Purchase and Debt Restructuring Agreement

PURCHASE AND DEBT RESTRUCTURING AGREEMENT

-----------------------------------------





This Purchase and Debt Restructuring Agreement (this "Agreement") is made as of August 3, 1994, between JetFax, Inc., a Delaware corporation ("JetFax"), and Ailicec International Enterprises Limited, a Hong Kong corporation ("Ailicec"), with reference to the following facts:



Ailicec has delivered 800 units of the 8000-D model of plain paper facsimile machine (the "8000-D Model") pursuant to a Purchase Order dated September 21, 1993, between JetFax and Ailicec (the "Purchase Order"). The amount unpaid with respect to the delivery of such units is $667,700 as of the date hereof (the "Unpaid Amount"). Ailicec and JetFax have entered into a Manufacturing Agreement, dated as of October 21, 1991 (the "Manufacturing Agreement"), and a Security Agreement, dated as of Octobe r 1991 (the "Old Security Agreement"), applicable to such 800 units of the 8000-D Model and the units of the 8000-D Model purchased hereunder. JetFax, Ailicec and investors (the "Bridge Investors") who will provide bridge loan financing (the "Bridge Finan c ing") to JetFax will execute and deliver an intercreditor agreement (the "Intercreditor Agreement") contemporaneously with the execution and delivery of this Agreement. JetFax also intends to raise capital through an equity financing (the "Equity Financi ng") by the issuance of a series of preferred stock (the "Financing Preferred").



NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants herein, JetFax and Ailicec agree as follows:



1. Purchase of Additional Units. Ailicec hereby agrees to sell and

---------------------------- deliver to JetFax, and JetFax agrees to purchase 1,000 units of the 8000-D Model, on the request of JetFax, which shall specifically identify that such units will be purchased at $800 per unit, according to the terms and conditions in this Agreement. Ailicec has delivered the first 515 units of the 8000-D Model, which have been paid for by JetFax except for $42,000 owed to Ailicec for units shipped more than 15 days prior to July 26, 1994 (the "Current Debt") and payment for 100 of such units (the "July Units") that will be paid according to Schedule 1 attached hereto. On the next succeeding Business Day (as defined below) after the d a te that JetFax receives funds from the Bridge Financing or other lender, JetFax shall pay to Ailicec the Current Debt. JetFax will order and pay for and Ailicec will ship to JetFax the number of units set forth on Schedule 1 hereto substantially accordin g to the shipping and payment schedule set forth on such Schedule; provided that (a) for each Business Day that shipment of such units (identified on the Schedule by code 5) is delayed, JetFax may delay its payments called for on that Schedule for such del a yed units (identified by code 7) by one Business Day; and (b) for each Business Day that receipt of any of the amounts indicated on such Schedule (including payment for units shipped previously and the reduction in the Unpaid Amount by $300 per unit as se t forth in Section 3 for the 485 units delivered after the date of this Agreement and the 100 July Units, the payment for reduction of the Unpaid Amount as provided in Section 4 below and any additional amounts required by such Schedule) is delayed from t he date originally scheduled (identified by code 8), Ailicec may delay the shipment of subsequent units (identified by code 5) by one Business Day; provided that with respect to units not in Ailicec's inventory for

-------- which Ailicec must remit payment to Ailicec's supplier prior to shipment to Ailicec, Ailicec may delay the shipment of such units (with a corresponding adjustment to the Schedule) until funds identified by Code 1 are received from JetFax so that Ailicec can issue the appropriate remuneration or letter of credit to such supplier in order to release such units, as set forth in such Schedule.



The parties understand that Schedule 1 may be further adjusted for events of force majeure as described Section 10 of the Manufacturing Agreement. The parties agree to cooperate in good faith to make appropriate adjustments to such Schedule as r e asonably required by the circumstances, within the parameters established under such Schedule for payment (that is, net 15 days in July and net 10 days thereafter) and prerequisites for shipment of units (that is, receipt of amounts to fund the appropriat e letters of credit and timing required for shipment following receipt of funds).



2. Delivery. Unless advised otherwise in writing, all shipments

-------- shall be addressed to JetFax at the address indicated below its signature. Title (subject to Ailicec's purchase money and general security interest) shall pass to JetFax on payment for the units as referred to in section 1. Risk of loss or damage to units of the 8000-D Model that are specified on a Request shall pass to JetFax from the time the units are placed on the carrier designated by JetFax in Hong Kong. All shipping dates are Hong Kong dates.



3. Purchase Price. The purchase price for the units of the 8000-D

-------------- Model purchased and sold hereunder shall be $800 per unit plus, with respect to each of the 485 units delivered after the date of this Agreement and the 100 July Units previous ly shipped, an additional $300 per unit (the "Additional Amounts") to be applied toward the reduction of the Unpaid Amount (or Debt if such Unpaid Amount is paid in full). "JetFax shall be responsible for all taxes, claims, shipping costs and insurance re lated to the delivery of the units of the 8000-D Model arising after the units have been delivered to the carrier designated by JetFax at the Hong Kong port.



4. Paydown of Unpaid Amount. (a) Subject to the conditions

---------- -------------- specified in section 4(b) and the modifications specified in section 4(c), JetFax shall pay to Ailicec the Unpaid Amount in installments as specified herein with interest thereon at the rate of 6% simple inte rest



per annum on such amount remaining unpaid from time to time from the date hereof until such Unpaid Amount is fully repaid. Any amounts not paid when due under this section 4 shall bear interest at a rate of 10% simple interest per annum. Subject to the provisions of section 4(b), until the Unpaid Amount is paid in full, JetFax shall make the following payments to Ailicec to reduce the unpaid balance of the Unpaid Amount: (i) $15,000 on the next succeeding Business Day after the date that JetFax rece i ves funds from any Bridge Financing or the date that JetFax receives funds from any other lender (such as a factoring agent), whichever is earlier, and JetFax shall make successive payments starting at $20,000 due and payable one month thereafter and incr e asing by $5,000 each month due and payable on the same day of each month, or the next succeeding Business Day (as defined below) if that day is not a Business Day; (ii) 10% of the amount of any Bridge or Equity Financing or financing provided by a commerc i al lending institution, as to which Ailicec has agreed to subordinate its security interest, that is received by JetFax shall be added to the next payment owed to Ailicec following the receipt of such Bridge or Equity Financing; and (iii) the Additional A m ounts as provided in section 3. Subject to the provisions of section 4(b), the remaining unpaid balance of the Unpaid Amount, together with all accrued but unpaid interest, shall be due and payable on December 31, 1994. JetFax shall have the right to prep a y all or any portion of the Unpaid Amount without premium or penalty, so long as any amount prepaid is applied first to reduce accrued interest. "Business Day" shall mean any day other than a Saturday, Sunday, statutory holiday, or other day on which bank s in the State of California are required by law to close or are customarily closed.



(b) The obligations of JetFax to make any payments under section 4(a) shall be subject to the fulfillment of the following condition: Ailicec shall have perform ed and complied in all material respects with the obligations and agreements to be performed or complied with by it under this Agreement. It is understood that failure to strictly comply with the schedule referred to in section 1 is a failure to comply i n a material respect with this Agreement.



(c) If the condition set forth in section 4(b) is not satisfied, as JetFax's sole remedy under such section, JetFax may postpone payment of any obligations under section 4(a) for the period in which Ailic ec has failed to perform or comply with the obligations and agreements to be performed or complied with by it under this Agreement beginning on such failure and applying to payments due during the period of such failure.



(d) Notwithstanding the conditions of section 4(b), the remaining unpaid balance of the Unpaid Amount, together with all accrued but unpaid interest, shall be due and payable on December 31, 1994 (subject to adjustment specified in section 4(c)).





5. Conditions of Ailicec. The obligations of Ailicec in this

--------------------- Agreement shall be subject to the performance and compliance by JetFax in all material respects (including, without limitation, payment str ictly in accordance with Schedule 1, subject to section 4(c) above) with the obligations and agreements to be performed or complied with by it under this Agreement; provided that except with respect to payments by JetFax pursuant to Section 1 above, if Je t Fax does not so perform and comply, Ailicec shall notify JetFax in writing and JetFax shall have 30 days after receipt of such notice to cure such nonperformance or noncompliance. If JetFax does not cure such nonperformance or noncompliance in such 30-da y period, Ailicec may terminate its obligations to deliver units of the 8000-D Model under this Agreement.



6. Manufacturing Agreement. This Agreement shall be subject to all

----------------------- terms and conditions of the Manufacturing Agreement not inconsistent with the terms and conditions hereof, and if any terms and conditions of this Agreement are inconsistent with any terms and conditions of the Manufacturing Agreement, the terms and conditions of this Agreement shall prevail.



7. Use of Proceeds of Bridge Financing. JetFax agrees to use a

----------------------------------- majority of the Bridge Financing to finance the purchase of the units of the 8000-D Model to be delivered pursuant to this Agreement and to pay the Unpaid Amount.



8. Purchase Money Security Interest. JetFax acknowledges and agrees

-------------------------------- that all goods delivered pursuant to this Agreement and the Debt (as defined below) shall be subject to the general and purchase money security interest granted by JetFax to A i licec pursuant to the New Security Agreement and Section 2.5 of the Manufacturing Agreement. Ailicec has agreed to subordinate such general and purchase money security interest to the security interests of the Bridge Investors pursuant to the Intercredito r Agreement.



9. Conversion of Outstanding Debt. (a) Subject to the conditions

------------------------------ specified in section 9(e)(i), $675,000 in outstanding debt owed by JetFax to Ailicec s hall be converted into a warrant to purchase 290,000 shares of JetFax Series E Preferred Stock (the "Warrant"). The exercise price of the Warrant shall be the lesser of $2.75 per share or the purchase price of the JetFax preferred stock next sold by JetF ...