EXHIBIT 4.4
First Pacific Networks, Inc.
000 Xxx Xxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Gentlemen:
This letter will confirm our mutual agreement with respect to our
engagement as exclusive Placement Agent ("Distributor") to act on behalf of
First Pacific Networks, Inc. (the "Company") in connection with the offer and
sale on a best efforts basis of a minimum of 3,500 shares and a maximum of 5,000
shares of the Company's Series G Preferred Stock ($.001 par value) (the
"Preferred Share"), having a purchase price of $1,000 per share of the Company
(the "Series G Preferred Stock" or "Preferred Shares") pursuant to Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act").
1. The engagement hereunder shall commence upon the execution of this
letter by the Company, and terminate thirty (30) days thereafter. You represent
that no other offering under Regulation S or Regulation D is presently in
progress by the Company which has not been disclosed to us.
2. (a) The net proceeds to be received by the Company after deducting
Distributor's Fees of $50 per Preferred Share shall be $950 per share of Series
G Preferred Stock. Other than the Distributor's Fee payable hereunder, and the
warrants set forth in PARA10 hereof, the Distributor shall not be entitled to
any additional compensation from the Company, nor shall Distributor be
reimbursed for its expenses. The Company shall pay the Escrow Agent's (as
defined below) fee of $10,000 from the net proceeds of the Sale of the Preferred
Shares.
(b) Each purchaser of Preferred Shares will, within two business days
after acceptance by the Company of a Stock Purchase Agreement ("Stock Purchase
Agreement") in the form attached as Exhibit A, pay the purchase price for the
Preferred Shares in escrow to the Escrow Agent. The Escrow Agent is authorized
to release the funds of each purchaser after
(i) the Company approves such purchaser and the Stock Purchase
Agreement and subscription documents' (in the form of an
exhibit hereto) which have been submitted and signed by
the purchaser, and
(ii) the Company has caused to be delivered to the Escrow Agent
or his designee, one or more certificates for the
Preferred Shares purchased by such purchaser and the
opinion of counsel attached as Xxxxx XXX to the Stock
Purchase Agreement, and
(iii) the Escrow Agent has received good funds representing the
purchase price for the Preferred Shares, and disbursed
same to the Company.
(c) Each purchaser will be an accredited investor as said term is
defined in Rule 501 under Regulation D promulgated under the Act.
EXHIBIT 4.4
(d) The Company shall have the right in its sole discretion to reject
any subscription, and to disapprove any person or entity which is proposed by
the Distributor to be a purchaser of any Preferred Shares.
3. The Company will cause the certificates representing the Preferred
Shares purchased pursuant to such Agreement to be delivered to Xxxxxxx & Xxxxxx,
Esqs. as escrow agent (the "Escrow Agent') pursuant to the terms of the Joint
Escrow Instructions attached as Annex II to the Stock Purchase Agreement.
4. (a) The Distributor represents, warrants and agrees that each
purchaser of the Preferred Shares will be qualified to purchase the Preferred
Shares under the laws of the jurisdiction in which such person resides and that
the offer and sale of the Preferred Shares will not violate the securities or
other laws of such jurisdiction. Without limiting the foregoing, Distributor
agrees that it will not solicit offers for, or offer or sell Preferred Shares by
any form of general solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act) in any manner involving a public
offering within the meaning of 4(2) of the Securities Act. The Company and
Distributor acknowledge that the Distributor will primarily offer the securities
to persons not resident in the United States. The Company agrees that with
respect to any offerees resident in the United States, the Company will file, at
the request of Distributor, any necessary applications with any applicable
securities regulatory authority, provided, that all offerees will be accredited
investors.
(b) The Distributor understands that the Preferred Shares have not
been registered under the Act and may not be offered or sold within the United
States or to, or for the account or benefit of, United States persons except in
accordance with the Act or pursuant to an exemption from the registration
requirements of the Act.
5. The Distributor further agrees that:
(a) all offering materials and documents used in connection with
offers and sales of the Preferred Shares prior to the expiration of the
engagement period shall be approved in advance in writing by the Company, and
shall include statements to the effect that the Preferred Shares have not been
registered under the Act and that neither the purchaser, nor any direct or
indirect purchaser of the Preferred Shares from such purchaser, may directly or
indirectly offer or sell the Preferred Shares unless the Preferred Shares are
registered under the Act, or an exemption from the registration requirements of
the Act is available;
(b) it will comply with all laws, rules and regulations of the
jurisdictions in which the Preferred Shares are offered and sold; and
(c) Distributor has no authority to act on behalf of the Company or
otherwise bind the Company except as expressly set forth herein.
6. Distributor is an independent contractor, and is not the agent of the
Company. It is not authorized to bind the Company, or to make any
representations or warranties on behalf of the Company.
7. The Company represents, warrants, and agrees that, in addition to the
warranties to be made by the Company to the purchasers:
(a) the Common Stock to be issued upon conversion of the Preferred
Shares has been registered pursuant to Section 12(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Company has timely filed all
the material required to be filed pursuant to Section 13(a) or 15(d) of the
Exchange Act for a period of at least twelve months preceding the date hereof,
and the Company will continue to file all such material on a timely basis;
EXHIBIT 4.4
(b) The Company is in full compliance, to the extent applicable, with
all reporting obligations under either Section 12(b), 12 (g) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has registered its Common Stock pursuant to Section 12 of the Exchange Act and
the Common Stock is listed on the NASDAQ/SmallCap, and has received no notice,
either oral or written, with respect to its continued eligibility for such
listing;
(c) the Preferred Shares will be offered and sold in compliance with
the requirements for the exemption from registration pursuant to Section 5 of
the Act contained in Regulation D, and with all other U.S. securities laws and
regulations; it being understood that this representation, warranty and
agreement is made relying exclusively on the representations, warranties and
agreements made by the Distributor and/or purchasers herein or in the applicable
subscription documents. The Company will, at its expense, make all filings
required under the Act and any applicable domestic securities exchange or
trading market, if any;
(d) all information furnished by the Company to purchasers under
Regulation D will not contain any untrue statement of material fact or omit to
state a material fact required to be stated or necessary to make the statements
therein not misleading; provided however, that this representation and warranty
does not extend to written material furnished to the Company by Distributor
relating to Distributor or the distribution process;
(e) the Company will not sell any common stock or securities
convertible into common stock under Regulation S for a period of ninety (90)
days from Closing Date and under Regulation D for a period of seventy-five (75)
days from Closing Date if 5,000 Preferred Shares are purchase pursuant to this
Stock Purchase Agreement and sixty (60) days if less than 5,000 shares are
purchased pursuant to this Stock Purchase Agreement, unless such Shares shall
not be freely transferable for a period of six (6) months from the Offering
Date;
(f) the Company has all requisite corporate power and authority to
execute and perform this agreement. All corporate action necessary for the
authorization, execution, delivery and performance of this agreement and the
transaction contemplated hereby have been taken. This agreement constitutes a
valid and binding obligation of the Company subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally;
(g) the execution and performance of this agreement by the Company
and the offer and sale of the Preferred Shares will not violate any provision of
the Certificate of Incorporation or Bylaws of the Company or any material
agreement or other instrument to which the Company is party or by which it is
bound, and which violation(s) would have a material adverse effect on the
business or financial condition of the Company. Any material necessary
approvals, U.S. governmental and private, will be obtained by the Company prior
to the issuance of the Preferred Shares;
(h) the Company makes no other representation or warranty with
respect to the Company, its finances, assets, recent sales of securities,
business or prospects or otherwise. Distributor will advise each purchaser and
potential purchaser of the foregoing, and that such purchaser is relying on its
own investigation with respect to all such matters, and that it will be given
reasonable access to any and all material publicly available documents and
Company personnel it may require for such investigation; and
(i) the Company will deliver to each Purchaser, a Registration Rights
Agreement substantially in the form annexed hereto as Annex IV to the Stock
Purchase Agreement, the Company and each Purchaser will comply with all of its
obligations thereunder.
8. The Company will provide Escrow Agent, as Agent for the Purchaser,
with an opinion of counsel substantially in the form attached as Xxxxx XXX to
the Stock Purchase Agreement.
EXHIBIT 4.4
9. Further, during the time period commencing upon completion of this
distribution and ending one hundred five (105) days thereafter, the Distributors
will have the right of first refusal on any further offer or sale of common
stock or securities convertible into common stock in any non-public offering,
other than strategic investments under Regulation D which will not effect
registration for six months.
10. The Company agrees to issue to Distributor, within ten (10) days after
the Closing Date, transferable divisible warrants for one hundred (100) shares
of Common Stock for each share of Series G Preferred stock sold, at an exercise
price per share of Common Stock equal to 120% of the Market Price at Closing,
exercisable commencing forty-five (45) days from closing, and for a period of
thirty-six (36) months thereafter, in form to be hereafter agreed.
11. As more fully described in Exhibit B hereto, which is incorporated
herein by reference, each party hereto will indemnify and hold the other
(including its partners, agents, employees, and controlling persons within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) harmless
from and against certain claims, liabilities, losses, damages and expenses
incurred, including fees and disbursements of counsel, related to or arising out
of this engagement. Exhibit B will be executed and delivered simultaneously
with this agreement.
12. This agreement shall be governed by and construed under the laws of
the State of New York without giving effect to principles governing the
conflicts of laws. A facsimile transmission of this signed agreement shall be
legal and binding on all parties hereto. Capitalized terms not defined herein
shall have the respective meanings ascribed to them in the Stock Purchase
Agreement.
Dated: September 25 , 1996
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FIRST GRANITE SECURITIES, INC.
By:
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AGREED & ACCEPTED:
FIRST PACIFIC NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Its Chief Financial Officer
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EXHIBIT 4.4
EXHIBIT B
INDEMNIFICATION AGREEMENT
In consideration of the agreement of FIRST GRANITE SECURITIES (hereinafter
"Distributor") to act on behalf of FIRST PACIFIC NETWORKS, INC. (the "Company")
pursuant to the Distribution Agreement (the "Agreement") dated September 26,
1996, the Company agrees to indemnify and hold harmless Distributor, their
affiliates, and each of their respective partners, directors, officers, agents,
consultants, employees and controlling persons (with the meaning of the
Securities Act of 1933) (Distributor and each such other person or entity are
hereinafter referred to as an "Indemnified Person"), from and against any
losses, claims, damages, expenses and liabilities or actions in respect thereof
(collectively "Losses"), as they may be incurred including all reasonable legal
fees and other expenses incurred in connection with investigating, preparing,
defending, paying, settling or compromising any Losses (whether or not in
connection with any pending or threatened litigation in which any Indemnified
Person is a named party) to which any of them may become subject (including in
any settlement effected with the Company's consent) and which are related to or
arise out of the engagement under the Agreement. The Company will not, however,
be responsible under the foregoing provisions with respect to any Losses (a) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment that such Losses resulted primarily from actions taken or omitted
to be taken by an Indemnified Person due to its gross negligence, bad faith or
willful misconduct, or (b) resulting solely from one or more decreases in the
market price of the Company's common stock.
If the indemnity referred to in this agreement should be, for any reason
whatsoever, unenforceable, unavailable or otherwise insufficient to hold such
Indemnified Person harmless, the Company shall pay to or on behalf of each
Indemnified Person contributions for Losses so that each Indemnified Person
ultimately bears only a portion of such Losses as is appropriate (i) to reflect
the relative benefits received by each such Indemnified Person, respectively, on
the one hand and the Company on the other hand in connection with the
transactions, or (ii) if the allocation on that basis is not permitted by
applicable law, to reflect not only the relative benefits referred to in clause
(I) above but also the relative fault of each such Indemnified Person,
respectively, and the Company as well as any other relevant equitable
considerations; provided, however, that in no event shall the aggregate
contribution of all Indemnified Persons to all Losses in connection with an
transaction exceed the vale of the consideration actually received by
Distributor pursuant to the Agreement. The respective relative benefits
received by Distributor and the Company in connection with any transaction shall
be deemed to be in the same proportion as the aggregate consideration received
by Distributor in connection with the transaction bears to the total
consideration of the transaction. The relative fault of each Indemnified Person
and the Company shall be determined by reference to, among other things, whether
the actions or omissions to act were by such Indemnified Person or the Company,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action or omission to act.
The Company also agrees that no Indemnified Person shall have any liability
to the Company or its affiliates, directors, officers, employees, agents or
shareholders, directly or indirectly, related to or arising out of the
Agreement, except that each Indemnified Person shall indemnify and hold harmless
the Company, its directors, officers, agents, consultants and controlled persons
from and against any Losses as they are incurred, which result primarily from
actions taken or omitted to be taken by such Indemnified Person due to its gross
negligence, bad faith or willful misconduct. In no event, regardless of the
legal theory advanced, shall the Company or any Indemnified Person be liable for
any consequential, indirect, incidental or special damages of any nature.
If any action is brought against any Indemnified Person in respect of which
indemnity may be sought against the Company hereunder, such Indemnified Person
shall promptly notify the Company in writing of such action and the Company
shall be entitled to participate therein and, to the extent the
EXHIBIT 4.4
Company shall wish, assume the defense thereof. Upon the request of an
Indemnified Person, the Company shall retain counsel reasonably satisfactory to
such Indemnified Person to represent such Indemnified Person and any others the
Company may designate in such action and shall pay the reasonable fees and
expenses of such counsel related thereto as they are incurred. In any such
action, an Indemnified Person shall have the right to retain its own counsel at
its own expense, except that the Company shall pay as they are incurred the
reasonable fees and expenses of counsel retained by the indemnified party only
in the event that (i) the Company and such Indemnified Person shall have
mutually agreed to the retention of such counsel or (ii) the Company has
directed counsel to represent one or more parties in addition to such
Indemnified Person in such action and representation of both such Indemnified
Person and such other party or parties by the same counsel would be
inappropriate, in the reasonable opinion of such Indemnified Person, due to
actual or potential differing interests between them, it being understood that
the Company shall not be liable for the reasonable fees and expenses of more
than one separate firm for all the Indemnified Persons. No indemnification
provided for herein shall be available to any Indemnified Person that fails to
give notice as provided above if the Company was unaware of the action to which
such notice would have related and was substantially prejudiced by such failure
or to any Indemnified Person that retains its own counsel in accordance with the
immediately preceding sentence except in the circumstances set forth in clauses
(i) and (ii) thereof. The Company agrees that without Distributor's prior
written consent it shall not settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding related
to the Distribution Agreement unless the settlement, compromise or consent also
includes an express unconditional release of all Indemnified Persons from all
liability and obligations arising therefrom.
The respective obligations of the Company and the Indemnified Persons
referred to above shall be in addition to any rights that any Indemnified Person
or the Company, as the case may be, may otherwise have and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of any Indemnified Person and the Company. It is understood
that the respective obligations of the Company and the Indemnified Persons will
remain operative regardless of any termination or completion of Distributor's
services pursuant to the Agreement.
FIRST GRANITE SECURITIES
By:
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Title:
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FIRST PACIFIC NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Title: Chief Financial Officer
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