>
EXHIBIT D
ESCROW AGREEMENT
<PAGE>
ESCROW AGREEMENT
----------------
FOR SOURCE CODE AND MANUFACTURING MATERIALS
-------------------------------------------
ACCOUNT NUMBER:____________________
This Escrow Agreement is entered into by and among Data Securities
International, Inc., ("DSI"), a Delaware corporation with offices at 49
Stevenson Street, Suite 550, San Francisco, CA 94105;_________________
("Licensor"), a _______________ corporation with offices at
__________________________________________; and Hewlett-Packard Company
("HP"), a California corporation with principal offices at 3000 Hanover
Street, Palo Alto, CA 94304 ("HP").
RECITALS
This Agreement is effective as of _______________.
This Agreement is entered into in furtherance of the provisions and
objectives of that certain Master Development, Purchase and Distribution
License Agreement, effective January 31, 1997, between HP and Licensor
("Master Agreement").
For valuable consideration, the parties agree as follows:
1 DEPOSITS
===========
Licensor shall deposit with DSI those materials specified in Exhibit A
("Deposit"). Licensor shall keep the Deposit at the current revision level
on a semi-annual basis commencing with the effective date of this Agreement.
In addition, Licensor shall update the Deposit at any time during the term or
any renewal term of this Agreement that Licensor issues a new version or
release of the Deposit or otherwise makes revisions to its manufacturing
process requiring changes to the Deposit. Licensor also agrees to comply with
DSI's reasonable requests for the deposit or replacement of Deposit materials
likely to physically degrade.
2 RETENTION OF REPLACED DEPOSIT
================================
DSI will destroy any replaced Deposit unless HP instructs DSI to retain it
within twenty days of notice from DSI of such replacement. Retention of the
replaced Deposit may incur an additional fee, as specified in DSI's fee
schedule.
3 VERIFICATION AND DELIVERY
============================
The Deposit shall be packaged for storage as reasonably instructed by DSI and
accompanied by a cover sheet identifying the contents as indicated in Exhibit
A. Risk of loss or damage during shipment of the Deposit shall rest with the
party sending it. HP shall have the right to verify each Deposit before
shipment. Licensor shall give HP fifteen days advance written
1.
<PAGE>
notice and opportunity to inspect, compile or otherwise reasonably assure
itself of the contents of the Deposit to be shipped. HP may authorize DSI to
act in its place.
Licensor hereby grants HP or DSI, free of charge, the right to supervised use
of the facilities of Licensor, including its computer systems, to verify the
Deposit. Licensor shall make available technical support personnel as
necessary to verify the deposit.
4 STORAGE OF DEPOSIT
=====================
DSI shall safekeep the Deposit in a security vault and exercise the same high
standard of care to protect the Deposit which DSI would use to protect items
of this nature which DSI might own, but in no event less than that standard of
care customary in the industry.
5 USE AND NONDISCLOSURE
========================
Except as provided in this Agreement, DSI shall not disclose or make any use
whatsoever of the Deposit, nor shall DSI disclose or make use of any
information provided to DSI by Licensor or HP in connection with this
Agreement without the prior written consent of Licensor or HP, respectively.
These obligations shall continue indefinitely notwithstanding termination of
this Agreement.
6 RECORDS AND AUDIT RIGHTS
===========================
DSI shall keep complete written records of the activities undertaken and
materials prepared pursuant to this Agreement. Upon reasonable notice to DSI
during the term of this Agreement, Licensor and HP shall be entitled to
inspect and request the records of DSI with respect to this Agreement at
reasonable times during normal business hours at DSI's facilities and to
inspect the Deposit required then to be held by DSI.
7 RELEASE OF DEPOSIT
=====================
If HP notifies DSI of the occurrence of a release condition as defined in
Exhibit B, DSI shall immediately notify Licensor and provide Licensor with a
copy of the notice from HP. Licensor shall have twenty (20) days from the
date Licensor receives the notice from DSI, to in return notify DSI that
Licensor (1) disputes HP's claim that a release condition has occurred or (2)
has cured the condition that might have triggered such release. Failing such
timely notice, DSI shall release a copy of the Deposit to HP. However, if DSI
receives timely notice from Licensor, DSI shall not release a copy of the
Deposit but shall instead institute the Dispute Resolution Process below
within 5 business days of such timely notice from Licensor.
8 DISPUTE RESOLUTION PROCESS
=============================
DSI shall first notify Licensor and HP in writing of contrary instructions
from HP and Licensor for release of the Deposit. Within five business days
after the date the notice is sent by DSI, three referees shall be appointed,
one each by Licensor, HP and DSI. Each party shall notify the others of its
referee's identify within the five day period or forfeit its right to appoint
one.
2.
<PAGE>
On the tenth business day after the dispute notice from DSI, the referees
shall meet at the San Francisco offices of DSI located at 49 Stevenson Street,
Suite 550, San Francisco, CA 94105 and shall hear testimony and other evidence
that Licensor and HP may wish to present with respect to the dispute. The
meetings shall proceed with whatever number of duly appointed referees attend
the meetings, and shall be conducted from 8:30am to 5:30pm on no more than
five consecutive business days, national holidays excluded. HP shall present
up to two days of evidence followed by up to two days of presentation from
Licensor, followed by a final day reserved for rebuttal by each party in the
morning and afternoon, respectively. Licensor, HP and DSI agree that the
evidence and results of the hearings shall not be disclosed to third parties.
Within two business days after the close of the presentations, the referees
shall resolve the dispute by majority vote. Any refusal to vote shall be
deemed an abstention by that referee. In the event of a tie, the Deposit
shall not be released.
This dispute resolution process shall be the exclusive means for resolving
disputes to which it applies, and the decision of the referees shall be final,
conclusive and enforceable by a court of competent jurisdiction. All costs of
the referees shall be borne by the unsuccessful party.
9 JOINT RELEASE
================
HP and Licensor may, by joint written instruction to DSI, authorize the
delivery of the Deposit or a copy of it to the party named in the instruction.
10 RIGHTS IN DEPOSIT
=====================
Rights in the Deposit are stated in Exhibit C.
11 TERM AND TERMINATION
========================
This agreement shall have an initial term of one year, renewable upon receipt
by DSI of the specified renewal fee.
If DSI does not receive the renewal fee by the anniversary date, DSI shall
give notice to Licensor and HP. If the fee is not received from Licensor or
HP within thirty days of such notice, this Agreement shall expire. Upon
expiration of this Agreement, DSI will, at Licensor's option, either destroy
or return the Deposit to Licensor. All obligations of DSI under this
Agreement shall terminate thereafter, except for those stated in the Use and
Nondisclosure Section of this Agreement.
12 FEES
============
All fees shall be invoiced to and due from HP, in full upon receipt of DSI's
invoice. Fees shall be those specified in DSI's schedule of fees in effect
for the initial term of this Agreement plus taxes. To be effective, DSI must
notify Licensor and HP at least ninety days prior to expiration of the initial
term (or any renewal term) of this Agreement of any scheduled increase for the
succeeding renewal term.
3.
<PAGE>
13 ACCOUNT REPRESENTATIVE
===========================
Licensor, HP and DSI shall each designate an authorized individual(s) to
receive notices and otherwise act on behalf of Licensor in connection with
this Agreement, as set forth in Exhibit D. Representatives may be changed by
written notice to the other parties.
14 NOTICES
===========
All notices in connection with this Agreement shall be in writing addressed to
the Account Representatives, shall be sent by certified mail, return receipt
requested, and shall be effective forty-eight hours after deposit with the
U.S. Postal Service.
15 AUTHENTICITY
================
DSI may act in reliance upon any instruction, instrument or signature believed
to be genuine and may assume that it has been duly authorized.
16 HOLD HARMLESS
=================
Licensor will hold DSI harmless against any action regarding the release or
refusal to release a copy of the Deposit by DSI so long as DSI has acted in
good faith and in accordance with this Agreement.
17 GOVERNING LAW
===================
This Agreement shall be governed by and construed in accordance with the laws
of the State of California.
18 MERGER
============
The Master Agreement and this Agreement, including the Exhibits, constitutes
the entire agreement between the parties concerning the subject matter and
shall supersede all previous communications, representations, understandings,
and agreements, either oral or written, between the parties.
19 SEVERABILITY
================
If any provision of this Agreement is held by any court to be invalid or
unenforceable, then that provision will be severed from this Agreement and the
remaining provisions shall continue in force.
20 ASSIGNMENT
==============
No party may assign any rights or obligations of this Agreement without the
prior written consent of the others and any attempt to do so shall be deemed
void.
21 WAIVER
==========
Waivers of any right under this Agreement shall only be effective if in
writing signed by the party possessing the right.
4.
<PAGE>
22 EXHIBITS
============
The following Exhibits are made a part of this Agreement by this reference:
Exhibit A: Deposit
Exhibit B: Release Conditions
Exhibit C: Rights in Deposit
Exhibit D: Account Representatives
Approved and agreed to:
=======================
DSI, Inc. LICENSOR (________________)
By: ___________________________ By:_____________________________
___________________________ _____________________________
(Print Name) (Print Name)
Title: _________________________ Title:__________________________
HEWLETT-PACKARD COMPANY
By:______________________________
______________________________
(Print Name)
Title:___________________________
5.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT E
TRADEMARKS, BRAND NAMING, SPLASH SCREENS / LOGOS, ICONS, UI GUIDELINES
1. JETFAX TRADEMARKS
JetFax/TM/
JetSuite(R)
[*]
2. HP TRADEMARKS
Hewlett-Packard/TM/
[*]
[*]
[*]
picture of Hewlett Packard logo
3. BRAND NAME AND VERSION NAMING
The product name for JetFax developed PC software for the HP Product will
include the key word "for" such that any branding which is apparent in the
product will read [*] for Hewlett-Packard.
The following version naming shall be used for the different planned releases
of the [*] for Hewlett-Packard. The JetFax Product naming is only for
reference and does not, in anyway, obligate JetFax to use such version
naming. However, JetFax will not be allowed to use the same version names for
their own products as those listed for the HP versions of the product.
<TABLE>
<CAPTION>
Win 3.x, Win '95 NT 4.0 Win '97 NT 5.0
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JetFax Product [*] [*] [*] [*]
HP Splash Screen [*] [*] [*] [*]
HP "About" JetSuite [*] [*] [*] [*]
HP documentation, CD ROM jackets, [*] [*] [*] [*]
disk labels
- ---------------------------------------------------------------------------------
</TABLE>
These naming conventions for HP versions will be referenced where applicable
within the application (including but not limited to the "About JetSuite"
dialog box). Additionally, HP will use this naming structure, where
appropriate, in product manuals, on diskette and/or CD ROM packaging and
labels, and on promotional pieces. JetFax reserves the right to maintain a
parallel version mechanism where not readily visible to users and where
necessary to permit proper operation of version-checking program operation.
An example would be in records within a file to allow the Viewer to
distinguish between *.RCH versions, or in *.DLL files to distinguish software
capabilities implemented.
4. SPLASH SCREENS/LOGOS
JetFax and HP agree that the same product splash screen design shall be
displayed for the all instances in which the splash screen is to be
displayed. Those instances are limited to: 1) launch of the main [*] for
Hewlett-Packard desktop application, 2) launch of the [*] mini-viewer, 3)
installation of the [*] software for the HP Product, 4) on-line Getting
Started Guide (if developed for the HP Product), 5) launch into the on-line
Help system. All other instances in which the splash screen is to be
displayed, must be clearly specified and mutually agreed to by both JetFax
and HP prior to any such implementation.
3/27/97 Hewlett-Packard Company Confidential Page 1
<PAGE>
JetFax/HP Contract Exhibit E - Trademarks
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
In all cases, the splash screen shall not exceed a screen size which is the
same as the MS Word 6.0 splash screen.
The relative size of the JETSUITE name to the PICTURE OF THE HEWLETT PACKARD
LOGO brand will retain an approximate ratio of 1:1.
The splash screen shall remain visible for as long as it takes to load the
[*] desktop application, the [*] mini-viewer, the beginning installation
welcome screen, or the on-line Getting Started Guide, but not to exceed five
(5) seconds in any case, and on any platform which is a 486 33mhz processor
or faster.
HP and JetFax agree to allow HP the opportunity to work with graphic
designers of HP's choice in order to arrive at the final splash screen and
logo design which is mutually agreeable to both parties. That agreement will
include agreement on color scheme, font types, font sizes, and the graphic
design. This design, once agreed upon, and the overall look and feel of this
design, will remain exclusive to HP and the [*] for Hewlett-Packard software
product.
As a starting point for discussion of final graphic design, Appendix E1
contains an initial proposal for a design for the splash screen. It is non-
binding for either JetFax or HP, but is used as a physical reference for
discussion.
5. ICONS
Icons shall exist for several of the functions of the HP Product. [*] shall
use some standard FUNCTION ICON designs for the Fax, Copy, Print, Scan
functions within the desktop function of [*]. The TITLE BAR ICON is found in
the upper left corner of the title bar for [*] for Hewlett-Packard when the
application, and any of its associated UI dialogs, is active. The design of
the FUNCTION ICON and the TITLE BAR ICON icons shall be largely determined
by JetFax with approval by HP for the final designs.
The DESKTOP ICON is that icon which: 1) is found in the upper left corner of
the title bar for JetSuite Pro for Hewlett-Packard when the application, and
any of its associated UI dialogs, is active, 12) is the resulting icon on the
Windows desktop or tray icon bar once the [*] for Hewlett-Packard has been
minimized, and 23) is the icon associated with shortcuts and Windows Explorer
program type list of the [*] for Hewlett-Packard.
The HP PRODUCT SETUP ICON is that icon which, if this functionality is
created for the HP Product 1) is found in the upper left corner of the title
bar for the Setup Program associated with [*] for Hewlett-Packard when the
setup program, and any of its associated UI dialogs, is active, 2) is the
resulting icon on the Windows desktop or tray icon bar once the Setup Program
of [*] for Hewlett-Packard has been minimized, and 3) is the icon associated
with shortcuts and Windows Explorer program type list of the Setup Program of
the [*] for Hewlett-Packard.
HP and JetFax agree to allow HP the opportunity to work with graphic
designers of HP's choice in order to arrive at the final designs for DESKTOP
ICON and HP PRODUCT SETUP ICONS. These designs are to be mutually agreeable
to both parties. That agreement will include agreement on color scheme, font
types, font sizes, and the graphic design. This design, once agreed upon, and
the overall look and feel of this design, will remain exclusive to HP and the
[*] for Hewlett-Packard software product.
As a starting point for discussion of final graphic design, Appendix E2
contains an initial proposal for designs for the PROGRAM ICON. It is non-
binding for either JetFax or HP, but is used as a physical reference for
discussion.
3/18/97 Hewlett-Packard Company Confidential Page 2
<PAGE>
JetFax/HP Contract Exhibit E - Trademarks
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
6. USER INTERFACE GUIDELINES
For consistency, the following guidelines will be applied to the user
interfaces associated with [*] for Hewlett-Packard. These include but are not
limited to: 1) the appropriate Program Icon or Setup Icon in the upper left
corner of the active UI screen, 2) the name [*] (approximately 10 point
font), and nothing more, in the title bar for the main desktop program screen
for the [*] for Hewlett-Packard, 3) the name HP PRODUCT (approximately 10
point font) preceding the associated function name, in the title bar for all
applet dialog boxes which result from activating that function, and whose
main function is to interface with the HP Product function. As an example,
Fax Option menu, the resulting applet UI title bar would display HP Product
- -
Fax Option.
Color schemes for background of the desktop, wallpaper design, font sizes,
and UI dialog designs are specified as much as possible in the HP Product
Technical Specification. Absent of this, all other UI guidelines and
decisions for the [*] for Hewlett-Packard product will be mutually agreed
upon by the JetFax and HP product development and marketing teams.
3/18/97 Hewlett-Packard Company Confidential Page 3
<PAGE>
JetFax/HP Contract Exhibit E - Trademarks
APPENDIX E1
PROPOSAL OF INITIAL SPLASH SCREEN DESIGN
3/18/97 Hewlett-Packard Company Confidential Page 4
<PAGE>
JetFax/HP Contract Exhibit E - Trademarks
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*] SCREEN WITH HEWLETT PACKARD LOGO AND NEW PRODUCT NAME AND LOGO
3/18/97 Hewlett-Packard Company Confidential
<PAGE>
JetFax/HP Contract Exhibit E - Trademarks
APPENDIX E2
PROPOSAL OF INITIAL PROGRAM ICON DESIGN
3/18/97 Hewlett-Packard Company Confidential Page 5
<PAGE>
JetFax/HP Contract Exhibit E - Trademarks
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*] proposed icon designs for new product
3/18/97 Hewlett-Packard Company Confidential
<PAGE>
EXHIBIT F
HP SOFTWARE LICENSE TERMS
<PAGE>
ATTENTION: USE OF THE SOFTWARE IS SUBJECT TO THE HP SOFTWARE LICENSE TERMS SET
FORTH BELOW. USING THE SOFTWARE INDICATES YOUR ACCEPTANCE OF THESE LICENSE
TERMS. IF YOU DO NOT ACCEPT THESE LICENSE TERMS, YOU MAY RETURN THE SOFTWARE FOR
A FULL REFUND. IF THE SOFTWARE IS BUNDLED WITH ANOTHER PRODUCT, YOU MAY RETURN
THE ENTIRE UNUSED PRODUCT FOR A FULL REFUND.
HP SOFTWARE LICENSE TERMS
The following License Terms govern your use of the accompanying Software unless
you have a separate signed agreement with HP.
License Grant. HP grants you a license to Use one copy of the Software. "Use"
means storing, loading, installing, executing or displaying the Software. You
may not modify the Software or disable any licensing or control features of the
Software. If the Software is licensed for "concurrent use", you may not allow
more than the maximum number of authorized users to Use the Software
concurrently.
Ownership. The Software is owned and copyrighted by HP or its third party
suppliers. Your license confers no title to, or ownership in, the Software and
is not a sale of any rights in the Software. HP's third party suppliers may
protect their rights in the event of any violation of these License Terms.
Copies and Adaptations. You may only make copies or adaptations of the Software
for archival purposes or when copying or adaptation is an essential step in the
authorized Use of the Software. You must reproduce all copyright notices in the
original Software on all copies or adaptations. You may not copy the Software
onto any public network.
No Disassembly or Decryption. You may not disassemble or decompile the Software
unless HP's prior written consent is obtained. In some jurisdictions, HP's
consent may not be required for limited disassembly or decompilation. Upon
request, you will provide HP with reasonably detailed information regarding any
disassembly or decompilation. You may not decrypt the Software unless decryption
is a necessary part of the operation of the Software.
Transfer. Your license will automatically terminate upon any transfer of the
Software. Upon transfer, you must deliver the Software, including any copies and
related documentation, to the transferee. The transferee must accept these
License Terms as a condition to the transfer.
Termination. HP may terminate your license upon notice for failure to comply
with any of these License Terms. Upon termination, you must immediately destroy
the Software, together with all copies, adaptations and merged portions in any
form.
Export Requirements. You may not export or re-export the Software or any copy or
adaptation in violation of any applicable laws or regulations.
U.S. Government Restricted Rights. The Software and any accompanying
documentation have been developed entirely at private expense. They are
delivered and licensed as "commercial computer software" as defined in DFARS
252.227-7013 (Oct 1988), DFARS 252.211-7015 (May 1991) or DFARS 252.227-7014
(Jun 1995), as a "commercial item" as defined in FAR 2.101(a), or as "Restricted
computer software" as defined in FAR 52.227-19 (Jun 1987)(or any equivalent
agency regulation or contract clause), whichever is applicable. You have only
those rights provided for such Software and any accompanying documentation by
the applicable FAR or DFARS clause or the HP standard software agreement for the
product involved.
Last Updated On: 19 Aug 96
http://hpweb.corp.hp.com/Publish/legal/terms.htm
(C) Copyright 1996 Hewlett-Packard Company
1.
<PAGE>
No Third Party Warranty. NEITHER HP NOR ANY OF ITS REPRESENTATIVES MAKES OR
PASSES ON TO YOU OR OTHER THIRD PARTY, ANY WARRANTY OR REPRESENTATION ON BEHALF
OF HP'S THIRD PARTY SUPPLIERS.
Third Party Beneficiary. You are hereby notified that JetFax, Inc., a
California corporation located at 1376 Willow Road, Menlo Park, California 94025
("JetFax") is a third party beneficiary to this agreement to the extent that
this agreement contains provisions which relate to your use of JetFax supplied
software. Such provisions are made expressly for the benefit of JetFax and are
enforceable by JetFax in addition to HP.
2.
<PAGE>
EXHIBIT 10.39
REDACTED
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
OEM PURCHASE AGREEMENT
JetFax, Inc., (JetFax) a Delaware corporation having its principal place of
business at 1376 Willow Road, Menlo Park, CA 94025, agrees to purchase and Oki
America, Inc., a Delaware corporation, through its OKIDATA division, having a
principal place of business at 532 Fellowship Road, Mt. Laurel, NJ 08054
(OKIDATA) agrees to sell the Product(s), Spares Accessories and Consumables (all
as defined herein), together with their associated documentation, at the prices
set forth in Exhibit A and upon the terms and conditions set forth herein.
"Products" as used herein pertains to facsimile engines as defined by the
Specifications in Exhibit B. "Spares" as used herein means standard spare parts
as listed in OKIDATA's RSPL (Recommended Spare Parts List) for the Products, a
copy of which is contained in Exhibit C and unique spare parts as set forth in
Exhibit D. "Consumables" as used herein means toner cartridges and image drums
as set forth in Exhibit A. "Accessories" as used herein means a second paper
tray as set forth in Exhibit A.
<PAGE>
1. TERM OF AGREEMENT
The term of this Agreement shall be two (2) years commencing on the date on
which the last of the parties executes this Agreement (the Effective Date).
Orders placed during this twenty four (24) month ordering period must be
scheduled for delivery within thirty (30) months of the Effective Date.
2. CUSTOMER ORDERS
Purchases by JetFax will be by individual written JetFax purchase orders made
during the term of this Agreement, which orders will be accepted by OKIDATA so
long as they comply with the terms and conditions of this Agreement. Orders will
be accepted with OKIDATA's Order Acknowledgement (OA) form. If an OA is not
issued within ten (10) business days of receipt of order, the order will be
deemed accepted. The first purchase order (the Initial Order) is to be issued
simultaneously with the execution by JetFax of this Agreement for a quantity of
no less than twenty (20) percent of the Specified Quantity of all Product(s)
listed in Exhibit A, (i.e. 1000 units) and must specify delivery within six (6)
months of the Effective Date. Each purchase order, subject to the conditions set
forth in Section 4 below, shall set forth the desired delivery schedule for each
Product.
3. PRICES
A. The prices set forth in Exhibit A are based on purchase by JetFax of a
minimum of [*] of Product in each year of the term of this
Agreement. If, during the term of this Agreement JetFax does not purchase a
minimum of [*] of Product, OKIDATA may retroactively increase
the unit price by [*]. If, during the term of this Agreement,
JetFax purchases between [*] total units of Product, the unit
price will be increased retroactively by [*] per unit.
B. OKIDATA agrees to make Spares and Consumables available to JetFax for a
minimum of five (5) years after last shipment of Product to JetFax. During
the term of this Agreement, Spares will be invoiced at a [*] discount
from OKIDATA's U.S. Dealer list prices. Thereafter, the discount will be as
specified in Exhibit C.
C. OKIDATA will accrue an amount equal to [*] off the net invoice
value of all Product(s) purchased hereunder in an account maintained by
OKIDATA. Such accrued amount shall be applied as a credit towards the
payment of any amounts due from JetFax for the purchase of Spares
hereunder.
4. DELIVERY SCHEDULES
A. Requested delivery dates for Product(s), Accessories and Image Drum Kits
purchased hereunder shall be no sooner than one twenty (120) days after
receipt of a purchase order, FOB JAPAN.**
Requested delivery dates for Spares shall be no less than 90 days from
receipt of order. For non-unique Spares, OKIDATA will make reasonable
efforts to deliver reasonable quantities within in two weeks of order.
--------------
** Image drums purchased FOB Mt. Laurel, N.J., will be 2 weeks from receipt
of purchase order by Okidata.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
2
<PAGE>
Requested delivery dates for toner cartridges shall be no less than
fourteen (14) days after receipt of order for product in standard packaging
and sixty (60) days in custom packaging.
Notwithstanding the above order leads, OKIDATA will, on request, make
reasonable efforts to shorten the lead for demand exceeding forecast
quantities. All or the above lead times are contingent on OKIDATA's receipt
of the monthly forecast as set out in paragraph 7, below.
5. RESCHEDULING OF DELIVERIES
A. Rescheduling of deliveries is permitted up to the 46th day prior to
scheduled delivery. Thereafter, no rescheduling will be permitted.
6. CANCELLATION CHARGES
A. Cancellation is permitted up to the 46th day prior to scheduled delivery
date. Thereafter, no cancellation is permitted.
7. CUSTOMER FORECASTS
Once each month JetFax will furnish to OKIDATA a written non-binding
forecast of its requirements for the Product(s) for the ensuing twelve
months.
8. PAYMENT
A. Payment for purchases hereunder will be due net 30 days from date of
receipt by JetFax in the U.S. of the products invoiced. Pending
establishment of open credit terms, and prior to or simultaneous with
issuance of its initial purchase order, JetFax will establish an escrow
account or standby letter of credit acceptable to OKIDATA, in the amount of
[*] to secure the purchase price of the products ordered. For each
scheduled delivery or products the escrow or letter of credit is to be
maintained at a level at least equal to [*] of the value of each delivery.
This funding process is to occur at least 45 days prior to the dates of all
scheduled shipments. This secured ratio [*] of the second and all
subsequent shipments will remain in effect until JetFax has proven that
they are capable of sustaining open credit terms at which time the advance
security requirement and the discount described in paragraph B., below,
will cease. If JetFax does not comply with payment terms as specified
herein, OKIDATA reserves the right to modify the amount of security
required.
B. OKIDATA will give JetFax a discount equal to [*] of the net
invoice amount on the portion of each delivery secured by the escrow or
letter of credit.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
3
<PAGE>
C. Prices are exclusive of any sales, use, property, and like taxes. Any such
tax OKIDATA may be required to collect or pay upon the sale or delivery
of the Products, other than taxes based on OKIDATA's income, shall be
promptly reimbursed by JetFax.
D. All prices in this Agreement are in U.S. Dollars.
9. PATENT INDEMNITY
A. OKIDATA agrees to indemnify, defend and hold JetFax harmless from and
against any claim, suit or proceeding to the extent that such claim or
proceeding is based on a claim that Products (for purposes of this Section
9, Product will include Accessories) purchased hereunder infringe any
patent rights, provided that OKIDATA is notified promptly in writing and
given complete authority, information and assistance required for defense
of same, and OKIDATA shall pay all damages and costs as a result thereof.
OKIDATA, however, shall not be responsible for any settlement made by
JetFax without OKIDATA's prior written consent.
B. In the event any Product furnished hereunder is, in OKIDATA's reasonable
opinion, likely to or does become the subject of a claim of infringement,
OKIDATA may, at its option and expense, procure for JetFax the right to
continue using the Product, replace same with a non-infringing Product or
Accessory of similar capability, or modify the Product so it becomes non-
infringing (but has similar capability). In the event none of the foregoing
alternatives is commercially reasonable, and provided that there is a bona
fide claim of infringement, in order to minimize its liabilities hereunder,
OKIDATA may terminate this Agreement and the obligation to sell Product to
JetFax hereunder by written notice to JetFax; provided however, that
notwithstanding such termination, (i) the indemnity provided in paragraph A
hereof shall still apply and remain in full force and effect, and
(ii) OKIDATA shall promptly repurchase from JetFax at full cost, all
units of Product purchased by JetFax under this Agreement and not yet
resold by JetFax and JetFax will promptly return, same per the prior
written instructions of OKIDATA, which shall not be unreasonably withheld.
C. OKIDATA shall have no responsibility or liability for any claim of
infringement (i) arising out of the use of its Products in combination with
non-OKIDATA products, or (ii) if such infringement arises out of Product
manufactured to JetFax's design, or (iii) if such infringement arises as a
result of a modification to the product not made by or for OKIDATA, if, and
only if, such infringement would have been avoided by the use of the
Product without such combination, manufacture to JetFax design or
modification.
D. The foregoing states the entire liability of OKIDATA 'with respect to
infringement of any patent by the Products or any parts thereof and,
anything herein to the contrary notwithstanding, OKIDATA's liability to
JetFax hereunder shall in no event exceed the total price plus taxes and
other associated charges paid to OKIDATA by JetFax for all infringing or
4
<PAGE>
allegedly infringing Product purchased pursuant to this Agreement.
10. TERMINATION
This Agreement may be terminated or canceled as follows:
A. By either party at any time pursuant to the provisions of this Section 10,
if the other party violates any provision of this Agreement. The defaulting
party shall have a period of thirty (30) days from the date of receipt of
written notice from the non-defaulting party describing the default within
which to remedy the default. The termination shall become effective at the
end of the thirty (30) day period if the defaulting party has failed to
remedy the default.
B. If either party (i) admits in writing its inability to pay its debts
generally as they become due, or (ii) makes an assignment for the benefit
of its creditors, or (iii) institutes or consents to the filing of a
petition in bankruptcy, whether for reorganization or liquidation, under
federal or similar applicable state laws, or (iv) is adjudged bankrupt or
insolvent by a court having jurisdiction, then in either of such events,
the other party may, by written notice, immediately terminate this
Agreement.
C. JetFax's obligation to pay for all Products received by it hereunder shall
survive termination of this Agreement. In the event that OKIDATA terminates
the Agreement for default, OKIDATA will honor any Purchase orders which it
has accepted, but reserves the right to change payment terms as it deems
necessary.
11. SHIPPING AND RISK OF LOSS
Prices of Product(s), Accessories and Image Drum Kits are FOB Japan. Prices
of Spares and Consumables are FOB OKIDATA's U.S. facilities. Title and risk
of loss pass to JetFax at the time and place of delivery as soon as OKIDATA
has put the goods in the possession of the carrier. OKIDATA will package
the Products in accordance with accepted standard commercial practices for
normal shipment considering the type of Product involved and the normal
risks' encountered in shipments. JetFax shall designate the method of
shipment on each individual purchase order issued against this Agreement.
OKIDATA shall arrange for shipment by the designated method. All
transportation charges are freight collect.
12. LIMITATION OF LIABILITY
In no event will either party be liable for loss of profits or incidental,
special, or consequential damages arising out of any breach of obligations
under this Agreement.
5
<PAGE>
13. TRAINING
OKIDATA will provide one course for six (6) JetFax employees for a period
appropriate to the particular Product purchased (usually two (2) days). The
course will be given at OKIDATA's Mt. Laurel facility and will be scheduled
at a mutually agreeable time. OKIDATA will provide course material and
documentation free of charge. Travel and living expenses are to be borne by
JetFax. On-site training may be given at JetFax's expense and in accordance
with OKIDATA's policy at the time of execution of this Agreement.
14. VALUE ADDED
JetFax warrants and represents that the Products purchased hereunder are
for use and resale as part of, or as accessories to, equipment manufactured
or assembled by or for JetFax. OKIDATA grants JetFax the right to
incorporate the products purchased hereunder into any such equipment.
15. EXPORT RESTRICTIONS
JetFax agrees that it shall not at any time make or permit any export or
reexport of OKIDATA products directly or indirectly to any country, without
full compliance with United States export laws and regulations as issued by
the United States Department of Commerce, Office of Export Administration,
as amended from time to time, as those laws and regulations apply to
OKIDATA products, and all other things delivered to, or derived from things
delivered to, Customer under the OEM Purchase Agreement.
16. CONFIDENTIALITY AND PROPRIETARY RIGHTS
Each party agrees that it shall not disclose to any third party, or use for
its own benefit, except as expressly permitted herein and other than is
necessary for its performance under this Agreement, any trade secrets,
technical data, methods, processes or procedures or any other confidential,
financial, or business information or data of the other party, which is
disclosed by one party to the other in the course performance of the OEM
Purchase Agreement, without the prior written consent of the party
asserting ownership of the information. This obligation shall survive the
cancellation or other termination of the OEM Purchase Agreement.
This Section 16 shall not apply to any data or information which
(a) becomes generally known or available through no fault of the receiving
party; (b) is already known to the receiving party at the time of receipt
as evidenced by its written records; (c) is received from a third party
without breach of the confidentiality obligations of this Agreement; or
(d) is required by court order or operation of law.
6
<PAGE>
17. DOCUMENTATION AND SUPPORT
OKIDATA grants JetFax the right to use and modify OKIDATA user and service
documentation for distribution to JetFax customers as necessary only for
use and maintenance of JetFax products to the extent that these products
incorporate products purchased under this Agreement. JetFax will place a
copyright notice in any such reproduction or derivative work acknowledging
OKIDATA's copyrights. JetFax will not use any OKIDATA trademark without an
appropriate statement acknowledging OKIDATA's ownership of the mark.
OKIDATA will use reasonable efforts to assist in the development of,
diagnose problems in and provide ongoing assistance for its deliverables.
OKIDATA will provide all documentation necessary for JetFax to obtain
safety and certification approvals.
18. WARRANTY
All items purchased under this Agreement are warranted by OKIDATA to be
free from defects in materials and workmanship at the time of delivery.
Within thirty (30) days of receipt, JetFax will inspect Product(s), Spares,
Consumables and Accessories purchased hereunder and will notify OKIDATA in
writing of any claimed defects. OKIDATA will, at its option, repair or
replace any items which are defective. Should OKIDATA opt to perform
repairs at its facility, JetFax will bear the cost and risk of loss for
return of the products to OKIDATA and OKIDATA will be at the cost and risk
of loss for return of repaired or replacement items to JetFax within the 48
contiguous United States.
In the event of an epidemic failure, which, for purposes of this Agreement,
will mean a failure due to the same cause occurring in more than 5% of the
Products in any given delivery, OKIDATA will provide JetFax with a parts
kit to correct the problem.. These kits will be shipped at no charge to
JetFax, who will be responsible for the cost of labor required to install
the parts.
The above constitutes JetFax's sole remedy under this warranty.
19. TOOLING
JetFax agrees to pay to OKIDATA the sum of [*] for non-recurring
engineering (NRE) charges, for tooling related to changes to the left side
panel of the Product. This NRE charge will be amortized over the first [*]
units of Product purchased, at the rate of [*] per unit. If, during the
term of this Agreement, JetFax does not purchase [*] units, the remaining
unamortized amount of NRE will be invoiced and JetFax agrees to pay same.
If OKIDATA terminates this Agreement because of breach by JetFax, the
unamortized amount will be invoiced and JetFax agrees to pay the balance no
later than the due date for payment of any outstanding invoices for
products delivered pursuant to the Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
7
<PAGE>
All tooling changes performed pursuant hereto are exclusive to JetFax, and
OKIDATA shall not use the part or parts as modified by such tooling changes
other than pursuant to this Agreement or license to otherwise allow the use
of the part or parts as modified by such tooling change by anyone other
than JetFax.
20. GENERAL PROVISIONS
A. All notices required to be given hereunder will be sent by registered or
certified mail, return receipt requested, postage prepaid, forwarded to the
appropriate party at the address shown below, or at such other addresses as
that party may, from time to time, advise in writing, and which have been
received in the ordinary course of post.
B. Neither party shall have the right to assign its rights or obligations
under this Agreement except with the written consent of the other party,
provided, however, that a successor in interest by merger, by operation of
law, or by assignment, purchase or otherwise of all or substantially all of
the business of either party, shall acquire all interest of such party
hereunder and may receive an assignment hereof without such consent. Any
prohibited assignment shall be null and void.
C. The failure of either party to enforce at any time the terms, conditions,
requirements, or any other provisions of this Agreement shall not be
construed as a waiver by such party of ay succeeding non-performance of the
same term, condition, requirement or any other provision of this Agreement.
D. The headings of paragraphs contained herein are for convenience and
reference only and are not a part of this Agreement, nor shall they in any
way affect the interpretation thereof.
E. The parties agree that if any portion of this Agreement shall be held
illegal and/or unenforceable, the remaining portions of this Agreement
shall continue to be binding and enforceable provided that the effectivity
of the remaining portion of this Agreement would not defeat the overall
business intent of the parties, or give one party any substantial financial
benefit to the detriment of the other party.
F. This Agreement and its appendices shall be governed by the laws of the
State of Delaware, excluding its conflicts of law rules. Any disputes
arising out of or pertaining to this Agreement are to be settled by
arbitration to be conducted by a mutually agreed on alternate dispute
resolution organization. Arbitration will take place in Philadelphia, PA if
JetFax initiates the proceedings, and in San Francisco, CA if OKIDATA
initiates the proceedings.
G. This Agreement constitutes the entire Agreement between the parties and
supersedes all prior discussion, either oral or in writing, including,
without limitation, the Memorandum of Understanding dated January 17, 1995.
8
<PAGE>
H. The terms and conditions of this Agreement will prevail notwithstanding any
variance with the terms and conditions of any order or release submitted by
Customer, or any release acknowledgment returned by OKIDATA. Except as
expressly set forth in this Agreement, this Agreement shall not be deemed,
or construed to be, modified, amended, rescinded, or canceled in whole or
in part, except by written amendment executed by the parties hereto.
I. The provisions of Sections 3.B., 9, 10.C., 12, 14 and 16 shall survive the
termination or expiration of this Agreement.
J. EXHIBIT A, PRICING, EXHIBIT B, SPECIFICATIONS, EXHIBIT C, SPARE PARTS, and
EXHIBIT D, UNIQUE SPARES, attached hereto, are hereby incorporated herein
by this reference.
IN WITNESS WHEREOF, the parties hereto have set their names on the
dates hereinafter set forth.
JetFax Inc. OKIDATA
/s/ EDWARD R. PRINCE /s/ ROBERT E. HOLL
__________________________________ _________________________________
(Signature) (Signature)
EDWARD R. PRINCE ROBERT E. HOLL
__________________________________ _________________________________
(Typed/Printed Name) (Typed/Printed Name)
PRESIDENT MANAGER, CONTRACTS
__________________________________ _________________________________
(Title) (Title)
2-21-95 2/22/95
__________________________________ _________________________________
(Date) (Date)
9
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
F.O.B
SPECIFICATION ORDER ANNUAL JAPAN
PRODUCT NUMBER MULT QUANTITY PRICE
- ------- ------------- ------ -------- --------
<S> <C> <C> <C> <C>
[*]
</TABLE>
ACCESSORIES/CONSUMABLES PRICING
- -------------------------------
<TABLE>
<CAPTION>
SPECIFICATION ORDER
PRODUCT NUMBER MULT PRICE
- ------- ------------- ------ -----
<S> <C> <C> <C>
[*]
</TABLE>
NOTE
[*]
MGB, 02/13/95
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT B
Issue 1a February 1995
SPECIFICATION OF THE FAX ENGINE
FOR JETFAX
OKI Data Corporation
4-11-22, Shibaura, Minato-ku, Tokyo, Japan
Telephone: +81 3 5445 6119
Fax: +81 3 5445 6180
<PAGE>
CONTENTS
Chapter 1: General Description
Chapter 2: General Performance
Chapter 3: Physical Description
Chapter 4: BLANK
Chapter 5: Document Input
Chapter 6: Document Output
Chapter 7: BLANK
Chapter 8: Environmental Requirements
Chapter 9: BLANK
Chapter 10: Expanded View and Parts List
Chapter 11: BLANK
Chapter 12: Shipping Conditions
<PAGE>
1. GENERAL DESCRIPTION
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
2. GENERAL PERFORMANCE
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
3. PHYSICAL DESCRIPTION
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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[*]
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5. DOCUMENT INPUT
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6. Document Output
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8. ENVIRONMENTAL REQUIREMENTS
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ASSEMBLY
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SECTION 1 CABINET ASSEMBLY
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SECTION 3 PRINTER ASSEMBLY
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SECTION 4 BASE ASSEMBLY
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SECTION 5 SCAN ASSEMBLY
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SECTION 5 DETAIL A SCAN UNIT
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SECTION 5 DETAIL B PAPER GUIDE ASSEMBLY
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SECTION 6 CABLES
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12. Shipping Conditions
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4. Counters/Correction Value Check Commands
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VIDEO INTERFACE TIME CHART
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COMMAND INTERFACT TIME CHART
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OPERATION PANEL INTERFACE
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REMARKS
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EXHIBIT C - SPARE PARTS
-----------------------
A. Spare parts and the prices therefor, for Products purchased hereunder
shall be listed in OKIDATA'S Suggested End-User Price List issued from time
to time by OKIDATA. Suitable spare parts will be available for a period of
five (5) years from date of last delivery under this Agreement and may be
purchased by the issuance of a Customer purchase order acceptable to
OKIDATA. If Customer requires spare parts after they are no longer
available from OKIDATA, OKIDATA will provide available drawings or purchase
specifications to assist Customer in obtaining the Products from other
sources. The documentation to be supplied will be that documentation as is
in existence at that time.
B. Minimum spare parts order [*]
C. Prices for spare parts shall be invoiced at [*] discount from the Suggested
End-User Price List unless, in the twelve (12) month period immediately
preceding the Effective Date, Customer shall have purchased and paid for
spare parts from OKIDATA in an amount exceeding [*] or Customer anticipates
purchasing the same within the first twelve (12) months after the Effective
Date.
(i) If the amount previously purchased exceeds [*] or Customer
anticipates purchasing same within the term of this Agreement, the
discount shall be [*]
(ii) If the amount previously purchased exceeds [*] or Customer
anticipates purchasing same within the term of this Agreement, the
discount shall be [*]
D. Ribbons and manuals have special pre-discounted price and are, therefore,
not subject to the above discount percentages. OKIDATA offers additional
discounts for large volume orders.
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Exhibit D
Unique Parts List for JetFax MS
<TABLE>
<CAPTION>
ODA # OKI-Japan Part # Description List Price
<S> <C> <C> <C>
[*]
</TABLE>
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EXHIBIT 10.42
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AGREEMENT
This agreement ("Agreement") is entered into on 11-30, 1994, ("Effective Date")
by Intel Corporation ("INTEL"), having a place of business at 5200 NE Elam Young
Parkway, Hillsboro, OR 97124-6497 and Crandell Group, Inc. ("CGI"), having a
place of business at 125 East Victoria, Santa Barbara, CA 93101. INTEL and CGI
are individually referred to herein as a "Party" and collectively as the
"Parties."
RECITALS:
--------
CGI has developed or will develop certain software programs, related materials
and documentation hereinafter celled the "Products" and more explicitly defined
below.
INTEL desires to obtain from CGI a non exclusive license to use, market,
advertise, make or have made derivatives, copy and sublicense such Products.
CGI desires to give INTEL such a license and to support INTEL in its
application.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the foregoing Recitals and the covenants and
conditions set forth in this Agreement the Parties agree as follows:
1.0 DEFINITIONS
-----------
1.1 "Product(s)" means the software program(s), related materials and
documentation specified in Exhibit A. Products also includes any
Improvements made to the Product and accepted by INTEL hereunder.
1.2 "Error" means the error levels set forth in Section 6.0.
1.3 "Improvement(s)" means modifications, enhancements, upgrades and updates to
the Product supplied by CGI, which are related [*]described in Exhibit
A-1 but only those modifications, enhancements, upgrades and updates
which are supplied by CGI and accepted by Intel. CGI should provide
INTEL with the Improvements at least thirty (30) days prior to CGI
incorporating the Improvement in its products. Improvements do not
include derivatives of the Products or Improvements created by INTEL or
its sublicensees.
1.4 "NRE" means Non-Recurring Engineering.
1.5 "PCS" means Personal Conferencing Specification.
1
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HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1.6 "Real Time Conferencing" means [*]
[*]
2.0 TERM
----
The initial term of this Agreement will begin on the Effective Date and
continue until June 1, 1997. This Agreement shall be automatically
extended at the end of the initial term for additional one (1) year
terms, unless terminated by either Party by giving written notice of
termination to the other Party within ninety (90) days prior to the end
of any term.
3.0 LICENSE GRANT
-------------
3.1 CGI grants to INTEL and its subsidiaries a non-exclusive, perpetual
royalty-free, worldwide license to the Product in source and object
code form, with the rights to incorporate, use, copy, reproduce,
modify, advertise, market, make or have made derivative works,
manufacture or have the Product manufactured, and distribute in
conjunction with an Intel conferencing/multimedia product .
3.2 CGI grants to INTEL and its subsidiaries a non exclusive, perpetual,
royalty-free, worldwide license to sublicense the Products in source
and object code form, only in combination with Real Time Conferencing
software developer kits directly or through its subsidiaries,
distributors and representatives. This license includes the right to
copy and distribute the Product documentation.
3.3 Products distributed by INTEL hereunder will be sublicensed to INTEL
sublicensees in accordance with INTEL's then current standard licensing
programs. INTEL's sublicensees may incorporate and use the source and
object code version of the Product only in conjunction with a PCS-
compliant Real Time Conferencing sublicensee product. Sublicensees may
not further sublicense the source code form of the Product. Sublicensees
may not further sublicense the object code of the Product except as
described above.
3.4 CGI also grants INTEL and its sublicensees a non-exclusive right to use
CGI's trademarks in association with the Product, provided that all
such trademarks shall be clearly identified. INTEL may also use its
name and trademarks in association with CGI's.
3.5 All copies of the Product made by INTEL and it sublicensees shall contain
CGI's or its vendors copyright notices.
2
<PAGE>
3.6 CGI's copyright notices and trademarks are listed in Exhibit C.
3.7 INTEL may distribute Improvements to its sublicensees, subsidiaries,
distributors, and representatives by any method (including electronic
bulletin board) provided such method contains a procedure insuring such
distribution of Improvements are made only to INTEL's sublicensees,
subsidiaries, distributors, and representatives properly licensed or
authorized in accordance with this Agreement.
3.8 INTEL acknowledges that CGI considers Product source code to be a trade
secret. INTEL shall not disclose or otherwise make Product source code
available in whole or in part, in any form, except with the same degree
of care and sublicensing restrictions which INTEL provides for its own
confidential end trade secret information.
4.0 PRODUCT
-------
CGI will develop and provide INTEL with the Product deliverables,
documentation, and materials as specified in Exhibit A.
5.0 ACCEPTANCE PROCEDURE
--------------------
5.1 INTEL shall have sixty (60) days after receipt of each Product in which to
accept or reject it. Rejection will be based on the Product's failure
to meet the specifications identified in Exhibit A.
5.2 During the acceptance period, INTEL will give CGI written notice of any
error in the Product. CGI will correct such errors within thirty (30)
days following receipt of notice. After CGI delivers a corrected Product
INTEL will have an additional sixty (60) days to accept or reject the
corrected Product. INTEL will notify CGI in writing of Product
acceptance.
5.3 If CGI fails to deliver an acceptable Product within one hundred twenty
(120) days after the delivery date specified in Exhibit A, INTEL may
terminate this Agreement in accordance with Paragraph 14.0,
Termination, and CGI will refund any fees paid hereunder.
6.0 MAINTENANCE, SUPPORT AND TRAINING
----------------------------------
6.1 CGI shall exercise its best efforts to maintain the Product at no cost to
INTEL for the term of this Agreement for all levels of Errors described
below, in accordance with the following procedure:
A. Level "1" Error
Critical; line down Error; basic service provided by the Product is
--------
interrupted, the Product is not usable for a major specified function.
CGI Response: Within two (2) business days from INTEL's written
notification to CGI and provided INTEL has provided CGI with the
necessary hardware, software and documentation
3
<PAGE>
necessary for CGI to reproduce the problem, CGI shall provide to Intel a
proposed plan to correct such Error. If a workaround cannot be found, an
update will be prepared on an emergency basis.
B. Level "2" Error:
Important; basic service provided by the Product is degraded; some
---------
functions may not be available or may be inadequate; convenient work
around does not exist.
CGI Response: Within ten (10) business days from INTEL's written
notification to CGI and provided INTEL has provided CGI with the
necessary hardware, software and documentation necessary for CGI to
reproduce the problem, CGI shall provide to Intel a proposed plan to
correct such Error. CGI shall provide a weekly status on its progress in
resolving the problem. If a workaround cannot be found within a
reasonable time, an update will be prepared on an emergency basis.
C. Level "3" Error:
Minor or annoying; functional problems cause inconvenience to users of
-----------------
the Product; workaround exists; the Product recovers on its own, but the
problem continues.
CGI Response: Within thirty (30) calendar days from INTEL's written
notification to CGI and provided INTEL has provided CGI with the
necessary hardware, software and documentation necessary for CGI to
reproduce the problem, CGI shall provide to Intel a proposed plan to
correct such Error. CGI shall provide a monthly status on its progress
in resolving the problem.
D. Level "4" Error:
Suggestion or Comment; No immediate response is necessary. Suggestions
---------------------
and comments can be incorporated in the next update if Intel and CGI
deem it appropriate. If Intel is unable to solve a sublicensee's
problem, CGI will assist Intel by telephone according to the above
priorities, with respect to the use and operation of the Product. Such
assistance will be available to Intel at no cost continuously during
CGI's regular business hours.
6.2 CGI agrees to provide INTEL with support for the Product for a minimum of
two (2) years ("Initial Support Period',) beginning June l, 1995. This
Initial Support Period may be renewed for additional one-year periods
upon agreement between the Parties. In the event of a material breach
of the Agreement by CGI, INTEL may terminate the any Support Period and
receive a refund prorated as of the effective date of the termination.
6.3 If CGI fails to honor its obligations under this Paragraph 6.0, INTEL may
withhold any payment due CGI under this Agreement until CGI provides
the required assistance.
4
<PAGE>
6.4 CGI will provide at least two (2) days of training to INTEL's technical
staff for the Product provided hereunder at INTEL's premises. Training
will cover the design, use and maintenance of the Product. Training
will be conducted at times mutually agreeable to INTEL and CGI and
Intel will reimburse CGI for reasonable travel and living expenses.
7.0 FEES
----
In consideration of the license granted and the support to be provided
hereunder, INTEL shall compensate CGI in accordance with the fees set
forth in Exhibit B.
8.0 TAXES
-----
All taxes based upon INTEL's use, sale, or possession of the Product,
other than income or franchise taxes due from CGI will be borne and paid
by INTEL.
9.0 WARRANTY
--------
9.1 CGI represents and warrants that it has good and merchantable title to
the Products and has the sufficient right, title and interest in the
Products to enter into and perform this Agreement and that it has not
done nor will it do any act or entered into any agreement which limits
or restricts performance of this Agreement.
9.2 CGI represents and warrants that the Product is CGI's original work and
CGI agrees to execute the Certificate of Originality set forth in
Exhibit D at the same time this Agreement is executed by CGI.
9.3 During the term of this Agreement, including any extensions hereof, CGI
represents and warrants that the Product will meet the specifications
set forth in Exhibit A. CGI will use its best efforts to correct any
defects or errors which materially affect the operation of the Product
in accordance with the obligations set forth in Paragraph 6, Maintenance
and Support.
9.4 ANY AND ALL OTHER EXPRESS OR IMPLED WARRANTIES INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY
EXCLUDED.
10.0 PATENT AND COPYRIGHT INDEMNIFICATION
------------------------------------
CGI will defend any suit or proceeding brought against INTEL, its
subsidiaries and its sublicensees based on a claim that the Product in
whole or in part infringe any patent, copyright, trade secrets, or
other intellectual property right, if notified of such claim in writing
and given authority, information and assistance (at CGI's expense) for
the defense of same. CGI will pay all damages and costs awarded therein
against INTEL, its subsidiaries and its sublicensees and all expenses
incurred by them, including attorney fees. If the Product or any
portions thereof are held in such suit to constitute infringement and
INTEL's use of the same is enjoined, CGI will at its own expense,
procure for INTEL, including its subsidiaries and its sublicensees the
right to continue using them, replace them with non-infringing products,
or modify them to become non-infringing.
5
<PAGE>
11.0 LIMITATION OF LIABILITY
-----------------------
NEITHER PARTY WILL BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS OR
LOSS OF USE, ARISING OUT OF ANY BREACH OR FAILURE UNDER THIS AGREEMENT.
12.0 NON-DISCLOSURE AND CONFIDENTIALITY
----------------------------------
12.1 The terms, conditions and obligations under which either Party may
from time to time disclose or receive Confidential Information are set
out in the Corporate Non-Disclosure Agreement ("CNDA") number 46163
executed between the Parties. The Parties may disclose Confidential
Information to each other pursuant to a duly executed Confidential
Information Transmittal Record form referencing such CNDA.
12.2 Neither Party may use the other Parties name in advertisements nor
otherwise disclose the existence or content of this Agreement without
the other Parties prior written consent.
13.0 EVALUATION AND MARKETING
------------------------
This Agreement does not preclude INTEL from evaluating or marketing
similar products nor will it be construed as an obligation on INTEL part
to market or distribute the Product.
14.0 TERMINATION
-----------
14.1 Either Party may terminate this Agreement if the other: (a) breaches any
material provision of this Agreement and fails to cure the same within
thirty (30) days after receipt of written notice from the other Party;
(b) files or has filed against it a petition in bankruptcy; (c) has a
receiver appointed to handle its assets or affairs; (d) makes or
attempts to make an assignment for benefit of creditors; or (e)
undergoes a change in control through acquisition, except as provided
under Paragraph 16.0, Assignment.
14.2 In the event of termination by INTEL under Paragraph 14.1, INTEL's
license to use the Products per Paragraph 3.0, License Grant, shall
continue in full force and effect. In the event of termination by CGI
under Paragraph 14.1, INTEL's license to use the Products per Paragraph
3.0, License Grant, shall immediately cease, except as provided under
Paragraph 14.5.
14.3 In the event the use of the Product developed hereunder is enjoined in
accordance with Paragraph 10.0, Patent and Copyright Indemnification,
INTEL may immediately cease all fee payments and may terminate this
Agreement without liability. However, in all situations CGI's
obligations contained in Paragraphs 10.0, Patent and Copyright
Indemnification, and 12.0, Non-Disclosure, shall survive termination
14.4 The rights and remedies provided in this Paragraph 14.0 are in addition
to any other rights and remedies provided at law or in equity.
6
<PAGE>
14.5 Termination of this Agreement by either Party for any reason will not
affect the right of any end user to use the Product under sublicense
granted in accordance with this Agreement.
15.0 FORCE MAJEURE
-------------
Neither Party will be liable for any failure to perform due to
unforeseen circumstances or causes beyond the Parties reasonable
control, including, but not limited to, acts of God, war, riot,
embargoes, acts of civil or military authorities, fire, flood, accident,
strikes, inability to secure transportation, facilities, fuel, energy,
or materials. Time for performance will be extended by the length of the
force majeure.
16.0 ASSIGNMENT
----------
INTEL may assign all or any part of its rights or obligations to INTEL
subsidiaries without CGI's consent. Otherwise, neither Party may assign
any rights hereunder without the prior written consent of the other,
which consent shall not be reasonably withheld. Any attempt to assign
any rights, duties or obligations hereunder will be void.
17.0 RELATIONSHIP OF PARTIES
-----------------------
Both Parties hereto are independent contractors. Neither Party will have
the authority to act for and or bind the other in any way, or to
represent that either is responsible for the acts of the other. Nothing
herein will be construed as forming a partnership or agency between the
Parties.
18.0 OWNERSHIP
---------
Title to the Product developed by CGI shall remain with CGI or its
vendors. Title to Intel-developed or Intel sublicensee-developed
derivatives shall be owned by INTEL or its sublicensees.
19.0 NOTICES AND REQUESTS
--------------------
All notices and requests required under this Agreement will be in
writing, will reference this Agreement and will be deemed given upon
delivery if personally delivered or upon receipt if sent by registered
or certified mail, postage prepaid, return receipt requested, to the
addresses listed below, which addresses may be modified upon subsequent
written notice.
Notices to INTEL will be sent to:
Intel Corporation
5200 NE Elam Young Pkwy.
Hillsborough, OR 97124-6497
Attn: Contract Management
M/S: HF3-24
7
<PAGE>
Notices to CGI will be sent to:
Michael Crandell
--------------------------------------------
Crandell Group, Inc.
-------------------------------------------
125 East Victoria St.
-------------------------------------------
Santa Barbara CA 93101
----------------------
20.0 GOVERNING LAW
-------------
The terms herein will be governed by the laws of the State of Oregon.
21.0 PERSONAL CONFERENCING WORK GROUP (PCWG(TM))
-------------------------------------------
Intel, a core member of the PCWG (an unincorporated association of
members of the personal computer and telecommunications industries), may
submit elements of the interface protocols of the Product as defined in
Exhibit A-1 to the PCWG for possible inclusion in the Personal
Conferencing Specification (PCS).
In the event any or all of the Product's interface protocol is accepted
by the PCWG, CGI agrees not to assert claims of patent, copyright, or
trade secret infringement against members of the PCWG or against PCS
licensees for use of the subject interface protocols. Any such covenants
not to assert claims of infringement shall not extend to associated
products not required to meet to PCS.
22.0 ISDN SERVICES
-------------
CGI will use commercially reasonable efforts to obtain ISDN service at
its offices by Q2 '95.
23.0 ENTIRE AGREEMENT
----------------
This Agreement, which includes, without limitation, the Recitals, and
its Exhibits constitutes the entire agreement between the Parties with
respect to the subject matter hereof, supersedes all prior and
contemporaneous agreements and negotiations, oral or written, express or
implied, and may only be modified in a writing signed by authorized
representatives of both Parties. No waiver of any breach hereof shall be
held to be a waiver of any other or subsequent breach.
24.0 ATTORNEY'S FEES
---------------
CGI shall be reimbursed for reasonable attorney's fees incurred in the
event of non-payment by INTEL for any undisputed amounts pursuant to
this Agreement.
8
<PAGE>
25.0 EXHIBITS
--------
The following Exhibits are included as part of this Agreement:
(a) Exhibit A - Product Deliverables, Documentation and Delivery Dates
(b) Exhibit A-1- Product Specifications
(c) Exhibit B - Fees
(d) Exhibit C - CGI's Copyrights and Trademarks
(e) Exhibit D - Certificate of Originality
Agreed and accepted:
INTEL CORPORATION CRANDELL GROUP INC.
By: /s/ Patrick P. Gelsinger By: /s/ Michael Crandell
-------------------------- -------------------------
PATRICK P. GELSINGER MICHAEL CRANDELL
-------------------------- -------------------------
Printed Name Printed Name
VP/GM PRESIDENT
-------------------------- -------------------------
Title Title
12/9/94 12/2/94
-------------------------- -------------------------
Date Date
9
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A
Product Deliverables, Documentation and Delivery Dates
Product Deliverables:
- --------------------
[*]
Documentation:
- --------------
Delivery Dates:
- ----------------------------
[*] [*]
10
<PAGE>
EXHIBIT A-l
------------
Product Specifications
Attached in following pages 11-A through 11-K.
11
<PAGE>
CRANDELL GROUP, INC.
================================================================================
Crandell Group, Inc
125 East Victoria St
Santa Barbara, CA 93101
(805) 962-1 199
PROSHARE AND RICHIMAGE
INTEGRATION STRATEGY
Preliminary Specification
Revision 1.2
Michael Crandell
President
Bruce Wallace
Project Lead
CGI Inc.
October 13, 1994
RichImage(TM)
-----
11-A
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ProShare and RichImage Integration Strategy
INTRODUCTION
[*]
RICHIMAGE PRINT CAPTURE
[*]
PRINT CAPTURE DRIVER IDENTIFICATION
- -----------------------------------
[*]
11-B
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ProShare and RichImage Integration Strategy
PRINT JOB BEGINNING/ENDING CONTROL
- ----------------------------------
[*]
PRINT DATA TRANSFER
- -------------------
[*]
11-C
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ProShare and RichImage Integration Strategy
[*]
11-D
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ProShare and RichImage Integration Strategy
[*]
PRINT ERROR HANDLING
- --------------------
[*]
11-E
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ProShare and RichImage Integration Strategy
[*]
RICHIMAGE DISPLAY LIBRARY
-----
[*]
11-F
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ProShare and RichImage Integration Strategy
[*] Pages 11-G through 11-K are redacted.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT B
---------
Fees
PRODUCT NRE:
- ------------
INTEL will pay CGI NRE fees in the amount of [*] for
integrating the Product with Intel's ProShare product.
Intel has already made payment to CGI
in the amount of [*] under purchase requisition number
417484 dated 9-20-94. The remaining [*] will be paid to
CGI within thirty (30) days from Intel's acceptance of [*] as set forth in
Exhibit A.
CGI may, to accelerate payment of the NRE, submit the [*] for INTEL acceptance
before the dates specified in Exhibit A.
PRODUCT SOURCE CODE FEE:
- ------------------------
INTEL will pay CGI a source code fee in the amount of [*]
within thirty (30) days from INTEL's signature of this Agreement.
SUPPORT FEES:
- -------------
INTEL will pay CGI [*] per year, payable
quarterly. These support fees will be paid in advance quarterly, beginning June
l, 1995.
<PAGE>
EXHIBIT C
---------
CGI'S Copyrights And Trademarks
CGI's copyright notices and trademarks are listed below:
Copyright notice:
- -----------------
(C)Crandell Group, Inc. 1993-94. All rights reserved.
Trademark:
- ----------
RichImage(TM)
-----
<PAGE>
EXHIBIT D
---------
CERTIFICATE OF ORIGINALITY
This questionnaire must be completed by the company official furnishing a
software material (program product or offering and related documentation, or
other software material) for INTEL.
One questionnaire can cover one complete product, even if that product includes
multiple modules. However, a separate questionnaire must be completed for the
code and another for its related documentation (if any).
Please leave no questions blank. Write "not applicable" or "N/A" if a question
is not relevant to the furnished software material.
******************************
1. Name of the software material (provide complete identification, including
version, release and modification numbers for programs and documentation).
RichImage(TM) portable document software V1.04 specified in Exhibit A-1.
------------------------------------------------------------------------
------------------------------------------------------------------------
2. Was the software material or any portion thereof written by any party
other than you, or your employees working within their job assignment?
Yes No [X]
--- ---
If Yes, provide the following information:
(a) Indicate if the whole software material or only a portion thereof
was written by such party, and identify such portion: N/A
-----------
------------------------------------------------------------------------
(b) Specify for each involved party:
(i) Name:
N/A
------------------------------------------------------------------
(ii) Company:
N/A
------------------------------------------------------------------
(iii) Address:
N/A
------------------------------------------------------------------
------------------------------------------------------------------
(iv) If the party is a company, how did it acquire title to the
software material (e.g., software material was written by
company's employees as part of their job assignment)?
N/A
------------------------------------------------------------------
------------------------------------------------------------------
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(v) If the party is an individual, did s/he create the
software material while employed by or under contractual
relationship with another party?
Yes No N/A
--------- ---------
If Yes, provide name and address of the other party and
explain the nature of the obligations:
------------------
--------------------------------------------------------
--------------------------------------------------------
(c) How did you acquire title to the software material written by the
other party?
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
3. Was the software material or any portion thereof derived from any third
party's pre-existing material(s)?
Yes [X] No
--- ---
If Yes, provide the following information for each of the pre-existing
materials:
(a) Name of the materials: [*]
--------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
(b) Owner: [*]
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
(c) How did you get the right to use the pre-existing material(s)?
This is a widely available commercial library product which we
-------------------------------------------------------------------
licensed under [*] standard License. We are providing object/code
-------------------------------------------------------------------
only to Intel for this portion of the product.
-------------------------------------------------------------------
4. Identify below, or in an attachment, any other circumstances which might
affect Intel's ability to reproduce and market this software product,
including:
(a) Confidentiality or trade secrecy of pre-existing materials: N/A
-------
-------------------------------------------------------------------
-------------------------------------------------------------------
(b) Known or possible royalty obligations to other: N/A
------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
(c) Pre-existing materials developed for another party or customer
(including government) where you may not have retained full rights
to the material: N/A
--------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
<PAGE>
(d) Materials acquired from a person or company possibly not having title
to them: N/A
------------------------------------------------------------
-------------------------------------------------------------------
(e) Other circumstances:
----------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
CRANDELL GROUP, INC.
- ----------------------------------
CGI
by /s/ Michael Crandell
- ----------------------------------
Signature
MICHAEL CRANDELL
- ----------------------------------
Printed Name
PRESIDENT
- ----------------------------------
Title
12/2/94
- ----------------------------------
Date
12
<PAGE>
FIRST
AMENDMENT TO
AGREEMENT NO. 1 094SAW001
BETWEEN INTEL CORPORATION AND CRANDELL GROUP, INC.
EFFECTIVE NOVEMBER 30, 1994
This First Amendment ("First Amendment") to the Source Code License Agreement
between Intel Corporation ("Intel") and Crandell Group, Inc. ("CGI") dated
effective November 30, 1994
("Agreement") is hereby effective this 11th day of May , 1995
------- ----------
("Effective Date"), and modifies, amends and changes the Agreement as set forth
below.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which the
parties hereby acknowledge, the parties agree as follows:
1. Unless expressly set forth herein, all other terms and conditions in the
Agreement remain in full force and effect.
2. Unless expressly set forth herein, capitalized terms herein shall have
meanings given them in the Agreement.
3. Additions and changes to the Agreement are as follows:
3.1 The attached Exhibit A-2 is added to and made a part of this
Agreement.
4. The Agreement and this First Amendment are to be read together as one
document. If any terms in the Agreement conflict with any terms in this First
Amendment, the terms in this First Amendment shall govern regarding the subject
matter herein.
5. This First Amendment, which incorporates the Agreement constitutes the
entire Agreement between the Parties relating to the subject matter herein and
supersedes all prior and contemporaneous agreements, discussions, negotiations,
and understandings.
IN WITNESS WHEREOF, the Parties, by and through their respective
representatives, hereby execute this Agreement.
INTEL CORPORATION CRANDELL GROUP, INC.
By: /s/ Tony Baker /s/Patrick Gelsinger By: /s/ Michael Crandell
------------------------------------ -----------------------
Printed Name: Tony Baker Patrick Gelsinger Printed Name: MICHAEL CRANDELL
------------------------------- ----------------
Title: Director, CAE Vice President and Title: PRESIDENT
-------------------------------- -----------------------
and General Manager, Personal
Conferencing Division
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A-2
-----------
Phase Two Product Specifications, Product Deliverables, Documentation, Delivery
Dates and Fees
Attached in the following pages 1-4.
Intel Deliverables:
- ------------------
[*]
The above source code may be used internally only to complete this Phase Two of
this Agreement.
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CRANDELL GROUP
I N C O R P O R A T E D
FAX TRANSMISSION
----------------
FEBRUARY 10, 1995
TO: Bob Rossi, Intel
FR: Michael Crandell, CGI
RE: Project Quotes
Dear Bob:
Although I haven't heard from Imad yet, I expect that you need to move forward
in evaluating the quotes you asked me to give. So, in what follows, I have
made what I hope are reasonable assumptions about the scope of work based on the
overview that Imad gave me when we visited in January.
[*]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CRANDELL GROUP
I N C O R P O R A T E D
Estimated completion time: [*]
Fee for services: [*]
[*]
Estimated completion time: [*] (Some flexibility here depending on your
priority.)
Fee for services: [*]
Additional Work
- ---------------
We have also had some in-depth discussions here about the [*]
we discussed in our meeting with you. We are excited by this idea
technically, and are eager to implement this kind of functionality for ProShare.
I'd like to talk with you about some ideas we have of how that might be
organized and started.
Please give me a call to discuss things when you have time.
Best regards,
/s/Michael
Michael Crandell
President
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CRANDELL GROUP
I N C O R P O R A T E D
FAX TRANSMISSION
----------------
FEBRUARY 22, 1995
TO: Bob Rossi, Intel
FR: Michael Crandell, CGI
RE: New Font Seg work
Dear Bob:
Here is the approach we would take to the [*] As
you will see, much of the work has been done already to reach the point of
explaining how the problem lies and what can be done to solve it.
[*]
[*]
We have identified two possible approaches to solving this problem, both of
which
would need to be tested and confirmed.
[*]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CRANDELL GROUP
I N C O R P O R A T E D
[*]
[*]
We might have some questions to ask of [*] during this process, and we'd like
to submit them through a contract on your side using your support agreement with
them.
I hope this is specific enough to let you evaluate our doing the rest of the
work.
Best regards,
/s/Michael
Michael Crandell
President
<PAGE>
SECOND
AMENDMENT
AGREEMENT NO. 1 094SAW001
BETWEEN INTEL CORPORATION AND JETFAX, INC. (CRANDELL GROUP, INC.)
EFFECTIVE NOVEMBER 30, 1994
This Second Amendment ("Second Amendment") to Agreement No. 094SAW001 between
Intel Corporation ("'lntel") and JetFax, Inc. ("JetFax") (previously known as
Crandell Group, Inc. or CGI) dated effective November 30, 1994 ("Agreement")
is hereby effective this 23rd day of December, 1996 ("Effective Date"), and
modifies, amends and changes the Agreement as set forth below.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which the
parties hereby acknowledge, the parties agree as follows:
1. Unless expressly set forth herein, all other terms and conditions in the
Agreement which incorporates the First Amendment thereto dated effective May 12,
1995 (collectively referred to as Agreement, as defined above), remain in full
force and effect.
2. Unless expressly set forth herein, capitalized terms herein shall have
meanings given them in the Agreement.
3. Additions and changes to the Agreement are as follows:
3.1 The attached Exhibit A-3 is added to and made a part of this Agreement.
4. The Agreement and this Second Amendment are to be read together as one
document. If any terms in the Agreement conflict with any terms in this Second
Amendment, the terms in this Second Amendment shall govern regarding the subject
matter herein.
5. This Second Amendment, which incorporates the Agreement constitutes the
entire Agreement between the Parties relating to the subject matter herein and
supersedes all prior and contemporaneous agreements, discussions, negotiations
and understandings.
IN WITNESS WHEREOF, the Parties, by and through their respective
representatives, hereby execute this Agreement.
INTEL CORPORATION JETFAX, INC.
By:/s/ Scott C. Darling By: /s/ Michael Crandell
----------------------------- ----------------------------
Printed Name: SCOTT C DARLING Printed Name: MICHAEL CRANDELL
------------------- -------------------
Title: AM-BCO Title: VP SOFTWARE
-------------------------- --------------------------
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A-3
-----------
Product Specifications, Product Deliverables, Documentation, Delivery Dates and
Fees
Product Deliverables:
- --------------------
[*]
Documentation:
- -------------
RichImage Interface Specification, Final Version
Milestones:
- ----------
1. [*] - Delivery Date: [*]
-RichImage demo on [*] (stand-alone w/o Notebook).
- On-site visit to demo end deliver binaries.
Acceptance Criteria: [*]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
2. Notebook Integration [*] - Delivery Date: [*]
- Complete RichImage integration with Notebook. - Documentation update.
- On-site visit to integrate Notebook sources.
Acceptance Criteria:
[*]
3. QA/Beta Cycle
- 2 possible on-site visits for defect resolution.
4. [*] RichImage - Delivery Date: [*]
-RichImage demo on [*] (stand-alone w/o Notebook).
- On-site visit to demo and deliver binaries.
Acceptance Criteria: [*]
5. Notebook Integration [*] - Delivery Date: [*]
- Completed RichImage integration with Notebook. - Documentation update.
- On-site visit to integrate Notebook sources.
Acceptance Criteria:
[*]
<PAGE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[*]
6. QA/Beta Cycle
-2 possible on-site visits for defect resolution.
Intel Deliverables:
- ------------------
ProShare(R) Notebook [*] binaries - Delivery Date: [*]
Payments:
- --------
Intel shall pay the following fees in exchange for the work performed hereunder:
1. Non-Recurring Engineering Payments:
Subject to Intel's acceptance of JetFax's work according to the
milestones set forth in this Exhibit A-3, Intel shall pay JetFax non-
recurring engineering fees as follows:
<TABLE>
<CAPTION>
Milestone Description Payment Amount
<S> <C>
Milestone No. 2 - [*] RichImage [*]
Milestone No. 5 - [*] RichImage [*]
- ---------------------------------------------------
</TABLE>
Travel expenses incurred by JetFax during the course of this work will be paid
by JetFax.
Maintenance, Support and Training:
- ---------------------------------
Maintenance and support during the QA/Beta cycle will be provided to Intel
pursuant to the terms of the Agreement.
<PAGE>
[JetFax logo]
ASSIGNMENT AND ASSUMPTION
Pursuant to the terms of an Asset Purchase Agreement effective upon the closing
date, (the "Asset Purchase Agreement") Crandell Group, Inc. ("CGI") is assigning
all of its rights and delegating all of its obligations under and to the
following agreement (the "Agreement") to JetFax, Inc. ("JetFax"): The Agreement
No. 1094SAW001 Between Intel Corporation (the "Company") and Crandell Group,
Inc. dated November 30, 1994.
The Company hereby consents to CGI's assignment and delegation of the Agreement
to JetFax.
JetFax hereby agrees, subject to and effective upon the closing under the Asset
Purchase Agreement, to assume all rights and obligations of CGI under the
Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Assignment and Assumption
to be executed by their duly authorized representatives as of ___________,
1996.
JETFAX CGI
JetFax, Inc. Crandell Group, Inc.
By:/s/ Allen K. Jones By:/s/ Michael Crandell 7/30/96
--------------------------------- ------------------------------
Allen K. Jones Michael Crandell
Chief Financial Officer 7/30/96 President
INTEL
Intel Corporation
By:/s/ Patrick P. Gelsinger 7/31/96
------------------------
<PAGE>
EXHIBIT 21.1
Subsidiaries of Registrant
JetFax GmbH incorporated under the laws of Germany
