<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1996.
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FIRST PACIFIC NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 3577 77-0174188
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Number) Identification No.)
incorporation or
organization)
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871 FOX LANE
SAN JOSE, CALIFORNIA 95131
(408) 943-7600
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
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M. PETER THOMAS
CHIEF EXECUTIVE OFFICER
FIRST PACIFIC NETWORKS, INC.
871 FOX LANE, SAN JOSE, CALIFORNIA 95131
(408) 943-7600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
BRUCE E. SCHAEFFER
GRAY CARY WARE & FREIDENRICH
A PROFESSIONAL CORPORATION
400 HAMILTON AVENUE
PALO ALTO, CA 94301
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /x/
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 statement 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 statement number of the earlier effective registration statement
for the same offering. / /
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock ($.001 par value)................... 4,601,010 shares $1.44 $6,625,454 $2,284
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee and
based on the average of the high and low prices of the Common Stock of
First Pacific Networks, Inc. as reported on the Nasdaq SmallCap Market
on September 5, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
<PAGE>
4,601,010 SHARES
FIRST PACIFIC NETWORKS, INC.
COMMON STOCK
The 4,601,010 shares of Common Stock of First Pacific Networks, Inc. ("FPN"
or the "Company") offered by this Prospectus are shares of Common Stock issuable
or potentially issuable upon conversion of (i) 1,500 shares of Series F
Preferred Stock of FPN (the "Series F Preferred Shares"); and (ii) 2,500 shares
of Series E Preferred Stock of FPN (the "Series E Preferred Shares") (the
"Selling Stockholders") of the Company described in this Prospectus under
"Selling Stockholders."
The Selling Stockholders acquired the Series F Preferred Shares from the
Company in a private offering made in reliance upon Regulation D under the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to initially register under the Securities Act a number of shares of
Common Stock equal to at least 200% of the number of shares of Common Stock that
would be issuable if all the Series F Preferred Shares were converted at the
Fixed Conversion Price (as defined herein under "Risk Factors -- Need for
Additional Funds and No Assurance of Available Financing") on the date of filing
of the Registration Statement of which this Prospectus is a part and to register
an additional number of shares of Common Stock if the number of shares of Common
Stock initially registered is insufficient to cover all of the Common Stock
issued or issuable upon conversion of the Series F Preferred Shares in
accordance with the terms thereof.
The Selling Stockholders acquired the Series E Preferred Shares from the
Company in a private offering made in reliance upon Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to initially register under the Securities Act a number of shares of
Common Stock equal to at least 120% of the number of shares of Common Stock
that would be issuable if all the Series E Preferred Shares were converted at
the conversion rate in effect (see "Risk Factors -- Need for Additional Funds
and No Assurance of Available Financing") on the date of filing of the
Registration Statement of which this Prospectus is a part and to register an
additional number of shares of Common Stock if the number of shares of Common
Stock initially registered is insufficient to cover all of the Common Stock
issued or issuable upon conversion of the Series E Preferred Shares in
accordance with the terms thereof.
The number of shares of Common Stock initially registered and any
additional shares of Common Stock registered are hereinafter collectively
referred to as the "Shares". The Company has agreed to use its best efforts to
cause the registration statement(s) covering the Shares to be declared effective
and to remain effective for six (6) months. The Company will not receive any of
the proceeds from the sale of the Shares by the Selling Stockholders.
The Company has been advised by the Selling Stockholders that they intend
to sell all or a portion of the Shares from time to time in the Nasdaq SmallCap
Market, in negotiated transactions or otherwise, and on terms and at prices then
obtainable. The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of any of the Shares may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Company and the Selling
Stockholders have agreed to certain indemnification arrangements. See "Plan of
Distribution."
The Company will bear all costs and expenses incident to the offering and
sale of the Shares to the public, including without limitation, registration,
filing and qualification fees, printers' and accounting fees and fees and
disbursements of counsel for the Company. All discounts or commissions will be
borne by the Selling Stockholders'.
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF
ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF THE
SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR,
OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
<PAGE>
The Company's Common Stock is listed on the Nasdaq SmallCap Market. On
September , 1996, the last sales price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market was $ .
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES 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.
---------------
The date of this Prospectus is September , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. FPN's Common
Stock is traded on the Nasdaq SmallCap Market. Reports and other information
concerning FPN can also be inspected at the offices of the National Association
of Securities Dealers, Inc., Market Listing Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees
prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
1. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A;
2. Form 10-K for the fiscal year ended March 31, 1996; and
3. Form 10-Q for the period ended June 30, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated by reference in this Prospectus (other than
any exhibits thereto). Requests for such documents should be directed to First
Pacific Networks, Inc. at 871 Fox Lane, San Jose, California 95131, Attention:
Chief Financial Officer.
3
<PAGE>
THE COMPANY
First Pacific Networks, Inc. (the "Company") has developed a patented
telecommunications technology that enables telephone, data and video
communications to be transmitted simultaneously over a single wiring system to a
large number of users on a cost-effective basis. The Company's strategy is to
use a combination of strategic alliances with network system integrators,
network infrastructure builders, major communications service and equipment
providers, distributors and licensees as well as direct product sales to
telephone service and cable television operators and utilities worldwide to gain
market penetration of its products.
The Company believes that worldwide market and regulatory developments and
technological advancements are contributing to the increased demand by both the
telephone and cable television industries for telecommunications systems capable
of providing multiple and integrated communications services to their
subscribers at a cost below or competitive with that necessary to build
conventional communication systems. In addition, electric utility companies and
municipalities are seeking to develop systems capable of implementing energy
management programs as well as providing other communication services such as
voice and data. The implementation of these systems requires upgrading of the
broadband networks of the cable television industry and replacement and/or re-
engineering of the switched voice and low-speed data networks operated by the
telephone companies and/or, in certain instances, the deployment of new
distribution networks. The Company believes that its technology can provide a
cost-effective means of implementing such re-engineering. The Company's
technology enables multiple communications services to be provided over upgraded
network distribution systems or new hybrid fiber/coaxial cable (HFC) networks on
an incremental user basis. To implement the Company's strategy, the Company is
adapting and incorporating its core technology and family of products into
systems designed to address specific market applications. The Company's current
marketing activities are targeted primarily to cable telephony systems
internationally and to selected domestic telephone markets, and domestic energy
management applications for utility companies.
The Company is conducting ongoing product development and testing to adapt
its technology and products for specific market requirement applications and
evaluate products under operating conditions and to reduce product costs. To
date, no system wide first or commercial deployments of the Company's technology
have been implemented, although field trials and pilot systems that include
Company products are currently ongoing. Revenues have not been material and the
Company has incurred substantial operating losses.
In July 1992, the Company completed its initial public offering. The
Company was incorporated under the laws of the State of Delaware in 1987. In
August 1988, the Company changed its name to First Pacific Networks, Inc.
The principal executive offices of FPN are currently located at 871 Fox
Lane, San Jose, California 95131 and its telephone number is (408) 943-7600.
RISK FACTORS
THE SECURITIES OFFERED HEREBY INCLUDE A HIGH DEGREE OF RISK, AND
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS AND RISK FACTORS IN
CONJUNCTION WITH THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN
THIS PROSPECTUS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS PROSPECTUS.
NEED FOR ADDITIONAL FUNDS AND NO ASSURANCE OF AVAILABLE FINANCING. The
Company is experiencing negative cash flow from operations and it is expected
that the Company will continue to experience negative cash flow through the end
of fiscal 1997 and potentially thereafter. There can be no assurances that
adequate revenue growth and reduction of operating losses will be achieved, and
even if they are, management may choose to supplement the Company's cash
position.
4
<PAGE>
The Company believes based on its current operating levels that it has
sufficient cash resources at June 30, 1996, together with $1,500,000 raised in a
private placement in August 1996 for operating activities through September
1996, at which time it will require additional funds from other sources unless
and until it obtains sufficient revenues from product sales or license fees.
The Company is actively seeking additional funding for both near-term and long-
term requirements from private equity or debt financings and from funding by
strategic partners of various operational activities. To the extent the Company
raises additional funding by issuing equity securities or securities convertible
into equity securities ownership dilution to stockholders will result. The
Company may issue an additional series of preferred stock with rights,
preferences or privileges senior to those of the Company's Common Stock. The
Company does not have any commitments or arrangements to obtain any funding and
there can be no assurance that any required financing of the Company will be
available or if available will be obtainable on terms favorable to the Company
or its stockholders. While the Company is seeking approval at its Annual
Meeting of Stockholders on September 17, 1996, of an increase to the authorized
shares of Common Stock of the Company to have available shares for, among other
things, future financings there can be no assurance that the Company will attain
such approval. In the absence of such approval, financings which could be
available may not be available to the Company. The unavailability of any
required financing, could prevent or delay the continued development and
marketing of the Company's products, may require curtailment of the Company's
operations and could result in the bankruptcy or insolvency of the Company.
On May 31, 1996, the Company completed the sale of an aggregate of 5,000
shares of Series E Preferred Stock (the "Series E Preferred Shares") at
$1,000 per share or an aggregate purchase price of $5,000,000 (net proceeds
of $4,900,000 after the payment of placement fees) in a private placement.
The Series E Preferred Shares were offered and sold in reliance on Regulation
S promulgated under the Securities Act of 1933. In August 1996, one investor
converted 2,500 shares of the Series E Preferred Shares into 3,138,000 shares
of the Company's Common Stock. The remaining holder of Series E Preferred
Shares and the Company have entered into an agreement (the "Series E
Agreement") whereby the Company is obligated, to use its best efforts, to
effect a "shelf registration" of the Common Stock issuable upon conversion of
the Series E Preferred Shares and to keep such registration statement
effective for a period of not less than six months in consideration of the
willingness of the holder to forebear conversion of 1,250 shares of the
Series E Preferred shares, until the shares issuable upon conversion are
registered. In connection with the Series E Agreement the Company has agreed
to issue warrants to purchase up to 50,000 shares of Common Stock to the
holder of Series E Preferred Stock. The warrants will become exercisable
over a three year term and have an exercise price of $1.52 per share. The
shares issuable upon exercise will be registered pursuant to an amendment to
this Registration Statement or will be registered pursuant to a separate
additional registration.
On August 27, 1996, the Company completed the sale of an aggregate of 1,500
shares of Series F Preferred Stock (the "Series F Preferred Shares") at $1,000
per share or an aggregate purchase price of $1,500,000 in a private placement.
The Series F Preferred Shares were offered and sold in reliance on the exemption
from registration under the Securities Act set forth in Regulation D under the
Securities Act. In accordance with the subscription agreement between the
Company and the holder of the Series F Preferred Shares the Company is obligated
to use its best efforts to effect a "shelf" registration of the Common Stock
issuable upon conversion of the Series F Preferred Shares and to keep such
registration statement effective for up to six months. In connection with the
issuance of the Series F Preferred Shares, the Company has agreed to issue
warrants to purchase up to 100,000 shares of the Company's Common stock to an
individual as finder compensation. The warrants become exercisable over a
three year term and have an exercise price of $1.52 per share. The shares
issuable upon exercise will be registered pursuant to an amendment to this
Registration Statement or will be registered pursuant to a separate additional
registration.
The Series E Preferred Shares may be converted into the Company's Common
Stock at a conversion price which is the lower of (i) $3.25 (the "Fixed
Conversion Price"), or (ii) 80% of the average closing bid price for the three
trading days prior to the date the investor gives notice of conversion. The
Series E Preferred Shares shall automatically be converted into the Company's
Common Stock, if not previously converted, on May 31, 1998. The Series E
Preferred Shares are entitled to receive dividends only when and if dividends
are declared on the Company's Common Stock. The Company has the right to redeem
outstanding Series E Preferred Shares under certain circumstances.
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The Series F Preferred Shares may be converted into the Company's Common
Stock at a conversion price which is the lower of (i) $1.27 (the "Fixed
Conversion Price"), or (ii) 80% of the average closing bid price for the three
trading days prior to the date the investor gives notice of conversion. The
Series F Preferred Shares shall automatically be converted into the Company's
Common Stock, if not previously converted, on August 27, 1998. The Series F
Preferred Shares are entitled to receive dividends only when and if dividends
are declared on the Company's Common Stock. The Company has the right to redeem
outstanding Series F Preferred Shares under certain circumstances.
In addition, the Company has outstanding warrants that contain certain
piggyback registration rights. The warrants are subject to anti-dilution
adjustments and are currently exercisable into approximately 1,350,000 shares of
the Company's Common Stock. The shares issuable upon exercise will be
registered pursuant to an amendment to this Registration Statement or will be
registered pursuant to a separate additional registration. If exercised the
warrants will result in additional dilution to stockholders.
CONTINUING OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY. The Company has incurred substantial losses since its inception
and, as of June 30, 1996, had an accumulated deficit of approximately
$131,408,000. The Company has incurred and expects to incur, over the near-
term, additional operating losses and will continue to incur operating losses
until such time as product sales generate sufficient revenues to fund its
operations. The timing of achieving profitability is primarily dependent upon
the continued development and commercial acceptance of the Company's products,
and management's ability to strategically focus the Company. There can be no
assurance as to whether or when achievement of profitable operations will occur.
Numerous factors may materially and unpredictably affect operating results
of the Company including the uncertainties of new product introduction and sales
growth; the timing and extent of field trials of the Company's products; and
recognition of license fees. Accordingly, the Company's operating results are
expected to fluctuate from period to period.
RECEIPT BY THE COMPANY OF A GOING CONCERN OPINION FROM ITS INDEPENDENT
ACCOUNTANTS. The report dated May 17, 1996, of Coopers & Lybrand L.L.P. on
the Company's consolidated financial statements for the fiscal year ended
March 31, 1996, contains an explanatory paragraph regarding the Company's
ability to continue as a going concern.
LISTING OF THE COMPANY'S COMMON STOCK ON NASDAQ SMALLCAP MARKET. During
1995, the Company received notice from Nasdaq indicating that as a result of the
Company's failure to maintain $4,000,000 of net tangible assets, as required by
the NASD bylaws governing continuance on the Nasdaq National Market, the
Company's Common Stock would be delisted if the required net tangible assets
condition was not satisfied. Subsequently, the NASD moved the Company to the
Nasdaq SmallCap Market commencing August 25, 1995. The NASD bylaws governing
continuance on the Nasdaq SmallCap Market require companies to, among other
things, maintain $1,000,000 of stockholder's equity. Should the Company not
raise sufficient additional equity financing it is possible that as a result of
fiscal 1997 losses that the Company could fall below this minimum stockholders'
equity requirement. Were such condition to occur and if (a) no temporary
exception was granted by Nasdaq, and (b) further equity financing or other means
of increasing stockholders' equity was not available, the Company's Common Stock
would be delisted from the Nasdaq SmallCap Market. A delisting of the Company
from Nasdaq could adversely affect the value and liquidity of the shares of the
Company's Common Stock and restrict the Company's future ability to raise equity
capital.
UNCERTAINTY OF MARKET ACCEPTANCE. The Company's technology and products
relate to an innovative method of providing telecommunications services. Market
acceptance of the Company's technology will depend in large part on the
Company's ability to demonstrate to potential customers and licensees, the
viability, relative cost-effectiveness and other benefits of the Company's
technology compared to competitive solutions or alternative communications
technologies. Many companies have significant investments and vested interests
in existing technologies and, accordingly, may be unwilling to rapidly accept
new communications technologies. Deployment by telephone and cable service
providers and electric utilities, particularly in the United States, may be
prevented
6
<PAGE>
or further delayed by regulatory barriers or limitations on new capital
expenditures. The Company believes that the ability to achieve rapid acceptance
of its technology in major telecommunications markets depends on its
establishment of strategic alliances with major equipment suppliers (OEM's),
system integrators and communication service providers as well as the ability to
demonstrate the cost effectiveness and functionality of the Company's products
in a market with evolving requirements.
There can be no assurance that the Company's existing or future products
will be commercially accepted other than as demonstrated by the Company's sales
growth to date. If market acceptance of these products is slower than
anticipated, the Company's product sales and results of operations would be
adversely affected, which may result in continuing losses. In addition, a
slower rate of product commercialization is likely to result in an increased
need for additional outside funding of the Company's operations.
COMPETITION. Many areas of the telecommunications industry are
characterized by intense competition, with a large number of companies offering
or seeking to develop technology or system capabilities similar to those of the
Company's technology or products. Many of these companies have substantially
greater financial, marketing and other resources than the Company, are
significantly more established in the industry and have substantial investments
in their technology. The Company's competitors include manufacturers and
vendors of technology and products which address specific customer or market
needs for each discrete area of the telecommunications industry. The Company
also competes directly with many companies who are developing or who are forming
alliances with companies in the communications field to develop innovative
communications technologies. In certain markets, the Company will also be
indirectly competing with companies who are also potential customers of its
technology and products, such as original equipment manufacturers. There can be
no assurance that competitors will not succeed in developing technologies or
offering products that are marketed at a lower price than those of the Company
or in obtaining market acceptance for products more rapidly than the Company.
Continued deregulation of the domestic telephone and cable television
industries, as well as the emergence of new telecommunications technologies, can
be expected to result in increased competition.
TECHNOLOGICAL CHANGES; RISK OF PRODUCT OBSOLESCENCE. The market for the
Company's technology and products is characterized by rapidly changing
technology and evolving industry standards. Although the Company believes its
approach to telecommunications requirements to be innovative, current
competitors or market entrants may develop new technologies, products, or
standards which could adversely affect the Company's ability to compete
effectively or which could render the Company's technology and products
obsolete. The Company's success will depend on its ability to anticipate
changes in technology and industry standards and to respond to market and
technological developments on a timely basis.
RELIANCE ON CORPORATE RELATIONSHIPS. From time to time, the Company has
established corporate relationships and intends to enter into future corporate
relationships to test, distribute and market its products. Continued
participation by corporate partners under marketing, distribution and supply
agreements with the Company will depend not only on the timely achievement of
development and marketing objectives by the Company, which cannot be assured,
but also on each corporate partner's own financial, competitive, marketing and
strategic considerations. The Company's agreements with strategic marketing,
distribution and supply partners are generally terminable by their corporate
partners on short notice. Suspension or termination of agreements with certain
corporate partners could have a material adverse affect on the Company.
DEPENDENCE ON SUPPLIERS. The Company relies on outside sources to
manufacture components of its products, none of which are contractually
obligated to meet the long-term requirements of the Company. While the Company
believes there are a number of potential sources of supply for each component,
there can be no assurance that current or alternative sources will be able to
supply all of the Company's demands on a timely basis. Although the Company
believes alternative sources are available, any interruption in the supply by
these suppliers or substitution of an alternative supplier would likely result
in delays in delivery that could adversely affect the Company's business. In
addition, reliance on outside manufacturing sources reduces the Company's
control over production costs.
RELIANCE ON THIRD PARTY MANUFACTURERS. The Companies strategy includes
seeking subcontracts with high volume manufacturers in order to provide the
capacity necessary to support projected demands for the Company's
7
<PAGE>
products without incurring the capital expenditures required in connection with
establishing an internal manufacturing capability. The Company may also seek to
cross-license the manufacture of certain elements of its systems to strategic
alliances when such activity could result in enhancements or cost reductions to
its products being funded by the licensee. There can be no assurance that the
Company will be able to secure subcontract manufacturing. Should it not be able
to do so and significant sales materialize, the Company will incur significant
expenditures in building manufacturing capacity and could experience delays in
fulfilling it's production obligations.
In January 1994, the Company entered into a three-year agreement with Sanyo
Electric Co. Ltd. ("Sanyo") providing for Sanyo to manufacture the customer
interface unit of the FPN1000 system. Sanyo commenced initial manufacturing of
the customer interface unit during the fourth quarter of fiscal 1995. The
Company has outstanding non cancelable commitments with Sanyo to purchase
approximately $2.0 million of customer interface units. The Company and Sanyo
currently have agreed that the Company will purchase this inventory which is
comprised of both finished goods and components through the remainder of fiscal
1997.
RISKS OF INTERNATIONAL OPERATIONS. The Company's strategy includes
marketing its technology to licensees and partners, which may include
governmental entities, and selling products in foreign countries. In addition,
a substantial portion of the components of the Company's products are fabricated
overseas. Accordingly, the Company's business will be subject to many of the
risks of international operations, including tariffs and other trade barriers,
currency control regulations, political instability, unexpected changes in
regulatory requirements, difficulties in staffing and managing foreign
operations, longer payment cycles, greater difficulty in accounts receivable
collection and potential adverse tax consequences. Also, currency conversion
gains and losses could contribute to fluctuations in the Company's results of
operations. If for any reason exchange or price controls or other restrictions
on the conversion or repatriation of foreign currencies were imposed, the
Company's operating results could be adversely affected. There can be no
assurance that these factors will not have an adverse impact on the Company's
international operations and, consequently, its operating results.
DEPENDENCE ON LICENSEES AND INDEPENDENT DISTRIBUTORS. To the extent the
Company licenses its technology, revenues beyond the initial license fee will be
derived primarily from product component sales to or royalties from licensees or
other revenue-sharing arrangements which are dependent on the successful
marketing of products utilizing Company technology. Principal marketing
activities are expected to be conducted or controlled by licensees of the
Company's technology. Accordingly, the Company's future success will depend to
a significant extent on the commitment of Company licensees to the Company's
technology and products. If the Company licenses its technology and products,
it may also not have control over the manufacturing process, quality assurance
or costs. Although the Company's licensing strategy is based partially on the
Company's assessment that licensees may be more effective than the Company in
penetrating certain markets and obtaining greater market share, there can be no
assurance that this will be the case. Accordingly, revenues which may be
derived by the Company under license arrangements may be less than from sales
which might have been derived by the Company if the Company were marketing its
products directly. In addition, Entergy Enterprises is entitled to receive or
participate in certain license and sublicense fees derived by the Company.
Further, because the Company believes that the success of a telecommunications
technology such as the Company's depends on rapid and widespread market
penetration, the inability of licensees to achieve such penetration will
materially adversely affect the Company's business and prospects. In certain
markets, marketing efforts (including marketing to potential licensees) are or
may in the future be conducted by independent distributors and OEMs who may also
represent entities that are more significant to the distributor's business than
is the Company and who may have no contractual obligation to market the
Company's technology or products.
DEPENDENCE ON PATENTS AND OTHER PROPRIETARY RIGHTS. The Company has twelve
issued United States patents, six issued foreign patents and two additional
United States patent applications pending, all generally covering the Company's
core technology. In addition, more than 20 corresponding patent applications
are pending in various foreign countries. The Company believes these patents
have been and will continue to be important in enabling the Company to compete
in the telecommunications industry. However, there can be no assurance that the
Company's patents will not be challenged or circumvented by competitors or will
provide the Company with any competitive advantages or that other companies will
not be able to market functionally similar products, systems or processes
without violating the Company's patent rights or that any additional patents
will be issued.
8
<PAGE>
Failure to obtain patent protection in certain foreign countries may have a
material adverse affect on the Company's ability to compete effectively in those
countries. The Company also relies on trade secrets that it seeks to protect,
in part, through confidentiality agreements with employees and other parties.
There can be no assurance that these agreements will not be breached, that the
Company will have adequate remedies for any breach or that the Company's trade
secrets will not otherwise become known to or independently developed by
competitors. As the Company intends to enforce its patents, trademarks and
copyrights and protect its trade secrets, it may be involved from time to time
in litigation to determine the enforceability, scope and validity of these
rights. Any such litigation could result in substantial cost to the Company and
diversion of effort by the Company's management and other personnel.
GOVERNMENT REGULATION. The Company's markets in the United States may be
materially affected by regulations and actions of the Federal Communications
Commission ("FCC"), state public service and utility commissions, the United
States Congress, and the courts relating to regulatory barriers between the
telephone service and cable television industries, rate restrictions for
services provided by companies in such industries, or other factors which affect
the market and demand for and availability of communication systems providing a
combination of telephone, computer, and video services. In certain United
States markets, regulatory barriers restrict the ability of some service
providers to provide a full range of communications services. Although
legislation has been proposed to change the current regulations for those who
provide both telephone and video services, there can be no assurance that such
legislation will be implemented or, if implemented, when such changes will
become effective. These restrictions may be an important factor in decisions by
domestic telephone companies or cable operators in purchasing Company products
or licensing Company technology. A decision by a utility to deploy an energy
management system using PowerView-TM- for use in its existing service territory
for energy applications will depend in part on the evaluation and approval of
public utility commissions. There can be no assurance that public utility
commissions will permit utilities to recover the full costs of PowerView in
their customer rate bases.
RISKS RELATING TO FIELD AND PILOT TESTING. Telecommunications technologies
such as the Company's are generally first evaluated through a lengthy process of
testing, field trials and first deployments prior to any commercial deployments.
As a result, the Company has expended and may continue to expend substantial
sums on product development and modifications and for inventory to support field
trials which may not result in any commercial deployments. The Company's
technology and products have been tested in certain field trials which have not
yet resulted in significant purchases of Company products. Field trials are
ongoing and the Company is unable to predict whether or when any commercial
deployments will result, as this may depend on numerous factors beyond the
Company's control, such as regulatory constraints, priorities and limitations on
capital expenditures of the customer.
VOLATILITY OF STOCK PRICE. The trading price of the Company's Common
Stock has been highly volatile and could continue to be subject to
significant fluctuations in response to variations in the Company's quarterly
operating results, general trends in the industry and other factors. The
market prices of stocks of high technology companies often fluctuate based on
factors unrelated to the operating performance of specific companies.
Announcements by potential customers of their plans with respect to field
trials or deployment orders for products of the Company or of competitors of
the Company could cause the market price of the Common Stock to fluctuate
substantially. Announcements of regulatory changes, or the failure to make
changes which are anticipated by the telecommunications industry or the
public, may create public perception that the business prospects of the
Company may be adversely affected. Such a perception, whether or not
accurate, may adversely affect the market price of the Common Stock.
DEPENDENCY ON HARDWARE SUPPLIERS. The Company's PowerView-Registered
Trademark- system is integrated with hardware and software components that
comprise the in-home network. The Company has completed integration of its
current version of PowerView-Registered Trademark- in cooperation with two
hardware suppliers. The Company is currently dependent upon these suppliers for
its continued involvement in certain field trials of PowerView-Registered
Trademark- as well as potential near-term sales activities. Should these
suppliers be unable to supply or discontinue production, the Company could
experience significant delays and costs as a result of identifying and
integrating the PowerView-Registered Trademark- product with a replacement
supplier. Although the Company is investigating and evaluating additional
sources there can be no
9
<PAGE>
assurance that such activities will occur or, occur in a timely enough
fashion to avoid delays and incurring significant additional integration
costs.
FLUCTUATION IN REVENUES. The Company's strategy includes licensing
arrangements, which are expected to include a license fee. During the period in
which license fees are derived and retained by the Company, these fees can
represent a substantial portion of the Company's revenues. Because of the
extensive period of time involved in negotiating and obtaining a licensing
arrangement as well as the inability to predict whether or when any licenses
will be entered into, the Company may experience significant fluctuations in
revenues (or periods in which minimal or no revenues are recognized) and
operating results, at least over the near term. In addition, Entergy
Enterprises has the right to receive or participate in certain license or
sublicense fees derived by the Company. Additional variability in revenues and
operating results may arise from timing and extent of field trials, budgeting
and purchasing patterns of customers, regulation of cable television operators
and telephone companies and technological developments in the telecommunications
industry, as well as general economic trends. Notwithstanding the lack of
revenues in certain periods, the Company continues to incur significant expenses
and, accordingly, substantial net losses and cash flow shortfalls from
operations. The continued inability of the Company to generate revenues on a
predictable basis could result in the interruption or cancellation of certain of
the Company's research and product development efforts, and require the Company
to obtain additional funds.
DEPENDENCE UPON KEY PERSONNEL. Because of the specialized technical nature
of the Company's business the Company's success will depend to a significant
extent upon a number of key technical and management employees. While the
Company employees are required to sign standard agreements concerning
confidentiality and ownership of inventions, the employees are generally not
otherwise subject to employment agreements. The loss of the services of any of
the Company's key employees could have a material adverse effect on the
Company's business, financial condition or results of operations. The Company
does not maintain life insurance policies on its key employees.
NO ASSURANCE OF ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. The Company's
ability to maintain its competitive technological position will depend, in part,
upon its ability to attract and retain highly qualified scientific, managerial
and manufacturing personnel. Competition for such personnel is intense. The
loss of a significant group of key employees would adversely affect the
Company's product development effort.
OBLIGATIONS DUE ENTERGY ENTERPRISES. Pursuant to an Amended Product
License Agreement (the "License Agreement") with Entergy Enterprises, Inc.
(Entergy) the Company is obligated to pay Entergy $3,500,000 in March 1998 and
$3,500,000 in March 1999. The amounts due Entergy will be reduced by any
royalty payments paid to Entergy in connection with the License Agreement prior
to their payment. There can be no assurance that the Company will have
generated sufficient cash flow from its operating activities to meet this
obligation and as a result may be required to seek external debt or equity
financing at that time.
ANTI-TAKEOVER PROVISIONS. The Company is subject to agreements and
provisions which could hinder or preclude an unsolicited acquisition of the
Company. The Company has an employment agreement with one of its executive
officers and severance agreements with five of its other officers and employees.
The employment agreement which expires in June 1997, provides for the executive
to be paid the remainder of his contract if it is terminated upon a change of
control. The severance agreements generally provide for six months salary in
the event the officer/employee is terminated without cause. Additional payments
would be due in the event new employment is not secured within a twelve month
period. In addition, the Company's Restated Certificate of Incorporation
authorizes the Board of Directors to issue, without stockholder authorization,
shares of preferred stock, in one or more designated series or classes. The
Restated Certificate of Incorporation and By-laws also provide for the Board of
Directors to be divided into three classes which serve for staggered three-year
terms. The Company is also subject to a Delaware statute regulating business
combinations. In addition, the Company has adopted a preferred stock purchase
plan. Any of these agreements or provisions could discourage, hinder or
preclude an unsolicited acquisition of the Company and could make it less likely
that stockholders receive a premium for their shares as a result of any such
attempt. These provisions may also have a depressive effect on the market price
of the Common Stock.
10
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholder holding Series E Preferred Shares acquired the
Series E Preferred Shares from the Company in a private offering made in
reliance on Regulation S under the Securities Act, in a transaction consummated
on May 31, 1996 (See "Risk Factors - Need for Additional Funds and No Assurance
of Available Financing"). The Company and the holder of the outstanding Series
E Preferred Shares have agreed to include such shares in a Registration
Statement on Form S-3.
The Selling Stockholder holding Series F Preferred Stock acquired the
Series F Preferred Shares from the Company in a private offering made in
reliance on Regulation D under the Securities Act, in a transaction consummated
on August 27, 1996 (See "Risk Factors - Need for Additional Funds and No
Assurance of Available Financing").
The following table lists the Selling Stockholders, the number of shares of
the Company's Common Stock which each owned or had the right to acquire upon the
conversion of the Preferred Shares purchased by each, the number of Shares
expected to be sold by each, assuming the conversion of all Preferred Shares and
the number and the percentage of the shares of the Company's Common Stock which
each will own or have the right to acquire after the offering pursuant to the
Registration Statement, assuming the sale of all the Shares expected to be sold.
Shares
Owned Shares Percentage
Before Shares To Owned After Owned After
Selling Stockholder(1) Offering Be Offered Offering Offering
---------------------- -------- ---------- -------- --------
Newsun Limited(2) 2,238,806 2,238,806 -- 0 -- --
Musuem Assets Ltd.(3) 2,362,204 2,362,204 -- 0 -- --
- ---------------
(1) The persons named in the table have sole voting and investment power with
respect to all shares of FPN Common Stock shown as beneficially owned by
them, subject to community property laws, where applicable.
(2) Represents 120% of the shares issuable upon conversion of the Series E
Preferred Shares had such conversion occurred on September 11, 1996. The
conversion rate at September 11, 1996 represents 80% of the average closing
bid price for the three trading days prior to September 11, 1996. (See
"Risk Factors - Need for Additional Funds and No Assurance of Available
Financing".)
(3) Represents 200% of the shares issuable upon conversion of the Series F
Preferred Shares had such conversion occurred on September 11, 1996. The
conversion rate at September 11, 1996 represents the Fixed Conversion
Price. (See "Risk Factors - Need for Additional Funds and No Assurance of
Available Financing".)
11
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that they, or
their respective pledges, donees, transferees or successors in interest, intend
to sell all or a portion of the Shares from time to time on the Nasdaq SmallCap
Market at prices and at terms prevailing at the time of sale or at prices
related to the then current market price, or in negotiated transactions. The
Shares may be sold by one or more of the following methods: (a) a block trade
in which the broker or dealer so engaged will attempt to sell the Shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its own account pursuant to this Prospectus;
(c) an over-the-counter distribution in accordance with the rules of the Nasdaq
SmallCap Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions.
There is no assurance that any of the Selling Stockholders will sell any or
all of the Shares offered by them. Pursuant to the terms of the Certificate of
Designation for Series E Preferred Stock executed by the Company and the Selling
Stockholders in connection with the Series E Preferred Share financing, Series E
Preferred Shares are immediately convertible into Common Stock at the option of
the holder and are convertible into shares of Common Stock at a conversion rate
which may vary with the market price of the Company's Common Stock. Pursuant
to the terms of the Certificate of Designation for Series F Preferred Stock
executed by the Company and the Selling Stockholders in connection with the
Series F Preferred Share financing Series F Preferred Shares are convertible at
the option of the holder into Common Stock on the earlier of October 26, 1996,
or the effectiveness of a Registration Statement on Form S-3. The Series F
Preferred Shares are convertible into shares of Common Stock at a conversion
rate which may vary with the market price of the Company's Common Stock. See
"Risk Factors -- Need for Additional Funds and No Assurance of Available
Financing." Therefore, the number of shares of Common Stock into which the
Series E and Series F Preferred Shares are convertible and which may be sold by
the Selling Stockholders at a particular time will vary in accordance with the
then applicable conversion rates.
In effecting sales, brokers or dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers
will receive commissions or discounts from the Selling Stockholders in amounts
to be negotiated prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. The Company will
pay all expenses incident to the offering and sale of the Shares to the public,
including without limitation, registration, filing and qualification fees,
printers' and accounting fees and fees and disbursements of counsel of the
Company. All discounts or commissions will be borne by the Selling
Stockholders.
The Company has agreed to indemnify in certain circumstances the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act. The Selling Stockholders have agreed to indemnify in
certain circumstances the Company and certain related persons against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed with the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part effective for
six months. The Company intends to de-register any of the Shares not sold by
the Selling Stockholders at the end of such six month period.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
12
<PAGE>
EXPERTS
The consolidated balance sheets as of March 31, 1996 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1996 incorporated by
reference in this Prospectus have been incorporated in reliance on the report
(which contains an explanatory paragraph relating to the Company's ability to
continue as a going concern as described in Note 2 of Notes to Consolidated
Financial Statements) of Coopers & Lybrand LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
13
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES,
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION
IN WHICH 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 AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
Available Information. . . . . . . . . . . . . . . . 3
Incorporation of Certain
Documents by Reference . . . . . . . . . . . . . 3
The Company. . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . 4
Selling Stockholders . . . . . . . . . . . . . . . .11
Plan of Distribution . . . . . . . . . . . . . . . .12
Use of Proceeds. . . . . . . . . . . . . . . . . . .12
Legal Matters. . . . . . . . . . . . . . . . . . . .12
Experts. . . . . . . . . . . . . . . . . . . . . . .13
4,601,010 SHARES
FIRST PACIFIC NETWORKS, INC.
COMMON STOCK
----------------------------------------
PROSPECTUS
-----------------------------------------
September 12, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
SEC Registration Fee. . . . . . . . . . . . . . . . . . .$ 2,284
--------
Nasdaq filing fee . . . . . . . . . . . . . . . . . . . . 7,500
--------
Accounting fees and expenses. . . . . . . . . . . . . . . 2,000
--------
Printing. . . . . . . . . . . . . . . . . . . . . . . . . -
--------
Transfer agent and registrar fees and expenses. . . . . . -
--------
Blue Sky fees and expenses (including counsel fees) . . . -
--------
Legal fees and expenses . . . . . . . . . . . . . . . . . 5,000
--------
Miscellaneous expenses. . . . . . . . . . . . . . . . . . 1,000
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . .$ 17,784
--------
--------
The Company will pay all expenses of registration, issuance and
distribution of the shares being sold by the Selling Stockholders, excluding
underwriting discounts and commissions and legal fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and By-Laws of the Company provide that
the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporate Law (the "GCL"). Section 145 of the GCL, relating to
indemnification, is hereby incorporated herein by reference.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Company eliminates the personal liability of directors to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director with certain limited exceptions set forth in Section
102(a)(7).
The Registrant has also entered into indemnification agreements with each
of its executive officers and directors, as well as several of its officers, the
form of which is filed as Exhibit 10.1 and reference is hereby made to such
form.
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
EXHIBIT
NUMBER EXHIBIT TITLE
4.1 Certificate of Designation of Series E Preferred Stock of First
Pacific Networks, Inc. (1)
4.2 Form of Series E Offshore Securities Subscription Agreement (2)
4.3 Certificate of Designation of Series F Preferred Stock of First
Pacific Networks, Inc. (3)
4.4 Form of Subscription Agreement between First Pacific Networks, Inc.
and the investor executing such Agreement (3)
4.5 Letter of agreement between Newsun Limited and First Pacific Networks,
Inc.(3)
10.1 Form of Indemnifaction Agreement (4)
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional
Corporation.(3)
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants.(3)
23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1)
24.1 Power of Attorney (included in the Signature Page contained in Part II
of the Registration Statement).
- ---------------
(1) Filed as Exhibit 3.7 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 and incorporated herein by
reference.
(2) Filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 and incorporated herein by
reference.
(3) Filed herewith.
(4) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 and incorporated herein by
reference.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the
<PAGE>
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement 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.
C. The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, 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, 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.
E. The undersigned Registrant hereby undertakes that:
(1) For the 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
<PAGE>
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 the registration statement as of the time it was declared effective.
(2) For the purposes 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California on the 12th day of September 1996.
First Pacific Networks, Inc.
By: /s/ M. Peter Thomas
-----------------------
M. Peter Thomas
President and Chief Executive
Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of First Pacific Networks, Inc.,
hereby severally constitute and appoint M. Peter Thomas and Kenneth W.
Schneider, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-3 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and generally to do all such things in our names and
behalf in our capacities as officers and directors to enable First Pacific
Networks, Inc. to comply with the provisions of the Securities Act and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any of
them, to said Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 12, 1996 by the
following persons in the capacities indicated.
SIGNATURE TITLE
/s/ M. Peter Thomas PRESIDENT, CHIEF EXECUTIVE OFFICER AND
- ------------------------------------ DIRECTOR
M. Peter Thomas
/s/ Kenneth W. Schneider EXECUTIVE VICE PRESIDENT FINANCE;
- ------------------------------------ CHIEF FINANCIAL OFFICER; CORPORATE
Kenneth W. Schneider SECRETARY (PRINCIPLE FINANCIAL AND
ACCOUNTING OFFICER)
/s/ Craig J. Brunet CHAIRMAN OF THE BOARD OF DIRECTORS
- ------------------------------------
Craig J. Brunet
/s/ Robert P. McNamara, Ph.D. CHIEF TECHNICAL OFFICER; DIRECTOR
- ------------------------------------
Robert P. McNamara, Ph.D.
/s/ Ambassador William A. Wilson DIRECTOR
- ------------------------------------
Ambassador William A. Wilson
/s/ Paul C. O'Brien DIRECTOR
- ------------------------------------
Paul C. O'Brien
/s/ Dr. Bill B. May DIRECTOR
- ------------------------------------
Dr. Bill B. May
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
- -----------
4.1 Certificate of Designation of Series E Preferred Stock of First
Pacific Networks, Inc. (1)
4.2 Form of Series E Offshore Securities Subscription Agreement (2)
4.3 Certificate of Designation of Series F Preferred Stock of First
Pacific Networks, Inc. (3)
4.4 Form of Subscription Agreement between First Pacific Networks, Inc.
and the investor executing such Agreement (3)
4.5 Letter of agreement between Newsun Limited and First Pacific Networks,
Inc.(3)
10.1 Form of Indemnifaction Agreement (4)
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional
Corporation.(3)
23.1 Consent of Coopers & Lybrand LLP, independent accountants.(3)
23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1)
24.1 Power of Attorney (included in the Signature Page contained in Part II
of the Registration Statement).
- ---------------
(1) Filed as Exhibit 3.7 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 and incorporated herein by
reference.
(2) Filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 and incorporated herein by
reference.
(3) Filed herewith.
(4) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 and incorporated herein by
reference.
<PAGE>
Exhibit 4.3
CERTIFICATE OF DESIGNATION
OF
FIRST PACIFIC NETWORKS, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
--------------------
SERIES F PREFERRED STOCK
First Pacific Networks, Inc., a Delaware corporation (the
"Corporation"), hereby certifies that the following resolution has been duly
adopted by the Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board") by the
provisions of the Restated Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), there hereby is created, out of the 6,060,000
shares of Preferred Stock, par value $0.001 per share, of the Corporation
authorized in Article III of the Certificate of Incorporation (the "Preferred
Stock"), a series of the Preferred Stock of the Corporation consisting of 1,500
shares, which series shall have the following powers, designations, preferences
and relative, participating, optional and other rights, and the following
qualifications, limitations and restrictions:
1. DESIGNATION. The designation of the series of Preferred Stock
fixed by this resolution shall be "Series F Preferred Stock" (hereinafter
referred to as the "Series F Preferred Stock").
2. CONVERSION RIGHTS.
(a) RIGHT TO CONVERT. The total number of original shares of
Series F Preferred Stock acquired by any holder may be converted, at the option
of the holder thereof, at any time after the earliest to occur of (i) the date
that the Registration Statement (referred to in and defined in Section 4(c) of
the Securities Subscription Agreement, dated August 26, 1996, between the
Corporation and the initial holder of the Series F Preferred Stock) is declared
effective by the Securities and Exchange Commission and (ii) the sixtieth (60th)
day following the date of original issuance thereof, without the payment of any
additional consideration therefor, into that number
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of fully paid and nonassessable shares of common stock, $0.001 par value per
share, of the Corporation (the "Common Stock") as is determined by dividing (i)
the sum of (a) $1,000 plus (b) the amount of all declared but unpaid dividends
on the shares of Series F Preferred Stock being so converted by (ii) the
Conversion Price (determined as hereinafter provided) in effect at the time of
conversion. The "Conversion Price" shall be equal to the lower of (i) the
higher of (a) $1.25 or (b) the average of the closing bid price of the Common
Stock for the three trading days immediately preceding the date of initial
issuance of the Series F Preferred Stock or (ii) eighty percent (80%) of the
average closing bid price of a share of Common Stock as reported on the NASDAQ
Small Cap Market (or, in the event that such security is not traded on the
NASDAQ Small Cap Market, such other national or regional securities exchange or
automated quotations system upon which the Common Stock is listed and
principally traded or, in the event that the Common Stock is not listed on any
exchange or quoted on the NASDAQ Stock Market, any trading market in which
quotes can be obtained) over the three consecutive trading days immediately
preceding the date of the Conversion Notice (as defined in Section 2(b) hereof).
(b) MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of Series F Preferred Stock. If upon
conversion of shares of Series F Preferred Stock held by a registered holder
which are being converted, such registered holder would, but for the provisions
of this Section 2(b), receive a fraction of a share of Common Stock thereon,
then in lieu of any such fractional share to which such holder would otherwise
be entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then effective Conversion Price. Before any holder of Series F Preferred
Stock shall be entitled to convert the same into full
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<PAGE>
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series F Preferred Stock, and shall give written notice
(the "Conversion Notice") to the Corporation at such office that such holder
elects to convert the same and shall state therein such holder's name or the
name or names of its nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, but in any event within three business days of
the date of its receipt of the original Conversion Notice and the certificate or
certificates representing the shares of Series F Preferred Stock to be
converted, issue and deliver or cause to be issued and delivered to such holder
of Series F Preferred Stock, or to its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share. Such
conversion shall be deemed to have been made on the date that the Corporation
first receives the Conversion Notice, by telecopier or otherwise, and the person
or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date. Upon the conversion of any shares of
Series F Preferred Stock, such shares shall be restored to the status of
authorized but unissued shares of Preferred Stock and may be reissued by the
Corporation at any time.
(c) NOTICES OF RECORD DATE. In the event of (i) any declaration
by the Corporation of a record date of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend or other distribution or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of
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the capital stock of the Corporation, any merger or consolidation of the
Corporation, and any transfer of all or substantially all of the assets of the
Corporation to any other Corporation, or any other entity or person, or any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the Corporation shall mail to each holder of Series F Preferred
Stock at least twenty (20) days prior to the record date specified therein, a
notice specifying (A) the date on which any such record is to be declared for
the purpose of such dividend or distribution and a description of such dividend
or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and (C) the time, if any, that is to
be fixed, as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution or winding up.
(d) STOCK DIVIDENDS; STOCK SPLITS; ETC. In the event that the
Corporation shall (i) take a record of holders of shares of the Common Stock for
the purpose of determining the holders entitled to receive a dividend payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares or (iv) issue, by reclassification of the Common Stock, any other
securities of the Corporation, then, in each such case, the Conversion Price
then in effect shall be adjusted so that upon the conversion of each share of
Series F Preferred Stock then outstanding the number of shares of Common Stock
into which such shares of Series F Preferred Stock are convertible after the
happening of any of the events described in
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<PAGE>
clauses (i) through (iv) above shall be the number of such shares of Common
Stock into which such shares of Series F Preferred Stock would have been
converted if so converted immediately prior to the happening of such event or
any record date with respect thereto.
(e) MANDATORY CONVERSION. If not sooner converted, all
outstanding shares of Series F Preferred Stock shall be subject to mandatory
conversion on the second anniversary of the date of original issuance thereof.
For purposes of clause (b) above, such second anniversary date shall be deemed
to be the date on which the Corporation receives a Conversion Notice with
respect to the then outstanding shares of Series F Preferred Stock.
(f) COMMON STOCK RESERVED. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of all of the then outstanding shares of Series F Preferred Stock.
3. DIVIDEND RIGHTS OF SERIES F PREFERRED STOCK. Subject to the
dividend provisions fixed by the Board for any series of Preferred Stock
designated by the Board in the future, the holders of Series F Preferred Stock
shall be entitled to receive dividends, out of any assets at the time legally
available therefor, when and as declared by the Board. No cash dividends shall
be paid on any Common Stock unless at the same time a dividend is paid with
respect to all outstanding shares of Series F Preferred Stock in an amount for
each such share of Series F Preferred Stock equal to the aggregate amount of
such dividends payable on that number of shares of Common Stock into which each
such share of Series F Preferred Stock could then be converted on the date of
the declaration of the dividend assuming, if it is not otherwise the case, that
the Series F Preferred Stock was convertible at the option of
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<PAGE>
the holders of Series F Preferred Stock on such date pursuant to the provisions
of Section 6(a) below.
4. VOTING RIGHTS OF SERIES F PREFERRED STOCK. Except as otherwise
required by law, the holders of outstanding shares of Series F Preferred Stock
shall not be entitled to vote on any matters submitted to the stockholders of
the Corporation.
5. PREFERENCE ON LIQUIDATION. Subject to the liquidation
preferences of any series of Preferred Stock other than the Series F Preferred
Stock, including, without limitation, any liquidation preferences that provides
for payments to any series of Preferred Stock or the Common Stock prior to or on
a parity with any payment to holders of the Series F Preferred Stock provided
for below (including any preferences that provide for additional parity or non-
parity payments to the holders of the Series F Preferred Stock), in the event of
any liquidation, dissolution or winding up of the Corporation, distributions to
holders of Series F Preferred Stock, holders of Series E Preferred Stock,
holders of Series D Preferred Stock, holders of Series C Preferred Stock,
holders of Series B Preferred Stock, holders of Series A Convertible Preferred
Stock (the "Series A Preferred Stock") and holders of Common Stock shall be made
in the following manner:
(a) The holders of Series F Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of the Common Stock by reason of their ownership of
such stock, the amount of (i) $1,000 per share of each share of Series F
Preferred Stock then held by them, adjusted for any stock split, stock
combination, stock distribution or stock dividend with respect to such shares
and (ii) an amount equal to all declared but unpaid dividends on the Series F
Preferred Stock as provided in Section 2 above. The Series F
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<PAGE>
Preferred Stock shall rank on a parity with the Series A Preferred Stock with
respect to Article III, Section A.4 of the Certificate of Incorporation (the
"Series A Liquidation Section"), Section 3 of the Certificate of Designation of
the Series C Preferred Stock (the "Series C Liquidation Section"), Section 3 of
the Certificate of Designation of the Series D Preferred Stock (the "Series D
Liquidation Section") and Section 5 of the Certificate of Designation of the
Series E Preferred Stock (the "Series E Liquidation Section"), as to the
distribution of assets and funds upon dissolution, liquidation or winding up of
the Corporation, with the effect stated in the Series A Liquidation Section, the
Series C Liquidation Section, the Series D Liquidation Section and the Series E
Liquidation Section.
(b) After payment in full to (i) the holders of Series F
Preferred Stock of all amounts exclusively payable on or with respect to said
shares pursuant to Section 5(a) above, (ii) the holders of Series E Preferred
Stock of all amounts exclusively payable on or with respect to said shares
pursuant to the Series E Liquidation Section, (iii) the holders of the Series D
Preferred Stock of all amounts exclusively payable on or with respect to said
shares pursuant to the Series D Liquidation Section, (iv) the holders of the
Series C Preferred Stock of all amounts exclusively payable on or with respect
to said shares pursuant to the Series C Liquidation Section and (v) the holders
of Series A Preferred Stock of all amounts exclusively payable on or with
respect to said shares pursuant to the Series A Liquidation Section, the holders
of the Common Stock and Series B Preferred Stock shall be entitled to receive
the remaining assets of the Corporation available for distribution to the
stockholders upon the dissolution, liquidation or winding up of the Corporation.
If the assets and funds available for distribution among the holders of the
Common Stock and among the holders of the Series B Preferred
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<PAGE>
Stock or of any other series of Preferred Stock ranking on a parity with the
Common Stock with respect to this Section 5(b) as to the distribution of assets
upon such dissolution, liquidation or winding up shall be insufficient to permit
the payment to such holders of their full liquidation payments, then the entire
remaining assets and funds of the Corporation legally available for such
distribution shall be distributed ratably among such holders in proportion to
their aggregate preferential amounts.
(c) A consolidation or merger of the Corporation with or into
another corporation or entity in a transaction involving the disposition of more
than fifty percent (50%) of other voting power of the Corporation, or a sale of
all or substantially all of the assets of the Corporation (a "Sale of the
Corporation") shall be regarded as a dissolution, liquidation or winding up of
the Corporation within the meaning of this Section 5. The Corporation shall not
consummate a Sale of the Corporation before the expiration of ten (10) days
after mailing written notice of the proposed Sale of the Corporation to the
holders of record of the Series F Preferred Stock (the "Sale of the Corporation
Notice").
6. REDEMPTION RIGHTS. (a) In the event that the Corporation has
issued 1,500,000 or more shares of Common Stock upon the conversion of shares to
Series F Preferred Stock, the Corporation shall have the right to redeem the
remaining outstanding shares of Series F Preferred Stock, in whole or in part,
at a cash redemption price equal to the sum of (i) $1,000 per share, (ii) the
amount of all accrued but unpaid dividends with respect to the shares being
redeemed and (iii) an amount equal to twenty-five percent (25%) of the aggregate
amount referred to in clauses (i) and (ii) (collectively, the "Cash Redemption
Price"); provided, however, that the Corporation shall not be entitled to redeem
any shares of Series F Preferred Stock unless it has given
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<PAGE>
the holder of such shares written notice of such redemption (the "Redemption
Notice") prior to the date that the holder submits a Conversion Notice with
respect to such shares. In the event that the Corporation delivers a timely
Redemption Notice, the Cash Redemption Price will be paid to the holder of the
shares to be redeemed within five (5) business days of the date of the
Redemption Notice, by certified or official bank check, upon the surrender of
the certificate(s) representing the shares of Series F Preferred Stock being so
redeemed.
(b) If after 60 days from the date of issuance of the Series F
Preferred Stock, the average closing bid price of the Common Stock of the
Corporation is less than the higher of (a) $1.25 or (b) the average of the
closing bid price of the Common Stock for the three trading days immediately
preceding the date of initial issuance of the Series F Preferred Stock for a
period of 5 consecutive trading days, the Corporation shall have the right to
redeem the outstanding shares of Series F Preferred Stock, in whole or in part,
at the Cash Redemption Price; provided, however, that the Corporation shall be
required to give the holder of such shares 10 days prior written notice of such
redemption (the "Notice Period"). In addition, the holder shall have the right,
at any time during the Notice Period, to elect to convert such holder's shares
of Series F Preferred Stock by submitting a Conversion Notice to the Corporation
in accordance with the terms of Section 2(b) hereof. In the event that the
holder does not elect to convert such shares during the Notice Period, the Cash
Redemption Price will be paid to the holder of the shares to be redeemed within
five (5) business days of the date of the Redemption Notice, by certified or
official bank check, upon the surrender of the certificate(s) representing the
shares of Series F Preferred Stock being so redeemed.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its President, and attested by its Secretary, this
26th day of August, 1996.
FIRST PACIFIC NETWORKS, INC.
By: /s/ M. Peter Thomas
-------------------
M. Peter Thomas
President
Attest:
By: /s/ Kenneth W. Schneider
------------------------
Kenneth W. Schneider
Corporate Secretary
10
<PAGE>
Exhibit 4.4
SECURITIES SUBSCRIPTION AGREEMENT
FIRST PACIFIC NETWORKS INC.
THE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE BECAUSE THEY
ARE EXEMPT FROM REGISTRATION UNDER VARIOUS REGULATIONS PROMULGATED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED (THE "ACT"). THIS SUBSCRIPTION AGREEMENT
SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL.
This Securities Subscription Agreement (the "Agreement") is executed by
the undersigned (the "Subscriber") in connection with the irrevocable offer
and the subscription of the undersigned to purchase an aggregate of 1,500
shares of Series F Convertible Preferred Stock, par value $0.001 per share
(the "Shares"), of First Pacific Networks Inc., a Delaware corporation (the
"Company"), at a price of US $1,000 per share, which Shares are convertible
into shares of common stock, par value $0.001 per share (the "Common Stock"
and together with the Shares, the "Securities"), of the Company. The terms
and provisions of the Shares are set forth in the Certificate of Designation
attached hereto as Exhibit A. This Agreement and the offer and sale of the
Securities contemplated hereby are being made in reliance upon the provisions
of certain rules and regulations which provide an exemption from the
registration provisions under the Securities Act of 1933, as amended (the
"Act"). The Subscriber, in order to induce the Company to enter into the
transaction contemplated hereby and acknowledging that the Company will rely
thereon represents, warrants and agrees as follows:
1. OFFER TO SUBSCRIBE; PURCHASE PRICE. The Subscriber hereby offers to
purchase and subscribes for an aggregate of 1,500 Shares for an aggregate price
of $1,500,000 at the time of the Closing (as hereinafter defined). The closing
of the transactions contemplated hereby (the "Closing") shall be deemed to occur
when this Agreement has been executed by both Subscriber and Company. Payment
shall be made at the Closing by delivering immediately available funds in United
States dollars by wire transfer for simultaneous closing by delivery of
securities versus payment. The Company agrees to deliver certificates
representing the Shares subscribed for at the Closing. The date on which the
Closing occurs is hereafter referred to as the Closing Date.
2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION
(a) ACCREDITED INVESTOR STATUS. Subscriber represents and warrants
to the Company that Subscriber is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D ("Regulation D") promulgated under the
Act.
(b) ACCESS TO INFORMATION. The Subscriber or his professional
advisor has been granted the opportunity to conduct a full and fair examination
of the records, documents and files of the Company, to ask questions of and
receive answers from representatives of the Company, its
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officers, directors, employees and agents concerning the terms and conditions of
this offering, the Company and its business prospects, and to obtain any
additional information which the Subscriber or his advisor deems necessary to
verify the accuracy of the information received.
(c) RELIANCE ON OWN ADVISORS. The Subscriber has relied completely
on the advise of, or has consulted with, its own tax, investment, legal and
other advisors and has not relied on the Company or any of its affiliates,
officers, directors, attorneys, accountants or any affiliates of any thereof and
each other person, if any, who controls any thereof, within the meaning of
Section 15 of the Securities Act for any tax or legal advice.
(d) CAPABILITY TO EVALUATE. The Subscriber has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the prospective investment, which are substantial.
(e) INVESTMENT EXPERIENCE. Subscriber is an investor in securities
of companies in the development stage and has made investments in securities
other than those of the Company. Subscriber acknowledges that it is able to
fend for itself in the transaction contemplated by this Agreement, that it has
the ability to bear the economic risk of its investment pursuant to this
Agreement and that it is an "Accredited Investor" by virtue of the fact that it
meets the qualification standards set forth above. Subscriber has not been
organized for the purpose of investing in securities of the Company, although
such investment is consistent with its purposes.
(f) FEND FOR SELF. The Subscriber has either a pre-existing personal
or business relationship with the Company and its officers, directors and
controlling persons or by reason of its business or financial expertise has the
capacity to protect its own interest in connection with this transaction.
(g) INVESTMENT; NO DISTRIBUTION. The Subscriber is acquiring the
Shares solely for the Subscriber's own account for investment purposes as a
principal and not with a view to immediate resale or distribution of all or any
part thereof. The Subscriber is aware that there are legal and practical limits
on the Subscriber's ability to sell or dispose of the Shares and the shares of
Common Stock issuable upon conversion thereof, and therefore, that the
Subscriber must bear the economic risk of the investment for an indefinite
period of time and has adequate means of providing for the Subscriber's current
needs and possible personal contingencies and has need for only limited
liquidity of this investment. The Subscriber's commitment to illiquid
investments is reasonable in relation to the Subscriber's net worth.
(h) NO GENERAL SOLICITATION. The Shares were not offered to the
Subscriber through, and the Subscriber is not aware of, any form of general
solicitation or general advertising, including, without limitation, (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
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<PAGE>
(i) BENEFICIAL OWNER. Subscriber is purchasing the Shares, and upon
conversion thereof will be purchasing the shares of Common Stock issuable
thereupon, for its own account.
(j) INDEPENDENT INVESTIGATION. Subscriber in electing to
subscribe for the Shares hereunder, has relied solely upon the representations
and warranties of the company set forth in this Agreement and on independent
investigation made by it and its representatives, if any, and Subscriber has
been given no oral or written representations or assurance from the Company or
any representation of the Company other than as set forth in this Agreement or
in a document executed by a duly authorized representative of the Company making
reference to this Agreement.
(k) NO GOVERNMENT RECOMMENDATION OR APPROVAL. Subscriber
understands that no United States federal or state agency, or similar agency of
any other country, has passed upon or made any recommendation or endorsement of
the Company, this transaction or the purchase of the Securities.
3. THE COMPANY REPRESENTS, COVENANTS AND WARRANTS THE FOLLOWING:
(a) CONCERNING THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified as a foreign corporation in all jurisdictions in
which the failure to so qualify would have a material adverse effect on the
Company and its subsidiaries taken as a whole. The Company has registered its
Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Common Stock is listed and trades on the
NASDAQ Small Cap Market. The Company has timely filed all material required to
be filed pursuant to all applicable reporting obligations under either
Section 13(a) or 15(d) of the Exchange Act for a period of at least twelve (12)
months immediately preceding the offer or sale of the Shares. The Company meets
the eligibility requirements of the Securities and Exchange Commission (the
"Commission") with respect to the use of Form S-3 for the filing of a resale
registration statement with the Commission.
(b) CONCERNING THE SECURITIES. The issuance, sale and delivery of
the Shares and the shares of Common Stock issuable upon the conversion thereof
are within the Company's corporate powers and have been duly authorized by all
required corporate action on the part of the Company and its stockholders and
when such securities are issued, sold and delivered in accordance with the terms
hereof and the Shares for the consideration expressed herein and in the
Certificate of Designation, such securities will be duly and validly issued,
fully paid and nonassessable. There are no preemptive rights of any
stockholders of the Company.
(c) SUBSCRIPTION AGREEMENT. This Agreement has been duly authorized,
validly executed and delivered on behalf of the Company and is a valid and
binding agreement enforceable against the Company in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
(d) NON-CONTRAVENTION. The execution and delivery of this Agreement
and the consummation of the issuance of the Shares and the
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transactions contemplated by this Agreement and the Certificate of Designation
do not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the articles of
incorporation or by-laws of the Company, or any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, except that it is
understood that the execution and delivery of this Agreement may violate the
piggy-back registration rights of certain security holders of the Company. In
addition, it is understood that the execution and delivery of the Agreement does
not violate the terms of any existing applicable law, rule or regulation of the
United States or any State thereof or any applicable decree, judgment or order
of any Federal or State court, Federal or State regulatory body, administrative
agency or other United States governmental body having jurisdiction over the
Company or any of its properties or assets.
(e) LITIGATION. There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now pending or,
to the knowledge of the Company, threatened, against or affecting the Company,
or any of its properties, which might result in any material adverse change in
the condition (financial or otherwise) or in the earnings of the Company, or
which might materially and adversely affect the properties or assets thereof.
(f) NO DEFAULT. The Company is not in default in the performance
or observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property may be bound.
(g) SEC FILINGS. None of the Company's filings with the Commission
since January 1, 1995 contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statement therein in light of the circumstances under which they were
made, not misleading at the time such filings were made. The Company has since
January 1, 1995 timely filed all requisite forms, reports and exhibits thereto
with the Commission.
4. COVENANTS OF THE COMPANY. For so long as any Shares held by the
Subscriber remain outstanding, the Company covenants and agrees with the
Subscriber that:
(a) It will use its best efforts to maintain the listing of its
Common Stock on the NASDAQ Small Cap Market.
(b) Except as otherwise expressly provided in Section 6 below, it
will not issue stop transfer instructions to its transfer agent with respect to
and will not place a restrictive legend on the certificates representing the
Shares or the shares of Common Stock issuable upon the conversion thereof.
(c) It will effect the registration under the Act and the rules and
regulations of the Commission of the resale of all shares of Common Stock
issuable upon the conversion of the Shares (the "Registration Shares") and, in
connection therewith, it will:
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(i) prepare and file with the Commission within ten business
days of the date hereof a registration statement on Form S-3 (the
"Registration Statement") with respect to Two Hundred percent (200%)
of the number of Registration Shares as would be issuable on the date
of filing of the registration statement if all of the Shares were
converted on that date, pursuant to the rules and regulations of the
Commission and cause the Registration Statement to become and remain
effective for a period of not less than six months;
(ii) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration
Statement effective for a period of not less than six months and
comply with the applicable provisions of the rules and regulations of
the Commission;
(iii) furnish to the Subscriber such number of copies of each
prospectus included in the Registration Statement for the Registration
Shares, including each preliminary prospectus, each of which shall be
in conformity with the requirements of the rules and regulations of
the Commission;
(iv) notify the Subscriber at any time when a prospectus
relating to such Registration Shares is required to be delivered under
rules and regulations of the Commission within the appropriate period
mentioned in clause (ii) preceding, of the happening of any event as a
result of which the prospectus included in the Registration Statement,
as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statement therein not misleading in the light of
circumstances then existing, and at the Subscriber's request, prepare
and furnish to it a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registration Shares,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(v) cause all of the Registration Shares to be listed on the
NASDAQ Small Cap Market; and
(vi) in instances where an exemption from such qualification is
not available, register or qualify the Registration Shares under the
securities or Blue Sky laws of such jurisdictions as the Subscriber
shall reasonably request; provided, that the Company shall not be
required to register or qualify under the Blue Sky laws in states
where the Company is already cleared.
(d) It will permit the Subscriber to exercise its right to convert
the Shares by telecopying an executed and completed Notice of
5
<PAGE>
Conversion to the Company and delivering the original Notice of Conversion and
the certificate representing the Shares to the Company by express courier. Each
date on which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed a conversion
date. The Company will transmit the certificates representing shares of Common
Stock issuable upon conversion of any Shares (together with the certificates
representing the Shares not so converted) to the Subscriber via express courier,
by electronic transfer or otherwise, within three business days after receipt by
the Company of the original Notice of Conversion and the certificate
representing the Shares to be converted (the "Delivery Date"). If, after three
business days after the Delivery Date, the Company has not delivered such shares
of Common Stock in accordance with the provisions of this Section 4(d), the
Subscriber shall be entitled to receive a penalty in an amount in cash equal to
$30.00 per day for each $50,000 face amount of Shares being so converted until
the earlier of the date of delivery of such shares of Common Stock or the
revocation of the Notice of Conversion as set forth below. In addition to any
other remedies which may be available to the Subscriber, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within five business days after the Delivery Date, the Subscriber will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company whereupon the Company and the Subscriber shall each
be restored to their respective positions immediately prior to delivery of such
Notice of Conversion.
5. RESTRICTIONS ON CONVERSION OF SHARES. The Subscriber or any
subsequent holder of the Shares (the "Holder") shall be prohibited from
converting any portion of the Shares which would result in the Subscriber or
the Holder being deemed the beneficial owner, in accordance with the
provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
of five percent (5%) or more of the then issued and outstanding Common Stock
of the Company.
6. RESTRICTIVE LEGENDS.
(a) All Shares and shares of common stock issuable upon the
conversion thereof will bear a restrictive legend in customarily form for
securities issued pursuant to Regulation D. Such legend shall be removed (i)
in the absence of an effective registration statement covering such shares,
upon the receipt by the Company of a legal opinion from counsel to the
Subscriber reasonably acceptable to the Company to the effect that such
removal is permitted under the Act, and (ii) if there is an effective
registration statement covering such shares, upon a sale pursuant to such
effective registration statement.
(b) The shares of Common Stock issuable upon conversion of the Shares
will be subject to stop transfer instructions issued to the Company's transfer
agent which will prohibit the transfer of such shares in the absence of any
effective registration statement covering such shares or a legal opinion from
counsel to the Subscriber reasonably acceptable to the Company to the effect
that such transfers may be effected without violation of the Act.
7. RELIANCE ON REPRESENTATIONS. The Subscriber understands that the
offer and sale of the Shares and the shares issuable upon conversion thereof are
not being registered under the Act. The Company and the Subscriber are relying
on the rules governing offers and sales made pursuant to Regulation D.
6
<PAGE>
8. RESALES. Subscriber acknowledges and agrees that the Securities may
only be resold (a) pursuant to an effective registration statement under the
Act; or (b) pursuant to an exemption from registration under the Act.
9. CONFIDENTIALITY. Each of the Company and the Subscriber agrees to
keep confidential and not to disclose to or use for the benefit of any third
party the terms of this Agreement or any other information which at any time
is communicated by the other party as being confidential without the prior
written approval of the other party; provided, however, that this provision
shall not apply to information which, at the time of disclosure, is already
part of the public domain (except by breach of this Agreement) and
information which is required or appropriate to be disclosed by the Company
under applicable sercurities law.
10. INDEMNIFICATION.
(a)(i) In anticipation of the registration of the Registration
Shares under the Act and the rules and regulations promulgated thereunder
pursuant to this Agreement, the Company will: (i) indemnify and hold
harmless the Subscriber and each other person, if any, who controls the
Subscriber within the meaning of the Act (each such party, an "Indemnified
Party"), to the fullest extent permitted by law, against any losses, claims,
damages or liabilities, joint or several, to which any such Indemnified Party
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which the
Registration Shares were registered under the Act and the rules and
regulations promulgated thereunder, any preliminary prospectus or final
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (ii) reimburse each Indemnified Party for any legal or
any other expenses reasonably incurred thereby in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement, said
preliminary prospectus, said prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Indemnified Party specifically for use in the preparation
thereof.
(ii) The Subscriber will (a) indemnify and hold harmless the
Company and each other person, if any, who controls the Company within
the meaning of the Act, to the fullest extent permitted by law,
against any losses, claims, damages or liabilities, joint or several,
to which the Company or such controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact
7
<PAGE>
contained in the registration statement under which the Registration
Shares were registered under the Act and the rules and regulations
promulgated thereunder, any preliminary prospectus or final prospectus
contained therein or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading or any action or inaction of the Subscriber
in connection with the resale of the Securities, and (b) reimburse the
Company and each other person, if any, who controls the Company within
the meaning of the Act for any legal or any other expenses reasonably
incurred thereby in connection with investigating or defending any
such loss, claim damage, liability or action; in each case to the
extent and only to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
said registration statement, said preliminary prospectus or said
prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by the
Subscriber specifically for use in the preparation thereof, provided,
however, that the aggregate liability of the Subscriber to the Company
or such controlling person shall be limited to the net proceeds
received by the Subscriber from the sale of the Registration Shares
covered by such registration statement.
(b) In addition to the indemnification provided in clause (a) of this
Section 10 and the remedies provided for in Section 11 below, each of the
Company and the Subscriber agrees to indemnify the other and hold the other
harmless from and against any and all losses, damages, liabilities, costs and
expenses (including reasonable attorneys' fees) which the other party may
sustain or incur in connection with the breach by the indemnifying party of any
representation, warranty or covenant made by it in this Agreement.
11. FAILURE TO EFFECT REQUIRED REGISTRATION.
(a) In the event that the Company has not effected the registration
of the Registration Shares under the Act and relevant blue sky laws within 105
days of the date hereof, the Company shall pay to the Subscriber by wire
transfer, as liquidated damages (the "Liquidated Damages Amount") for such
failure and not as a penalty, 3% of the principal amount of the Shares purchased
by the Subscriber on the Closing Date for the initial period of 30 days or
portion thereof following the expiration of such 90-day period during which such
registration of the Registration Shares has not been effected, 3% of such
principal amount of Shares for the second period of 30 days or portion thereof
following the initial period of 30 days during which such registration of the
Registration Shares has not been effected and 3% of such principal amount of
Shares for the third period of 30 days or portion thereof following the second
period of 30 days during which such registration of the Registration of the
Registration Shares has not been effected. Such amount shall be due and payable
in cash in advance on the first business day of each such 30-day period,
commencing on the 91st day after the date hereof.
8
<PAGE>
(b) In the event that the Company has not effected the registration
of the Registration Shares under the Act and the relevant blue sky laws within
180 days of the date hereof, then, in addition to the Liquidated Damages Amounts
payable pursuant to clause (a) above, the Company covenants and agrees that (i)
the Subscriber may immediately convert all of the Shares purchased by the
Subscriber on the Closing Date into shares of Common Stock of the Company in
accordance with the terms of the Certificate of Designation, (ii) if the
Subscriber sells the shares of Common Stock issuable upon conversion of the
Shares without registration under the Act pursuant to the provisions of Section
4(1) of the Act, the Company will provide the Subscriber with all reasonable
assistance in consummating any such sales as the Subscriber shall reasonably
request, including, but not limited to, removing the restrictive legend set
forth on such shares, and (iii) the Subscriber shall be relieved of any
obligation to purchase additional Shares of the Company. Until such time as the
Subscriber converted the Shares and received unlegended and freely tradeable
shares of Common Stock, nothing contained herein shall be deemed to alter,
suspend or terminate the obligation of the Company to pay the Liquidated Damage
Amount to the Subscriber as provided in Section 11(a) above.
12. NOTICES. Any notice to be given or to be served upon any party to
this Agreement in connection with this Agreement must be in writing and will be
deemed to have been given and received upon confirmed receipt, if sent by
facsimile, or two (2) days after it has been submitted for delivery by Federal
Express or an equivalent carrier, charges prepaid and addressed to the following
addresses with a confirmation of delivery:
If to the Company, to:
First Pacific Networks Inc.
871 Fox Lane
San Jose, California 95131
Attention: Mr. Ken Schneider
Chief Financial Officer
Phone No.: (408) 943-7600
Fax No.: (408) 943-7696
If to the Subscriber, to:
Museum Assets Ltd.
83 Dana Crescent
Thornhill, Ontario
Canada L4J3H9
Any party may, at any time by giving notice to the other party,
designate any other address in substitution of an address established pursuant
to the foregoing to which such notice will be given.
13. MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original but all of which
will constitute one in the same instrument. However, in enforcing any party's
rights under this Agreement it will be necessary to produce only one copy of
this Agreement signed by the party to be charged.
9
<PAGE>
14. CERTAIN AGREEMENTS. The Company covenants and agrees that it will not
(i) enter into any subsequent Regulation D or Regulation S transaction with any
third party for a period of 60 days from the Closing Date without first offering
the Subscriber the opportunity (which shall remain open for a period of five
business days from the date the Subscriber receives notice thereof) to purchase
up to all of such additional Regulation D or Regulation S securities (in the
discretion of the Subscriber) on the terms and provisions on which the Company
proposes to offer such additional Regulation D or Regulation S securities to
such third parties. In the event that the Subscriber declines to participate in
any such investment, the Company shall provide the Subscriber with prompt
written notice of the consummation of any such transaction with a third party,
specifying the material terms thereof. In addition, the Company covenants and
agrees that the securities to be offered in any such subsequent Regulation D or
Regulation S transaction with any third party will not be added to the
Registration Statement referred to herein.
15. GOVERNING LAW. This Agreement will be construed and enforced in
accordance with and governed by the laws of the State of New York, except for
matters arising under the Act, without reference to principles of conflicts of
law. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the State of New York or the state courts
of the State of New York in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS, to the
bringing of any such proceeding in such jurisdictions. Each party hereby agrees
that if another party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
16. BROKERS. Other than with respect to Michael Arnouse, the Company is
not subject to any claim for commission or remuneration by any broker, finder or
other person in connection with the transactions contemplated hereby.
17. MANDATORY CONVERSION. The parties hereto acknowledge that the Shares
are subject to mandatory conversion as set forth in the Certificate of
Designation.
18. LIQUIDATED DAMAGES. In the event that the Company fails for any reason
to effect delivery of the shares of Common Stock issuable upon conversion within
the required time period set forth in Section 4 hereof, the parties agree that
the amount of damages sustained by Subscriber would be substantial but would be
difficult to determine precisely, accordingly, the Subscriber will be entitled
to receive, as liquidated damages for such failure and not as a penalty, an
amount in cash equal to the number of shares of Common Stock to which the
Subscriber would have been entitled on the date of the Conversion Notice
multiplied by the closing bid price for the Common Stock of the Company on the
third day following such date.
10
<PAGE>
The Subscriber acknowledges that this Agreement shall not be effective
unless and until accepted by the Company as indicated below.
Dated this day of August, 1996.
MUSEUM ASSETS LTD.
By:
-------------------------------
Name:
Title:
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE DAY OF
AUGUST, 1996.
FIRST PACIFIC NETWORKS INC.
By:
--------------------------------
Name:
Title:
11
<PAGE>
EXHIBIT 4.5
September 10, 1996
Newsun Limited
c/o ABN AMRO Trust Company
80 Rue du Rhone
1204 Geneva, Switzerland
Dear Mr. Steinmetz
This letter of agreement confirms the terms of a verbal agreement between
First Pacific Networks, Inc., a Delaware corporation (the "Company") and
Newsun Limited ("Holder") as the holder of 2,500 shares of Series E Preferred
Stock of the Company (the "Shares") made in August, 1996. Those terms are as
follows:
1. REGISTRATION RIGHTS. The Company will effect the registration under
the Securities Act of 1933, as amended (the "Act") and the rules and
regulations of the Securities and Exchange Commission (the "Commission") of
the resale of all shares of Common Stock of the Company issuable upon
conversion of the Shares ("Registration Shares") and, in connection
therewith, it will:
(a) prepare and file with the Commission on or before September 12,
1996 (the "Outside Filing Date") a registration statement on
Form S-3 (the "Registration Statement") with respect to One Hundred
Twenty percent (120%) of such number of Registration Shares as would
be issuable on the date of filing of the Registration Statement if all
of the Shares were converted on that date, pursuant to the rules and
regulations of the Commission and cause the Registration Statement to
become and remain effective for a period of not less than six months;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration
Statement effective for a period of not less than six months and
comply with the applicable provisions of the rules and regulations of
the Commission;
<PAGE>
Page 2
(c) furnish to Holder such number of copies of each prospectus
included in the Registration Statement for the Registration Shares,
including each preliminary prospectus, each of which shall be in
conformity with the requirements of the rules and regulations of the
Commission;
(d) notify Holder at any time when a prospectus relating to such
Registration Shares is required to be delivered under rules and
regulations of the Commission within the appropriate period mentioned
in clause (b) preceding, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of
circumstances then existing, and at Holder's request, prepare and
furnish to it a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registration Shares,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(e) cause all of the Registration Shares to be listed on the NASDAQ
SmallCap Market; and
(f) in instances where an exemption from all qualification is not
available, register or qualify the Registration Shares under the
securities or Blue Sky laws of such jurisdictions as Holder shall
reasonably request; provided, that the Company shall not be required
to register or qualify under the Blue Sky laws in states where the
Company is already cleared.
2. INDEMNIFICATION. (a)(i) In anticipation of the registration of the
Registration Shares under the Act and the rules and regulations promulgated
thereunder pursuant to this agreement, the Company will: (i) indemnify and
hold harmless Holder and each other person, if any, who controls Holder
within the meaning of the Act (each such party, an "Indemnified Party"), to
the fullest extent permitted by law, against any losses, claims, damages or
liabilities, joint or several, to which any such Indemnified Party may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement under which the Registration
Shares were registered under the Act and the rules and regulations
promulgated thereunder, any preliminary prospectus or final prospectus
contained therein or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the
<PAGE>
Page 3
circumstances under which they were made, not misleading; and (ii)
reimburse each Indemnified Party for any legal or any other expenses
reasonably incurred thereby in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in said registration statement, said preliminary prospectus,
said prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any
Indemnified Party specifically for use in the preparation thereof.
(b) Holder will (i) indemnify and hold harmless the Company and each other
person, if any, who controls the Company within the meaning of the Act, to
the fullest extent permitted by law, against any losses, claims, damage or
liabilities, joint or several, to which the Company or such controlling
person may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement
under which the Registration Shares were registered under the Act and the
rules and regulations promulgated thereunder, any preliminary prospectus or
final prospectus contained therein or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or any action or inaction of Holder in connection with
the resale of the Securities, and (ii) reimburse the Company and each other
person, if any, who controls the Company within the meaning of the Act or
any legal or other expenses reasonably incurred thereby in connection with
investigating or defending any such loss, claim, damage, liability or
action; in each case to the extent and only to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in said amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by Holder
specifically for use in the preparation thereof, provided, however, that
the aggregate liability of Holder to the Company or such controlling person
shall be limited to the net proceeds received by Holder from the sale of
Registration Shares covered by such Registration Statement.
(c) In addition to the indemnification provided in clauses (a) and
(b), each of the Company and Holder agrees to indemnify the other and
hold the other harmless from and against any and all loses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees)
which the other party may sustain or incur in connection with the
breach by the indemnifying party of any representations, warranty or
covenant made by in this agreement.
<PAGE>
Page 4
3. FORBEARANCE. Holder agrees to forebear from conversion of no more
than 1,250 Shares of Series E Preferred Stock until or after the date and
time of the effectiveness of the Registration Statement, provided that the
Registration Statement is filed on or before the Outside Filing Date and is
effective within 105 days of the date hereof (the "Outside Effectiveness
Date").
4. TERMINATION. The obligations of the parties hereunder will terminate
without liability to either party or the failure of the Company to file the
Registration Statement by the Outside Filing Date or of the Registration
Statement to become effective by the Outside Effectiveness Date.
Very truly yours,
FIRST PACIFIC NETWORKS, INC.
By: Kenneth W. Schneider
---------------------------
Title: Chief Financial Officer
------------------------
AGREED TO AND ACCEPTED
NEWSUN LIMITED
By: Raz Steinmetz
---------------------------
Title: By Proxy
------------------------
<PAGE>
EXHIBIT 5.1
September 11, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: FIRST PACIFIC NETWORKS, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
As legal counsel for First Pacific Networks, Inc., a Delaware corporation
(the "Company"), we are rendering this opinion in connection with the
preparation and filing of a registration statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended, of 4,601,010 shares of Common Stock, par value $.001 per
share (the "Common Stock"), issuable or potentially issuable by the Company upon
conversion of up to 2,500 shares of Series E Preferred Stock (the "Series E
Preferred Stock") of the Company and 1,500 shares of Series F Preferred Stock
(the "Series F Preferred Stock") of the Company (collectively the "Preferred
Shares") pursuant to respectively a Regulation S Subscription Agreement and a
Regulation D Subscription Agreement between the Company and certain investors
executing such Agreements and the Certificate of Designation of Series E
Preferred Stock and the Certificate of Designation of the Series F Preferred
Stock of the Company (collectively, the "Certificates of Designation").
We have examined such instruments, documents and records as we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion that the 4,601,010 shares
of Common Stock of the Company being registered pursuant to the Registration
Statement and to be sold by the selling stockholders are duly authorized shares
of Common Stock and, if and when issued upon conversion of the Preferred Shares
in accordance with the Certificates of Designation and cancellation of the
Preferred Shares, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above and the use of our name wherever it
appears in said Registration Statement.
This opinion is to be used only in connection with the issuance of the
Common Stock while the Registration Statement is in effect.
Respectfully submitted,
GRAY CARY WARE & FREIDENRICH
A Professional Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
First Pacific Networks, Inc. on Form S-3 of our reports, which include an
explanatory paragraph regarding the Company's ability to contiue as a going
concern, dated May 17, 1996 (except Note 15, as to which the date is June 20,
1996), on our audits of the consolidated financial statements and financial
statement schedule of First Pacific Networks, Inc. as of March 31, 1996 and 1995
and for each of the three years in the period ended March 31, 1996, appearing in
the 1996 Annual Report on Form 10K. We also consent to the reference to our
firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
San Jose, California
September 12, 1996
