As filed with the Securities and Exchange Commission on February 24, 1999
Registration No. 333-_______
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MULTI-LINK TELECOMMUNICATIONS, INC.
(Name of small business issuer in its charter)
Colorado 7389 84-1334687
--------------------- --------------------------- ------------------
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
Nigel V. Alexander
811 Lincoln Street, Suite 500 811 Lincoln Street, Suite 500
Denver, Colorado 80203 Denver, Colorado 80203
(303) 831-1977 (303) 831-1977
------------------------------------ -----------------------------------
(Address and telephone number of (Name, address and telephone number
principal executive offices and of agent for service)
address of principal place of business)
With Copies to:
Thomas S. Smith, Esq. Robert W. Walter, Esq.
Kevin J. Kanouff, Esq. Bradley A. Cromer, Esq.
Smith McCullough, P.C. Berliner Zisser Walter & Gallegos, P.C.
4643 South Ulster Street, Suite 900 1700 Lincoln Street, Suite 4700
Denver, Colorado 80237 Denver, Colorado 80203
(303) 221-6000 (303) 830-1700
Approximate date of proposed sale to the public:
As soon as practicable following the date on which the Registration
Statement becomes effective.
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. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities To Be Offering Price Aggregate Registration
To Be Registered Registered Per Unit(1) Offering Price Fee(1)
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<S> <C> <C> <C> <C>
Units Consisting of .......................................... 1,322,500 Units $ 6.00 $ 7,935,000 $ 2,206.00
(a) One Share of Common Stock ............................... 1,322,500 Shares
(b) One Warrant ............................................. 1,322,500 Warrants
Representative's Option for the Purchase of Units (3) ........ 1 Warrant $100.00 $ 100 $ 1.00
Units Underlying Representative's Option for the
Purchase of Units Consisting of (2)(4) ................... 115,000 Units $ 7.20 $ 828,000 $ 230.00
(a) One Share of Common Stock ............................... 115,000 Shares
(b) One Warrant ............................................. 115,000 Warrants
Common Stock (2)(5) .......................................... 718,750 Shares $ 9.00 $ 6,468,750 $ 1,799.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total ........................................................ $15,231,850 $ 4,236.00
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</TABLE>
(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee.
(2) In accordance with Rule 416 under the Securities Act of 1933, as amended, a
presently indeterminable number of shares of common stock are registered
hereunder which may be issued in the event provisions preventing dilution
become operative, as provided in the warrants and in the representative's
option for the purchase of units. No additional registration fee has been
paid for these shares of common stock.
(3) To be issued to the representative of the underwriters.
(4) Issuable upon exercise of the representative's option for the purchase of
units.
(5) Issuable upon exercise of the warrants, including the warrants contained in
the units underlying the representative's option for the purchase of units.
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, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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[Color graphic of three men on the telephone]
[Gatefold color graphic with five part schematic]
iii
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[RED HERRING LEGEND]
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with Securities and Exchange Commission becomes effective. This preliminary
prospectus is not an offer to sell these securities nor does it seek to buy
these securities in any jurisdictions where the offer or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 24, 1999
1,150,000 Units
MULTI-LINK TELECOMMUNICATIONS, INC.
1,150,000 Shares of Common Stock
and 1,150,000 Warrants
This is an initial public offering of units of Multi-Link
Telecommunications, Inc. The public offering price is $6.00 per unit. Each unit
consists of one share of common stock and one warrant. The common stock and
warrants are immediately separately transferable. There is currently no public
market for the common stock or warrants. The public offering price of the units
may not reflect the market prices of the common stock and warrants after the
offering.
Two warrants are exercisable to purchase one share of common stock for an
exercise price of $9.00 during the three years ending ---------, 2002, subject
to earlier redemption by Multi-Link under certain circumstances.
Multi-Link will list the common stock and warrants on The Nasdaq SmallCap
Market under the symbols "MLNK" and "MLNKW".
Investing in the units involves certain risks. See "Risk Factors" beginning on
page 7.
Per Unit Total
-------- -----
Public offering price $6.00 $6,900,000
Underwriting discounts and commissions $0.60 $ 690,000
Proceeds to Multi-Link $5.40 $6,210,000
The underwriters have a 45-day option to purchase an additional 172,500
units from Multi-Link.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The underwriters are offering the units subject to various conditions and
are severally underwriting the units being offered and expect to deliver the
units against payment on , 1999.
SCHNEIDER SECURITIES, INC.
Prospectus dated , 1999
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TABLE OF CONTENTS
Page
----
Prospectus Summary........................................................... 3
Risk Factors................................................................. 7
Additional Information....................................................... 12
Use of Proceeds.............................................................. 14
Dividend Policy.............................................................. 14
Dilution..................................................................... 15
Capitalization............................................................... 16
Selected Consolidated Financial Data......................................... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................... 18
Business..................................................................... 25
Management................................................................... 31
Principal Stockholders....................................................... 38
Description of Securities.................................................... 40
Shares Eligible for Future Sale.............................................. 43
Underwriting................................................................. 45
Legal Matters................................................................ 49
Experts...................................................................... 49
Index to Financial Statements................................................F-1
-------------------
Unless the context otherwise requires, as used herein the terms
"Multi-Link" and "Company" include Multi-Link's 97.5% owned subsidiary,
Multi-Link Communications, Inc.
-------------------
Some of the statements contained in this prospectus under "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" are forward-looking. They
include statements that involve risks and uncertainties that might adversely
affect Multi-Link's operating results in the future in a material way. Such
risks and uncertainties include:
o the availability and cost of future acquisitions;
o the effects of regional economic and market conditions on Multi-Link's
employee salaries and benefits and its ability to secure and keep
customers;
o increases in marketing and sales costs;
o intensity of competition for customers;
o costs of technologies; and
o and availability of financing.
Most of these risks are beyond Multi-Link's control. Actual results may differ
materially from those suggested by the forward-looking statements for various
reasons, including those discussed under "Risk Factors."
All share figures in this prospectus have been adjusted to reflect a 3
for 5 reverse split of Multi-Link's common stock that was effective on February
2, 1999. Unless otherwise stated, all information in this prospectus assumes no
exercise of the over-allotment option by the underwriters.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It is not complete and does not contain all of the information that you should
consider before investing in the units.
Multi-Link
Multi-Link provides integrated voice and fax messaging services for small
and medium sized businesses. These services enable businesses to improve the
handling of incoming calls and can be used with an automated attendant service
to replace receptionists. Multi-Link's voice messaging services can produce
improved efficiency and cost savings for the subscriber by offering
comprehensive voice messaging solutions. Multi-Link's integrated messaging
system:
[ ] provides personal mailboxes that can be linked to office, mobile and home
telephones, eliminating the need to check multiple mailboxes and providing
cost savings through the termination of multiple mailbox charges;
[ ] provides immediate notification to a subscriber's mobile phone or digital
pager that the subscriber has new messages;
[ ] automatically transfers important calls to the subscriber's office, mobile
telephone, pager and home phones to eliminate the need for callers to try
other numbers in an attempt to reach the subscriber; and
[ ] will soon offer a unified messaging service which will enable the
subscriber to receive voice, fax and Internet based e-mail messages in one
mailbox.
The local telephone companies, or "baby bells," have dominated the voice
messaging service industry over the last 20 years with an estimated 85% market
share in the United States. Management believes that recent developments in
voice and data messaging technology offer the opportunity for Multi-Link to
provide a service that is superior in both price and functionality compared to
the basic voice messaging services currently offered by the baby bells.
Multi-Link does not believe that the baby bells will offer certain technological
innovations in the near future because:
o changing messaging platforms might disrupt the baby bell's customer
base, creating possible customer attrition;
o providing a consolidated voice message service would reduce the baby
bells' revenue by reducing the overall number of voice mail boxes paid
for by their subscribers;
o the innovations will force the baby bells to connect with other
telecommunications companies, exposing their customers to competitive
carriers; and
o the complex nature of the services will require more support for the
baby bell's customers.
Multi-Link's target customers are small and medium sized businesses that
choose to subscribe to a messaging service rather than invest in their own
equipment. Multi-Link currently provides its voice messaging services to
approximately 5,000 businesses with approximately 16,000 individual users.
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Management estimates, based on an industry study, that the revenues of the
voice messaging services industry were approximately $2.67 billion in 1997 and
that the industry is highly fragmented with approximately 4,200 small businesses
across the United States providing voice messaging services. Multi-Link intends
to use a significant portion of the proceeds raised from this offering to
acquire voice messaging companies. Multi-Link believes that some of the 4,200
small businesses will be receptive to acquisition proposals because Multi-Link
could:
o offer an opportunity to realize a combination of liquidity and upside
potential through stock ownership;
o provide access to the capital necessary to acquire leading
technologies; and
o alleviate competitive pressures through access to greater marketing
resources and cost savings through centralized administration.
Multi-Link intends to provide its technology, capital and marketing resources to
each acquired business.
The principal components of Multi-Link's business strategy are to:
o increase its base of subscribers through sales by its growing network
of independent sales agents;
o provide an increasingly broad range of telecommunications services to
its customers, including Internet based e-mail and other Internet
related messaging services;
o acquire voice messaging companies in various geographic locations; and
o increase the number of independent sales agents selling its services.
Multi-Link's principal executive offices are 811 Lincoln Street, Suite 500,
Denver, Colorado 80203. Multi-Link's telephone number is (303) 831.1977 and its
facsimile number is (303) 831.1988. Multi-Link maintains a web site on the World
Wide Web at www.multilinkcom.com. The information on Multi-Link's web site is
not a part of this prospectus.
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The Offering
Securities offered ......... 1,150,000 units, each unit consisting of one
share of common stock and one warrant.
Warrant attributes ......... Two warrants are exercisable to purchase one
share of common stock for an exercise price of
$9.00 per share during the three years ending ,
2002, subject to Multi-Link's redemption rights.
Shares of common stock
to be outstanding after
the offering ............... 2,841,542 shares.
Dividend policy ............ Multi-Link does not intend to pay cash dividends.
Use of proceeds ............ Multi-Link estimates that it will receive
$5,745,000 in net proceeds. It expects to use the
net proceeds to repay debt, to fund acquisitions
and for working capital.
Multi-Link will receive additional net proceeds
of up to $900,450 if the underwriters exercise
their over-allotment option. Multi-Link intends
to use these proceeds for acquisitions and
working capital.
Risk factors .............. For a discussion of certain risks you should
consider before investing in the units, see "Risk
Factors."
Nasdaq SmallCap Market
symbols ................... MLNK and MLNKW.
In addition to the 2,841,542 shares of common stock to be outstanding after the
offering, Multi-Link may issue 575,000 shares of common stock on exercise of the
warrants included in the units and 468,500 shares of common stock on exercise of
currently outstanding options and warrants.
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Summary Consolidated Financial Data
The following table summarizes the financial data of Multi-Link's business.
The consolidated balance sheet data includes a column entitled "As Adjusted"
that reflects the sale of 1,150,000 units at an offering price of $6.00 per
unit, net of offering costs totaling $1,155,000. The row entitled "EBITDA"
reflects net income or loss plus depreciation, amortization and interest
expense, income taxes and other non-cash charges. EBITDA is not a measure of
financial performance under generally accepted accounting principles and should
not be considered a substitute for other financial measures of performance. You
should refer to the consolidated financial statements included elsewhere in this
prospectus for a more complete description of the financial condition of
Multi-Link.
<TABLE>
<CAPTION>
Consolidated Statements of Three Months
Operations and Comprehensive Year Ended September 30, Ended December 31,
Income (Loss) Data: ------------------------- ----------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues .......................................... $ 1,154,161 $ 1,859,276 $ 413,046 $ 512,714
Cost of services and products ........................... 348,413 371,391 92,933 95,994
Gross margin ............................................ 805,748 1,487,885 320,113 416,720
Total operating expenses ................................ 1,606,997 1,019,984 326,550 229,060
Income (loss) from operations ........................... (801,249) 467,901 (6,437) 187,660
Interest income (expense) ............................... (437,198) (635,518) (137,656) (103,134)
Net income (loss) and comprehensive
profit (loss) ......................................... (1,238,447) (167,617) (144,093) 84,526
Net income (loss) per share of
common stock - basic and diluted ...................... $ (0.89) $ (0.11) $ (0.10) $ 0.05
Weighted average common
stock outstanding - basic ............................. 1,392,568 1,496,905 1,490,698 1,632,325
- diluted ........................... 1,392,568 1,496,905 1,490,698 1,750,020
<CAPTION>
September 30, 1998 December 31, 1998
------------------ ----------------------
Actual As Adjusted
------ -----------
Consolidated Balance Sheet Data:
<S> <C> <C> <C>
Cash .................................................... $ 555,852 $ 188,574 $ 5,760,004
Working capital (deficit) ............................... (455,362) (45,406) 5,526,024
Total assets ............................................ 1,746,715 1,677,817 7,249,247
Long-term liabilities ................................... 2,469,872 2,415,291 2,241,721
Total stockholders' equity (deficit) .................... (1,838,655) (1,373,949) 4,371,051
<CAPTION>
Three Months
Year Ended September 30, Ended December 31,
----------------------- ------------------
1997 1998 1997 1998
---- ---- ---- ----
Other Information:
<S> <C> <C> <C> <C>
EBITDA (loss) ........................................... $ (734,306) $ 590,088 $ 15,181 $ 236,749
</TABLE>
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RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in the units.
Multi-Link has been operating its business only since February 1996
Multi-Link began voice messaging operations by completing an acquisition of
a voice messaging business in February 1996. Accordingly, Multi-Link has a
limited operating history upon which you may evaluate it. This limited operating
history makes predicting Multi-Link's future operating results difficult.
Multi-Link recently achieved profitability but its long-term success is not
assured
Multi-Link generated net income of $85,000 in the three months ended
December 31, 1998. Multi-Link has historically incurred net losses and has an
accumulated stockholders' deficit of $1.4 million. Although Multi-Link's
revenues have grown in recent periods, they may not continue to grow or even
continue at their current level. Multi-Link's expenses may increase in future
periods due to:
o goodwill and other amortized charges resulting from future
acquisitions, including acquisitions of subscriber accounts and
subscriber lists;
o planned equipment purchases; and
o increases in sales and marketing activities.
If any of these expenses are not accompanied by increased revenues,
Multi-Link's business, financial condition and operating results will be
materially adversely affected.
Multi-Link currently relies heavily on one independent sales agency
Approximately 86% of Multi-Link's sales are obtained through one
independent sales agency, Telcom Sales Associates, Inc., or "Telcom." The loss
of Telcom would adversely affect Multi-Link's future subscriber and revenue
growth in its current market. Multi-Link's agreement with Telcom is terminable
upon short notice and without cause. Such termination would materially adversely
affect Multi-Link's business, financial condition and operating results.
Multi-Link expects to continue to rely on independent sales agents to market its
services in the future
Multi-Link anticipates continuing to use independent sales agents to market
its services. The use of third parties to market its services may expose
Multi-Link to risks such as:
o increase in commissions or other compensation charged by independent
sales agents;
o inability to exercise control over the sales and marketing activities
of the independent sales agents; and
o termination of agreements with independent sales agencies on short
notice.
Multi-Link may be forced to adopt new and more costly methods of marketing
its services if the use of independent sales agents is ineffective.
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There is intense competition for voice messaging and related services
Multi-Link competes primarily with U S West, a baby bell, and expects to
compete with other national, regional and local telecommunications companies as
it expands. If Multi-Link is unable to compete successfully against its
competitors, its business, financial condition and operating results will be
adversely affected. Multi-Link's competitors may develop voice messaging
products or services that are superior to, or have greater market acceptance
than, Multi-Link's services. Most of Multi-Link's competitors have greater name
recognition and greater financial, marketing and other resources than
Multi-Link. This may place Multi-Link at a disadvantage in responding to its
competitors' pricing strategies, technological advances, advertising campaigns
and other initiatives.
Multi-Link depends on its voice messaging platforms to deliver services
Multi-Link depends on the efficient and uninterrupted operation of its
voice messaging platforms to deliver service to its customers. Any sustained
service interruption for customers could materially adversely affect its
business, financial condition and operating results. Multi-Link's facility was
struck by lightning in 1998, causing damage to the platforms and a temporary
disruption in Multi-Link's services. While the platforms were soon after
repaired and have since operated normally, this event resulted in a loss of
subscribers and a decrease in revenues. Service interruptions could result from
natural disasters as well as power loss, telecommunications failure and similar
events. Multi-Link's insurance may not provide sufficient coverage for these
events and its operating results could suffer if losses exceed Multi-Link's
coverage.
The voice messaging and related services market is characterized by rapid
technological change
Multi-Link's success depends on its ability to remain competitive in cost
and services provided. There can be no assurance that Multi-Link can acquire
superior technologies as needed. If Multi-Link is unable to successfully respond
to technological developments or acquire technologies in a cost effective way,
Multi-Link's business, financial condition and operating results will be
materially adversely affected. To be successful, Multi-Link must:
o continually improve its services on a cost-effective basis;
o develop and offer new features and services to meet customer needs;
and
o adopt Internet based messaging and other advanced technologies that
achieve widespread acceptance.
Multi-Link's success will depend in part on Multi-Link's ability to
purchase or license leading technologies necessary to remain competitive.
Licensing these technologies may require Multi-Link to pay royalties,
maintenance and other fees that reduce operating margins.
Multi-Link depends on U S West to provide interconnection to the public
telephone network
Multi-Link relies on U S West for interconnection to the public telephone
network. The inability of U S West to provide Multi-Link with interconnection
would materially adversely affect Multi-Link's business, financial condition and
operating results. In this event, Multi-Link would have to establish a new
connection to the public telephone network, possibly resulting in interrupted
service. Multi-Link could lose subscribers if such a disruption occurred.
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Restrictions imposed by Multi-Link's current loan agreement
The agreement between Multi-Link and its primary lender contains
restrictions on changes in Multi-Link's capitalization that are based on
comparisons between cash flow and liabilities. A violation of these restrictions
could accelerate Multi-Link's repayment obligation. Multi-Link must obtain the
prior written consent of its lender to:
o incur additional debt;
o make capital expenditures exceeding certain limits; and
o pay dividends.
Multi-Link may not have sufficient resources to repay the loan if it is
accelerated. Nonpayment of the loan allows the lender to foreclose on
Multi-Link's assets and would materially adversely affect Multi-Link's business.
Dependence on Multi-Link's key personnel
Multi-Link believes that its ability to successfully implement its business
strategy and to operate profitably depends on Nigel V. Alexander and Shawn B.
Stickle, both directors and officers, continuing to render their services to
Multi-Link. If Mr. Alexander or Mr. Stickle become unable or unwilling to
continue in their present positions, Multi-Link's growth, business and financial
results could be materially adversely affected. Multi-Link currently does not
have "key man" life insurance on either officer. Multi-Link intends to obtain
key man life insurance policies in the face amounts of $1,000,000 each on both
Mr. Alexander and Mr. Stickle within 90 days after this offering.
Multi-Link's expansion will require additional employees and technical personnel
Multi-Link plans to expand its employee base to manage its anticipated
growth. Competition for personnel, particularly for employees with technical
expertise, is intense. Multi-Link's business, financial condition and operating
results will be materially adversely affected if it cannot hire and retain
suitable personnel.
Multi-Link's business is subject to the effect of communications industry
regulations
Multi-Link is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally. Multi-Link's
suppliers are subject to varying degrees of federal, state and local regulation,
including by the Federal Communications Commission. The FCC has adopted
regulations that, among other things, set installation and equipment standards
for communications systems. Future regulations applicable to Multi-Link's
suppliers could be adopted by the FCC or other regulatory bodies. If these
regulations are adopted and adversely impact Multi-Link's suppliers, its
business, financial condition and operating results may be materially adversely
affected.
Multi-Link anticipates offering Internet based messaging services in the
future. There are currently few laws or regulations specifically addressing the
Internet. Due to the increasing use and growth of the Internet, it is possible
that such regulations may be adopted. This could require Multi-Link to make
significant expenditures or to modify any Internet based services it then
provides. Security breaches in Multi-Link's proposed Internet service that
result in unauthorized access to confidential information could damage
Multi-Link's reputation and expose it to a risk of loss or liability. Multi-Link
may be required to make significant investments to protect against or remedy
security breaches that may occur.
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Effectively managing Multi-Link's growth may be difficult
Multi-Link has grown and expects to continue to grow rapidly by acquiring
voice messaging companies and adding new services and subscribers. This growth
is likely to place a significant strain on Multi-Link's resources and systems.
To manage its growth, Multi-Link must continue to implement effective systems
and hire additional employees. Multi-Link cannot assure that its management will
be able to effectively or successfully manage its growth. Failure to manage this
growth could have a material adverse effect on Multi-Link's business, financial
position and operating results.
Multi-Link's acquisition strategy has certain risks
Multi-Link's acquisition strategy is subject to the following risks:
o Multi-Link may be unsuccessful in identifying suitable acquisition
candidates available for sale at reasonable prices;
o Multi-Link may be unable to consummate any acquisition or successfully
integrate services and personnel of any acquisition into its
operations;
o acquisitions may cause a disruption in Multi-Link's ongoing business,
distract its management and require additional resources;
o Multi-Link may acquire companies in markets in which it has little
experience;
o acquisitions could result in amortization of goodwill or other
expenses that adversely affect operating results;
o Multi-Link may incur debt or issue equity securities to pay for
acquisitions, resulting in additional interest expense or dilution to
existing shareholders; and
o Multi-Link's acquisitions may not result in any return on its
investment and Multi-Link could lose its entire investment in such
acquisitions.
Multi-Link will require additional equipment financing
Multi-Link expects to purchase additional voice messaging platforms and
accompanying software licenses. If financing for these purchases is unavailable
or is not available at an acceptable cost, Multi-Link's anticipated growth would
be materially adversely affected.
Multi-Link's suppliers may not be Year 2000 compliant
Multi-Link relies on certain suppliers to provide its voice messaging
service. A regional or national failure in the telephone network or power grid
would prevent Multi-Link from servicing its customers and generating revenues.
Such failure would materially adversely affect Multi-Link's business, financial
condition and operating results. Multi-Link has no contingency plan for
occurrence of these events.
Shares eligible for future sale
The market price of the common stock could decrease as a result of a large
number of shares of common stock being available for sale after the offering.
These sales could also make it more difficult for Multi-Link to raise funds
through future offerings. The 1,691,542 shares of Multi-Link's common stock
10
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outstanding prior to the offering are subject to certain resale restrictions
under the securities laws. Holders of these shares have agreed that they will
not sell such securities without the consent of the representative of the
underwriters until at least 12 months after the date of this prospectus.
Multi-Link's warrants are subject to applicable securities laws as well as
redemption
You will own one warrant for each unit purchased. You may purchase one
share of common stock through the exercise of two warrants on payment of the
$9.00 exercise price. You may only exercise your warrants if a registration
statement relating to the common stock underlying the warrants is then in effect
and Multi-Link has complied with applicable state securities laws. Multi-Link
may be unsuccessful in maintaining a current registration statement covering the
common stock underlying the warrants. You may be unable to exercise the warrants
for this or other reasons. Your warrants may also be redeemed by Multi-Link
under certain circumstances. Your warrants may be exercised during the notice
period prior to the date of redemption. If you do not exercise your warrants
prior to the redemption date, you will only be entitled to receive the
redemption price of $0.05 per warrant.
Anti-takeover provisions and the right to issue preferred stock could make a
third party acquisition of Multi-Link difficult
Anti-takeover provisions in Multi-Link's charter documents and under
applicable law could make it more difficult for a third party to acquire control
of it, even if such change in control would be beneficial to stockholders.
Multi-Link's restated articles of incorporation provide that its board of
directors may issue preferred stock without stockholder approval. In addition,
Multi-Link's bylaws provide for a classified board, with each board member
serving staggered terms. The issuance of preferred stock and the existence of a
classified board could make it more difficult for a third-party to acquire
Multi-Link.
Multi-Link's securities have never been publicly traded
There has not been a public market for Multi-Link's securities. Multi-Link
cannot predict the extent to which a trading market will develop or how liquid
that market might become. The initial public offering price has been determined
by negotiations between the representative of the underwriters and Multi-Link
and may not be indicative of prices that will prevail in the trading market.
Multi-Link's securities' prices are likely to be highly volatile
The market prices of Multi-Link's common stock and warrants are likely to
be highly volatile. Investors may not be able to resell their common stock and
warrants following periods of volatility because of the market's adverse
reaction to such volatility. The trading prices of many technology stocks have
reached historical highs within the last 52 weeks and reflect relative
valuations substantially above historical levels. During the same period, such
companies' stocks have also been highly volatile and have recorded lows well
below such historical highs. Multi-Link cannot assure you that its securities
will trade at the same levels of other telecommunications related stocks in
general or that Multi-Link's common stock and warrants will sustain the initial
offering price of the units. Factors that could cause such volatility may
include:
o actual or anticipated variations in Multi-Link's quarterly operating
results;
o announcements of technological innovations in the telecommunications
and voice messaging industry;
o development of new sales channels or new products or services;
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o changes in financial estimates by securities analysts;
o conditions or trends in the telecommunications or voice messaging
industry;
o changes in the market valuations of other telecommunications or voice
messaging companies;
o announcements by Multi-Link or its competitors of significant
acquisitions;
o capital commitments by Multi-Link;
o additions or departures of Multi-Link's key personnel; and
o sales of common stock by Multi-Link's current stockholders.
Many of these factors are beyond Multi-Link's control. These factors may
materially adversely affect the market price of Multi-Link's common stock and
warrants, regardless of Multi-Link's operating performance.
The offering will benefit Multi-Link's current stockholders who will continue to
exercise control
Multi-Link's current stockholders, including members of management, will
recognize significant benefits from the offering. These benefits include the
creation of a public market for common stock which will afford existing
stockholders the ability to liquidate their investments, subject, in certain
cases, to volume limitations and other restrictions upon the sale of the common
stock, including applicable lock-up arrangements. The amounts previously paid
for common stock by the executive officers and directors of Multi-Link is less
than the offering price of the common stock and warrants. Further, the use of
proceeds from this offering to repay debt will benefit two officers and
directors that provided personal guarantees to the lender. See "Management -
Certain Transactions" for a description of the debt and personal guarantees.
Potential for non-public sales of securities
In order to raise additional working capital, Multi-Link could make a
limited number of offers and sales of its common stock to qualified investors in
transactions that are exempt from registration under the securities laws. Such
purchasers may acquire Multi-Link's securities on terms more favorable than
offered to you. The price may not relate to any ascertainable criterion of
value, including the prevailing market price. Multi-Link may make sales of its
securities at a lower price than that of the units.
ADDITIONAL INFORMATION
Multi-Link has filed with the SEC a registration statement under the
Securities Act of 1933, as amended, with respect to the securities offered. This
prospectus, filed as part of the registration statement, omits certain
information contained in the registration statement in accordance with the rules
and regulations of the SEC. For further information, reference is hereby made to
the registration statement and to the exhibits filed therewith, which may be
inspected without charge at the principal office of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of the material contained therein may be
obtained from the SEC upon payment of applicable copying charges. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance you should refer to
the copy of such contract or other document filed as an exhibit to the
registration statement.
12
<PAGE>
On completion of this offering, Multi-Link will be subject to the reporting
and other informational requirements of the Securities Exchange Act of 1934 Act,
as amended, and will file reports and other information with the SEC. Such
reports, proxy statements and other information, once filed by Multi-Link, can
be inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the SEC's regional offices at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New
York, New York 10048. Information on the operations of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
Web site on the Internet that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC.
The address of such site is http:/www.sec.gov.
Multi-Link intends to furnish annual reports to stockholders containing
audited financial statements and will also make available quarterly reports and
such other periodic reports as it may determine to be appropriate or as may be
required by law.
13
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the units are estimated to be
approximately $5,745,000 ($6,645,450 if the underwriters' over-allotment option
is fully exercised).
The primary purpose of this offering is to provide additional capital to
support Multi-Link's expansion strategy. Multi-Link intends to use approximately
$5,000,000 of the net proceeds from this offering to fund the cost of acquiring
voice messaging businesses, including the cost of acquiring upgraded equipment
and software and to fund marketing expenditures for the acquired businesses.
Multi-Link has no present commitments, agreements or understandings with respect
to any such acquisitions. See "Business - Industry Consolidation and Geographic
Expansion Strategy" for a description of Multi-Link's expansion strategy.
Multi-Link intends to use approximately $173,000 of the net proceeds of
this offering to repay indebtedness owed to CS Capital Corp. or "CS Capital."
The indebtedness to be repaid was used by Multi-Link for working capital and is
evidenced by a promissory note that bears interest at a rate of 15% per annum
until September 30, 1999, at which time the interest rate will increase to 25%
per annum. The note requires interest payments only with the principal balance
due on the earlier of June 30, 2001 or completion of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Management - Certain Transactions" for more detailed
descriptions of this loan. Multi-Link expects to use the remaining net proceeds
of approximately $572,000 from this offering as working capital. If the
over-allotment option is exercised by the underwriters or if warrants are
exercised, Multi-Link will allocate additional amounts to acquisitions and
working capital.
The foregoing represents Multi-Link's best estimate of the uses of the net
proceeds to be received in this offering, based on current planning and business
conditions. However, Multi-Link reserves the right to change such uses when and
if market conditions or unexpected changes in operating conditions or results of
operations occur. The amounts actually expended for each use may vary
significantly depending upon a number of factors including, but not limited to,
future acquisitions and the amount of cash generated by Multi-Link's operations.
Multi-Link believes that its existing capital resources and the net proceeds of
this offering will be sufficient to maintain its current and planned operations
for a period of at least 12 months from the date of this Prospectus. Net
proceeds not immediately required for the purposes described above will be
invested principally in investment grade, interest-bearing securities.
DIVIDEND POLICY
Multi-Link has never declared or paid any dividends or distributions on its
common stock. The amount of cash dividends that Multi-Link may pay without the
consent of its primary lender is limited by Multi-Link's loan agreement.
Multi-Link anticipates that for the foreseeable future all earnings will be
retained for use in Multi-Link's business and no cash dividends will be paid to
stockholders. Any payment of cash dividends in the future on the common stock
will be dependent upon Multi-Link's financial condition, results of operations,
current and anticipated cash requirements, plans for expansion, restrictions, if
any, under debt obligations, as well as other factors that the board of
directors deems relevant.
14
<PAGE>
DILUTION
As of December 31, 1998, Multi-Link had a net tangible book value (deficit)
of $(1,771,853) or $(1.05) per share of common stock. After giving effect to the
sale of the 1,150,000 units offered hereby at an offering price of $6.00 per
unit, the pro forma net tangible book value of Multi-Link as of December 31,
1998, would have been $4,013,967 or $1.41 per share of common stock. This amount
represents an immediate increase in pro forma net tangible book value of $2.46
per share of common stock to the existing holders of common stock and an
immediate dilution of $4.59 per share of common stock to new investors. For
purposes of dilution, all of the offering price of a unit has been attributed to
the common stock and none of the offering price has been attributed to the
warrants. "Dilution" is determined by subtracting pro forma net tangible book
value per share of common stock after the offering from the offering price per
share of common stock, as illustrated by the following table:
Public offering price per share of common stock $ 6.00
Net tangible book value (deficit) per share of common
stock as of December 31, 1998 $ (1.05)
Increase in pro forma net tangible book value per share
of common stock attributable to new investors 2.46
-----
Pro forma net tangible book value per share of common
stock after the offering 1.41
-----
Dilution per share of common stock to new investors $ 4.59
=====
The following table sets forth as of December 31, 1998, the number of
shares of common stock acquired, the total cash consideration paid and the
average cash price per share of common stock paid to Multi-Link by Multi-Link's
existing shareholders and by new investors (assuming the sale of 1,150,000 units
at $6.00 per unit, before deduction of underwriting discounts and commissions
and other estimated offering expenses):
<TABLE>
<CAPTION>
Shares Purchased Cash Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders .......... 1,691,542 59.53% $ 955,000 12.16% $ 0.56
New investors .................. 1,150,000 40.47 6,900,000 87.84 6.00
---------- ------ --------- ------
Total ..................... 2,841,542 100.00% $7,855,000 100.00%
========== ====== ========= ======
</TABLE>
The foregoing information assumes no exercise of the warrants included in
the units, no exercise of currently outstanding options and warrants and no
exercise of the representative's option for the purchase of units. See
"Management--Stock Option Plan," "Description of Securities" and "Underwriting"
for more in depth descriptions of these options and warrants. To the extent that
currently outstanding options or warrants are exercised at prices below $6.00
per share, there will be further dilution to new investors.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Multi-Link as of
December 31, 1998, and as adjusted for the sale of the 1,150,000 units offered
at an offering price of $ 6.00 per unit (after deducting underwriting discounts
and commissions and estimated offering expenses) and excludes:
o 468,500 shares of common stock issuable on exercise of outstanding
options and warrants;
o 575,000 shares of common stock issuable on exercise of the warrants
included in the units; and
o 115,000 units issuable on exercise of the representative's option.
<TABLE>
<CAPTION>
December 31, 1998
--------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Long term debt (net of current portion) ................................. $2,415,291 $2,241,721
========== ==========
Stockholders' equity:
Preferred stock, par value $.01 per share;
5,000,000 shares authorized; no shares
issued or outstanding, as adjusted ........................... $ 0 $ 0
Common stock, no par value;
20,000,000 shares authorized; 1,691,542
shares issued and outstanding, 2,841,542
shares issued and outstanding, as adjusted ................... 822,771 6,567,771
Accumulated deficit .......................................... (2,196,720) (2,196,720)
----------- ----------
Total stockholders' equity (deficit) ......................... $(1,373,949) $ 4,371,051
=========== ==========
</TABLE>
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and the notes thereto included elsewhere
in this prospectus. The information in the table is derived from the
consolidated financial statements audited by HEIN + ASSOCIATES LLP, independent
auditors, for the year ended September 30, 1998 and for the year ended September
30, 1997 by James E. Scheifley & Associates, PC, independent auditors. The data
for the three months ended December 31, 1998 include, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of Multi-Link's financial position at those
dates and results of operations for those periods. The results of operations for
the three months ended December 31, 1998 are not necessarily indicative of the
results to be expected for the full year or future periods.
<TABLE>
<CAPTION>
Consolidated Statements of Three Months
Operations and Comprehensive Year Ended September 30, Ended December 31,
Income (Loss) Data: ----------------------- -------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues .......................................... $ 1,154,161 $ 1,859,276 $ 413,046 $ 512,714
Cost of services and products ........................... 348,413 371,391 92,933 95,994
Gross margin ............................................ 805,748 1,487,885 320,113 416,720
Total operating expenses ................................ 1,606,997 1,019,984 326,550 229,060
Income (loss) from operations ........................... (801,249) 467,901 (6,437) 187,660
Interest income (expense) ............................... (437,198) (635,518) (137,656) (103,134)
Net income (loss) and comprehensive
profit (loss) ......................................... (1,238,447) (167,617) (144,093) 84,526
Net income (loss) per share of
common stock - basic and diluted ...................... (0.89) (0.11) (0.10) 0.05
Weighted average common
stock outstanding - basic ............................. 1,392,568 1,496,905 1,490,698 1,632,325
- diluted ........................... 1,392,568 1,496,905 1,490,698 1,750,020
<CAPTION>
September 30, 1998 December 31, 1998
------------------ ----------------------
Actual As Adjusted
Consolidated Balance Sheet Data: ----- -----------
<S> <C> <C> <C>
Cash .................................................... $ 555,852 $ 188,574 $ 5,760,004
Working capital (deficit) ............................... (455,362) (45,406) 5,526,024
Total assets ............................................ 1,746,715 1,677,817 7,249,247
Long-term liabilities ................................... 2,469,872 2,415,291 2,241,721
Total stockholders' equity (deficit) .................... (1,838,655) (1,373,949) 4,371,051
<CAPTION>
Three Months
Year Ended September 30, Ended December 31,
----------------------- ------------------
1997 1998 1997 1998
---- ---- ---- ----
Other Information:
<S> <C> <C> <C> <C>
EBITDA (loss) ........................................... $ (734,306) $ 590,088 $ 15,181 $ 236,749
</TABLE>
The "As Adjusted" column in the foregoing table reflects the sale of
1,150,000 units at an offering price of $6.00 per unit net of offering costs.
"EBITDA" is defined as net income or loss plus depreciation, amortization and
interest expense, income taxes and other non-cash charges. EBITDA is not a
measure of financial performance under generally accepted accounting principles
and should not be considered a substitute for other financial measures of
performance.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto and the other financial
information included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Multi-Link's
actual results could differ materially from those anticipated in these forward
looking statements as a result of any number of factors, including those set
forth under "Risk Factors" and elsewhere in this prospectus.
Overview
Multi-Link provides integrated voice and fax messaging services for small
and medium sized businesses to improve the handling of incoming calls.
Multi-Link's automated attendant services can be used to replace receptionists
and can produce improved efficiency and cost savings for the subscriber.
Multi-Link's revenues are primarily derived from receiving fixed monthly
service fees, installation and set-up charges and sales of ancillary
telecommunications services such as paging. Multi-Link recognizes revenues as it
delivers services. Annual prepayments by subscribers are recognized over the
period covered by the prepayment on a straight-line basis.
Multi-Link's primary costs of delivering its voice messaging services to
its subscribers are its voice messaging platforms, maintenance costs and the
interconnection costs to the U S West network. Most of Multi-Link's general and
administrative expenses are incurred in the processing and servicing of new
subscriber accounts.
From inception through December 31, 1997, Multi-Link sold voice messaging
services to businesses through an in-house sales force. All salaries and
commissions associated with Multi-Link's in-house sales force were expensed as
incurred. On December 31, 1997, the in-house sales operations were closed and
Multi-Link began selling through independent sales agents. All commissions paid
to independent agents for procuring subscribers are capitalized and amortized.
Multi-Link's policy is to amortize subscriber account acquisition costs over the
estimated economic life of subscriber accounts or 36 months, whichever is less.
To determine the economic life of subscriber accounts, Multi-Link analyzes the
net reduction in the total amount billed to its existing subscribers each month.
The calculation includes service reductions and service increases to existing
subscribers but excludes new subscriber contracts or subscriber lists purchased
during the period. This enables Multi-Link to project the average subscriber
life across the total existing subscriber base. During fiscal 1998 Multi-Link
experienced an average attrition rate of 1.21% per month, indicating a projected
life of the subscriber portfolio of 82 months. Multi-Link currently amortizes
subscriber account acquisition costs over 36 months.
From inception through September 1998, Multi-Link financed its net losses
through factoring of customer contracts and working capital loans provided by CS
Capital at implied interest rates of up to 52% per annum. In September 1998,
Multi-Link refinanced most of its indebtedness to CS Capital with a five-year
term loan. The new loan has an interest rate of 3% per annum over the prime
rate. As a result, Multi-Link should experience significantly lower interest
expense in fiscal 1999 than in prior years.
Multi-Link plans to continue to increase its revenues by increasing the
number of independent sales agents that offer Multi-Link's voice messaging
services, by increasing the range of telecommunications services offered by
Multi-Link to its subscribers and by acquiring companies involved in the voice
messaging industry. After completing such any such acquisition, Multi-Link plans
to convert the operations of the acquired company to conform to the business
model currently used by Multi-Link, where economically feasible.
18
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship to net revenues of certain items in Multi-Link's consolidated
statements of operations and comprehensive income (loss):
<TABLE>
<CAPTION>
Year Ended Year Ended Quarter Ended Quarter Ended
September 30, September 30, December 31, December 31,
1997 1998 1997 1998
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net Revenues ..................................... 100.0% 100.0% 100.0% 100.0%
Cost of services and products .................... 30.2% 20.0% 22.5% 18.7%
------ ------ ------ ------
Gross margin ..................................... 69.8% 80.0% 77.5% 81.3%
Sales and advertising expense .................... 60.0% 8.4% 27.8% 2.0%
General and administrative expense ............... 73.4% 39.9% 46.1% 33.2%
Depreciation expense ............................. 5.4% 4.3% 4.9% 4.2%
Amortization expense ............................. 0.4% 2.2% 0.3% 5.3%
Total operating expenses ......................... 139.2% 54.8% 79.1% 44.7%
------ ------ ------ ------
Income (loss) from operations .................... (69.4%) 25.2% (1.6%) 36.6%
Interest income (expense) ........................ (37.9%) (34.2%) (33.3%) (20.1%)
------ ------ ------ ------
Net income (loss) and comprehen-
sive income (loss) ............................... (107.3%) (9.0%) (34.9%) 16.5%
====== ====== ====== ======
EBITDA ........................................... (63.7%) 31.7% 3.7% 46.2%
====== ====== ====== ======
</TABLE>
Quarter ended December 31, 1998 compared to quarter ended December 31, 1997.
Net Revenues. Net revenues for the quarter ended December 31, 1998 were
$513,000 compared to $413,000 for the quarter ended December 31, 1997, an
increase of approximately 24%. This increase reflects the steady net growth in
Multi-Link's base of customers.
Cost of Services and Products. Cost of services and products for the
quarter ended December 31, 1998 was $96,000 compared to $93,000 for the quarter
ended December 31, 1997, an increase of 3%. The relative stability of cost of
services and products in relation to the 24% growth in revenues resulted from
operating a network with excess capacity in 1997 and which required only minimal
additional expenditures to provide service for a greater number of customers in
1998.
Gross Profit Margin. Gross profit margin for the quarter ended December 31,
1998 was $417,000 compared to $320,000 for the quarter ended December 31, 1997,
an increase of 30%. The gross profit margin as a percentage of net revenues
increased from 78% to 81%. This increase in gross profit margin resulted from
achieving higher revenues from the same network capacity resulting in more
efficient utilization of fixed asset infrastructure.
Sales and Advertising Expenses. Sales and advertising expenses for the
quarter ended December 31, 1998 were $10,000 compared to $115,000 for the
quarter ended December 31, 1997, a decrease of 91%. This resulted from the
closure of Multi-Link's in-house sales and telemarketing operations on December
31, 1997 when Multi-Link began procuring subscriber accounts from independent
sales agencies and capitalizing the cost of acquiring such subscriber accounts.
General and Administrative Expenses. General and administrative expenses
for the quarter ended December 31, 1998 were $170,000 compared to $190,000 for
the quarter ended December 31, 1997, a decrease of 11%. This decrease was due
primarily to lower professional fees.
19
<PAGE>
Depreciation. Depreciation expense increased to $22,000 for the quarter
ended December 31, 1998 from $20,000 for the quarter ended December 31, 1997.
This increase was due to an increase in fixed assets.
Amortization. Amortization of subscriber accounts and goodwill was $27,000
for the quarter ended December 31, 1998 compared to $1,000 for the same period
in 1997. Amortization expense associated with subscriber accounts was first
incurred in 1998 after Multi-Link commenced procuring subscriber accounts
through the base of independent sales agencies as previously described.
Income (Loss) from Operations. The income from operations was $188,000 for
the quarter ended December 31, 1998 compared to a loss from operations of
$(6,000) for the quarter ended December 31, 1997, due to the factors discussed
above.
Interest Income (Expense). Multi-Link's interest income (expense) decreased
to $(103,000) for the quarter ended December 31, 1998 from $(138,000) for the
quarter ended December 31, 1997, a decrease of 25%. Although Multi-Link's total
indebtedness in 1998 was higher than in 1997, the refinancing of most of
Multi-Link's high interest debt with a term loan at a substantially lower rate
of interest caused a reduction in the total interest expense. See "Management -
Certain Transactions."
Net Income (Loss) and Comprehensive Income (Loss). Multi-Link realized net
income of $85,000 for the quarter ended December 31, 1998 compared to a net loss
of $(144,000) for the quarter ended December 31, 1997 due to the factors
outlined above. The net loss and comprehensive loss were the same for the
quarters presented. Multi-Link's net income for the quarter ended December 31,
1998 does not reflect an income tax provision because of the utilization of net
operating loss carryforwards.
Year ended September 30, 1998 compared to year ended September 30, 1997.
Net Revenues. Revenues for the year ended September 30, 1998 were
$1,859,000, compared to $1,154,000 for the year ended September 30, 1997, an
increase of 61%. This increase reflects the steady net growth in Multi-Link's
base of customers.
Cost of Services and Products. Cost of services and products for the year
ended September 30, 1998 was $371,000, compared to $348,000 for the year ended
September 30, 1997, an increase of 7%. The relative stability of cost of
services and products in relation to the 61% growth in revenues resulted from
operating a network with excess capacity in 1997 which required only minimal
additional expenditures to provide service for a greater number of customers in
1998.
Gross Profit Margin. Gross profit margin for the year ended September 30,
1998 was $1,488,000 compared to $806,000 for the year ended September 30, 1997,
an increase of 85%. The gross profit margin as a percentage of net revenues
increased from 70% to 80%. The increase in gross profit margin resulted from
achieving higher revenues from the same network capacity resulting in more
efficient utilization of fixed asset infrastructure.
Sales and Advertising Expense. Sales and advertising expenses for the year
ended September 30, 1998 were $155,000 compared to $692,000 for the year ended
September 30, 1997, a decrease of 78%. This resulted from the closure of
Multi-Link's in-house sales and telemarketing operations on December 31, 1997
when Multi-Link began procuring subscriber accounts from independent sales
agencies and capitalizing the cost of acquiring such subscriber accounts.
General and Administrative Expenses. General and administrative expenses
for year ended September 30, 1998 were $743,000 compared to $848,000 for the
year ended September 30, 1997. This decrease of 12% was due to a reduction in
personnel expenses during 1998.
20
<PAGE>
Depreciation of Equipment. Depreciation expense in the year ended September
30, 1998 was $81,000 compared to $62,000 for the year ended September 30, 1997.
This increase of 31% was due to increased fixed assets.
Amortization. Amortization of subscriber accounts and goodwill was $42,000
for the year ended September 30, 1998 compared to $5,000 for the year ended
September 30, 1997. Amortization expense associated with subscriber accounts was
first incurred in 1998 after Multi-Link commenced procuring subscriber accounts
through the base of independent sales agents as previously described.
Income (Loss) from Operations. The income from operations was $468,000 for
the year ended September 30, 1998 compared to an operating loss of $(801,000)
for the year ended September 30, 1997, due to the factors discussed above.
Interest Income (Expense). Interest income (expense) for the year ended
September 30, 1998 was $(636,000), compared to $(437,000) for the year ended
September 30, 1997, an increase of 46%. The increase is attributable to an
increase in outstanding borrowings.
Net Income (Loss) and Comprehensive Income (Loss). Multi-Link incurred a
net loss of $(168,000) for the year ended September 30, 1998, compared to a net
loss of $(1,238,000) for the year ended December 31, 1997, a decrease of 86% due
to the factors outlined above. The net loss and comprehensive loss were the same
for fiscal 1998 and 1997.
Liquidity and Capital Resources
General
Multi-Link has historically had two primary needs for cash: investment in
the equipment necessary to deliver its voice messaging services and the
financing of start-up losses until revenues exceed expenses.
Equipment Financing
Multi-Link paid for its voice messaging equipment with long term financing
provided by Associates Capital Corporation of Illinois. All loans were arranged
on Multi-Link's behalf by Glenayre, the manufacturer of the equipment. The loans
are repayable monthly over a five-year term with interest at the rate of 12.7%
per annum and are guaranteed by two of Multi-Link's directors and officers.
Currently, monthly payments on the voice messaging platforms are approximately
$18,000. Multi-Link was current on all loan obligations as of December 31, 1998.
Financing of Operations
From inception through September 1998, Multi-Link financed its operations
from equity contributions, loans from several stockholders, deferred executive
compensation, a factoring facility and several working capital loans.
In September 1998, Multi-Link obtained a $2.1 million, five-year senior
term loan facility from Westburg Media Capital LP or "Westburg." Multi-Link used
the proceeds of this facility to repay substantially all of the working capital
loans, deferred executive compensation and all but $173,000 of the indebtedness
to CS Capital. The loan from Westburg bears interest at the rate of 3% per annum
over a prime rate and is guaranteed by two of Multi-Link's directors and
officers. The loan is collateralized by 960,000 shares of common stock pledged
by certain stockholders and substantially all of the assets of Multi-Link. The
loan requires monthly payments of interest only (currently $18,000 per month)
until October 1999, when regular repayments of $26,900 per month, including
interest, commence on the basis of a ten-year amortization schedule. All
21
<PAGE>
outstanding balances are repayable on October 31, 2003. Under the terms of the
loan, Multi-Link's ratio of debt to annualized cash flow may not exceed 3 to 1
and Multi-Link's ratio of annualized cash flow to interest, principal repayments
and taxes may not be less than 1.25 to 1. Additionally, the loan has certain
other restrictions including limits on total indebtedness, limits on capital
expenditures and prohibitions on the payment of dividends.
As of December 31, 1998, Multi-Link is current on its obligations to all
lenders and in compliance with all debt covenants.
Cash Flow Information
For the three months ended December 31, 1997 and 1998 net cash used in
operations was approximately $(115,000) and $(190,000), respectively. Net cash
used in investing activities during the three months ended December 31, 1998,
was $304,000, up from $0 for the prior period. Expenditure for fixed assets and
intangibles increased $99,000 during the three months ended December 31, 1998
from $0 for the prior period. Additionally, Multi-Link advanced approximately
$204,000 to Telcom Sales Associates, Inc. during the three months ended December
31, 1998 that was paid back in February 1999. During the three months ended
December 31, 1997 and 1998, cash from financing activities included borrowings
of $561,000 and $229,000, respectively, before note payable payments of $444,000
and $494,000 for the same respective periods. Additionally, net cash from
financing activities included net proceeds of $397,000 from the sale of common
stock during the three months ended December 1998.
For the year ended September 30, 1997 and 1998, net cash used in operations
was approximately $(967,000) and $(109,000), respectively. Net cash used in
investing activities in the year ended September 30, 1998 for the purchase of
fixed assets and intangibles was $(266,000) compared to $(38,000) in the prior
year. During the year ended September 30, 1997 and 1998, cash from financing
activities included borrowings of $1,379,000 and $2,871,000, respectively,
before note payable payments of $380,000 and $1,795,000 for the same respective
periods.
Future Liquidity Considerations
As of December 31, 1998, Multi-Link had a cash balance of $189,000 and had
$150,000 available for drawing under the loan from Westburg. Upon completion of
this offering Multi-Link will receive minimum net proceeds of approximately
$5,745,000. Approximately $173,000 of the proceeds will be used to repay the
remaining indebtedness owed to CS Capital. Multi-Link intends to use the balance
for the acquisition of voice messaging companies and working capital. Multi-Link
may pay for such acquisitions by using a portion of the net proceeds of this
offering and by issuing debt and/or equity securities of Multi-Link. Multi-Link
has no present commitments, agreement or understandings with respect to any
acquisitions.
Multi-Link plans to purchase approximately $500,000 worth of additional
voice messaging equipment in the next 12 months. As Multi-Link expands to new
geographic markets, it will purchase this additional voice messaging equipment.
It is Multi-Link's intention to seek five year debt financing for all equipment
purchases. Although there are no assurances, management believes that such
financing will be available on terms no less favorable than Multi-Link has
obtained in the past.
Management anticipates that the net proceeds from this offering, together
with internally generated funds from operations, will be sufficient to meet
Multi-Link's presently projected cash and working capital requirements for the
next 12 months. Pending use of the proceeds, Multi-Link intends to invest the
net proceeds of the offering in investment grade, interest-bearing securities.
See "Use of Proceeds" for a more detailed discussion of Multi-Link's expected
use of proceeds.
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Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise and Related Information" ("Statement 131"), which is effective
for financial statements with fiscal years beginning after December 15, 1997.
Statement 131 requires that public business enterprises report certain
information about operating segments in complete sets of financial statements of
the enterprise and in condensed financial statements of interim periods issued
to stockholders. Statement 131 also requires that public business enterprises
report certain information about their products and services, the geographic
areas in which they operate and their major customers.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("Statement 132"), which revises employers' disclosures
about pension and other postretirement benefit plans. Statement 132 does not
change the measurement or recognition of those plans, but requires additional
information on changes in benefit obligations and fair values of plan assets and
eliminates certain disclosures previously required by SFAS Nos. 87, 88 and 106.
Statement 132 is effective for financial statements with fiscal years beginning
after December 15, 1997.
During June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Statement 133 establishes new
standards by which derivative financial instruments must be recognized in an
entity's financial statements. Besides requiring derivatives to be included on
balance sheets at fair value, Statement 133 generally requires that gains and
losses from later changes in a derivative's fair value be recognized currently
in earnings. Statement 133 also unifies qualifying criteria for hedges involving
all kinds of derivatives, requiring that a company document, designate and
assess the effectiveness of its hedges. Statement 133 is required to be adopted
by Multi-Link in 2000.
Multi-Link has not determined what additional disclosures, if any, may be
required by the provisions of Statements 131, 132, and 133 but does not expect
adoption of these statements to have a material effect on its results of
operations or consolidated financial position.
Effects of Inflation
Although Multi-Link cannot accurately anticipate the effect of inflation on
its operations, Multi-Link does not believe that inflation has had, or is likely
in the future to have, a material effect on its operating results or financial
condition.
Year 2000 Issue
Many computer systems, software applications and other electronics
currently in use worldwide are programmed to accept only two digits in the
portion of the date field, which designates the year. The "Year 2000 problem"
arises because these systems and products cannot properly distinguish between a
year that begins with "20" and the familiar "19." If these systems and products
are not modified or replaced, many will fail, create erroneous results and/or
may cause interfacing systems to fail.
Year 2000 compliance issues are of particular importance to Multi-Link
since its operations rely heavily upon computer systems, software applications
and other electronics containing date-sensitive embedded technology. Some of
these technologies were internally developed and others are standard, purchased
systems which may or may not have been customized for Multi-Link's particular
application. Multi-Link also relies heavily upon various vendors and suppliers
that are themselves very reliant on computer systems, software applications and
other electronics containing date sensitive embedded technology. These vendors
and suppliers include:
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o Glenayre, the manufacturer and supplier of Multi-Link's voice mail
operating platforms;
o Telemessaging Services, Inc., the supplier of Multi-Link's billing
software; and
o U S West, the local telephone line carrier with which Multi-Link has
interconnection agreements.
Internal Systems. Multi-Link has completed internal assessment and testing
of its date sensitive computer systems and has determined that its internal
billing, customer service and support systems are compatible with the year 2000.
Glenayre. Glenayre has advised Multi-Link that the voice messaging
platforms used by Multi-Link are year 2000 compatible.
Telemessaging Services, Inc. Telemessaging Services, Inc., the supplier of
Multi-Link's billing software, has certified that its software is Year 2000
compliant.
U S West and Other Infrastructure Providers. Multi-Link is dependent upon U
S West and other central infrastructure providers including suppliers of
electric power and the national telephone network for the provision of its
services to its customers. U S West has publicly announced that its local
telephone network is Year 2000 compliant. Multi-Link is not aware of any central
infrastructure provider that has indicated that it expects to be adversely
affected by the Year 2000 problem. However, Multi-Link has not obtained
assurances from such providers as to whether or not they will be adversely
affected by the Year 2000 issue.
Acquisitions. Multi-Link plans to use a significant portion of the proceeds
of this offering to acquire companies involved in the voice messaging business.
Multi-Link intends to address the Year 2000 issue in detail with all such
companies prior to acquisition. Management believes that there are many older
voice messaging systems that are not Year 2000 compliant, and that the Year 2000
issue may cause some companies to view Multi-Link's acquisition proposals
favorably. Multi-Link cannot quantify the risks and expenses that may be
incurred through acquisitions of companies that are not Year 2000 compliant.
Costs. Multi-Link has not incurred any material costs for Year 2000
modifications to date and does not anticipate incurring any such material costs
in the future. However, there can be no assurance that Multi-Link will not
identify other Year 2000 issues that may require expenditures in the future.
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BUSINESS
Summary
Multi-Link provides integrated voice and fax messaging services for small
and medium sized businesses. These services enable businesses to improve the
handling of incoming calls and can be used with an automated attendant service
to replace receptionists. Multi-Link's voice messaging services can produce
improved efficiency and cost savings for the subscriber by offering
comprehensive voice messaging solutions. Multi-Link's integrated messaging
system:
[ ] provides personal mailboxes that can be linked to office, mobile and home
telephones, eliminating the need to check multiple mailboxes and providing
cost savings through the termination of multiple mailbox charges;
[ ] provides immediate notification to a subscriber's mobile phone or digital
pager that the subscriber has new messages;
[ ] automatically transfers important calls to the subscriber's office, mobile
telephone, pager and home phones to eliminate the need for callers to try
other numbers in an attempt to reach the subscriber; and
[ ] will soon offer a unified messaging service which will enable the
subscriber to receive voice, fax and Internet e-mail messages in one
mailbox.
The Voice Messaging Industry
According to a 1998 industry study, revenues realized in 1997 by voice
messaging providers in the United States were approximately $2.67 billion, with
$2.1 billion of the total revenues realized by the local telephone companies or
the "baby bells." The remaining $570 million of revenues were realized by
approximately 4,200 independent voice messaging providers scattered throughout
the United States. The study also indicates that the voice messaging market was
growing at a 10% annual rate and was experiencing structural changes brought
about by new technology and changes in consumer preferences. Management believes
that these changes will increase the rate of growth of, and create an
opportunity for voice messaging providers such as Multi-Link, to capture
increased market share.
Development of the Business Voice Messaging Industry. In the 1970's, the
local telephone companies in the United States introduced a new service called
voice messaging or voice mail. The service uses automated "call-forwarding"
features programmed on the telephone line to transfer incoming calls to a
central voice mail platform when the line is in use or when nobody answers.
Voice mail service is almost always provided on a local basis since subscribers
are reluctant to incur long distance charges to receive and recover voice mail
messages.
The basic concept of voice mail has changed little since its introduction
two decades ago. Voice mail systems have become more sophisticated and more
reliable and now offer more features than they did when they were first
introduced. However, their basic operational method of using call forwarding
features to route incoming calls to the central system is the same. In almost
all cases, the voice mail service is provided as an additional option by the
provider of the telephone line or mobile phone and is a secondary function which
is only used if the person sought is unavailable.
Market acceptance of voice mail has changed since its inception, when
management believes it was disliked by many users. Management believes that
voice mail has now gained popular acceptance and most users in the business
community prefer to leave voice mail messages rather than written messages.
Despite this, the overall market penetration of voice mail remains low and
management believes there is opportunity for growth in this market.
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Currently, users often have several voice mailboxes: one for business
attached to their business phone lines, one for home use attached to their home
phone line and one attached to their mobile phone. After 20 years of providing
the same basic function, voice mail service is changing as new technology is
developed to streamline personal communications practices.
Although the local telephone companies are in the best position to sell
voice mail service to their customers, there is no technological barrier that
prevents companies from acquiring a central voice mail platform and offering
voice messaging services. The local telephone companies are motivated to provide
multiple voice mailboxes to each subscriber, thus increasing per subscriber
revenues.
Overview of Multi-Link's Current and Proposed Services
While reading this section, please open the schematic diagram on the inside
front cover of this prospectus for an illustrated representation of these
service concepts.
When Multi-Link launched its voice messaging service in May 1996, it did so
in anticipation of the significant technological changes now taking place in the
industry. Management believes that broad market adoption of the new services and
communications practices described below will be achieved over time. As a
result, Multi-Link will continue to offer traditional voice messaging services
while implementing the new services described below.
Service Type Available
------------ --------
Single Box Voice Mail Service for Business and Home Yes
Multiple Box Business Voice Messaging Networks Yes
Automated Attendant Call Routing Service Yes
Consolidated Messaging Service Yes
One Number Service Yes
Calling Card Functionality/Call Origination Capability Yes
Unified Messaging Service for Voice, Fax and Internet
based e-mail Voice/Fax: Yes
Internet e-mail:
Near Future
Voice Activated Commands Near Future
Single Box Voice Mail for Business and Home. Multi-Link provides single
voice mailboxes to residences and small businesses for telephone answering.
Using automated call forwarding features programmed on the phone lines, incoming
calls are transferred to a single mailbox when the line is busy or when nobody
answers. Management believes that Multi-Link's service is superior to answering
machines that do not function when the line is already in use. The standard
mailbox provided by Multi-Link has many useful features that currently are not
available from the baby bells or are provided by the baby bells as additional
cost options. These features include: multiple greetings which play according to
a time schedule, the option for a caller to press the zero key to be transferred
to another number and the option to have new messages notified to a pager or a
mobile telephone.
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Multiple Box Business Voice Messaging Networks. Multi-Link provides
comprehensive voice messaging networks for businesses that employ two to 50
people. Every network is designed individually to meet each specific customer's
needs. There are several ways callers can access the voice messaging system:
o using automated call-forwarding features programmed on the phone
lines, incoming calls are transferred to a single company mailbox when
the line is busy or when nobody answers. Callers then have the option
to leave a message in the general company mailbox or to reach the
mailbox of a specific individual through a directory;
o incoming calls during normal business hours can be answered by a
person and then transferred to an individual voice mailbox if the
person sought is not available; and
o callers who wish to leave a personal message can dial the voicemail
box directly without speaking with the receptionist.
Each mailbox within the overall network can be individually programmed to send
notification of new messages to a wide variety of pagers and mobile telephones,
to forward callers to different numbers when the zero key is pressed and to take
advantage of the consolidated messaging and one number services described below.
Automated Attendant Call Routing Service. Multi-Link offers automated call
routing services. Multi-Link's system answers all incoming calls for a business
and acts as the receptionist for the business. By pressing keys in response to a
series of progressive menus, callers reach the person or department they
require. The service provides fully automated call handling and often allows
businesses to reduce or eliminate the cost of receptionist personnel. Management
believes that the service is particularly valuable to businesses with multiple
locations in the same local calling area since all those businesses can now be
linked through one central access telephone number.
Consolidated Messaging Service: Multi-Link offers a consolidated messaging
service. A subscriber buys a voice mailbox from Multi-Link. Call forwarding is
then established from all of the subscriber's phone lines - home, business and
mobile - to the same voice mailbox. In this way, all voice messages are
channeled automatically into one voice mailbox. This saves time, is more
efficient and often saves money - one mailbox instead of three.
One Number Service. Multi-Link offers one number service which Multi-Link
calls "Constant Touch Service." Callers who reach a subscriber mailbox are given
two options in the greeting. If the reason they called the subscriber is not
urgent, they are instructed to leave a voice message for later attention by the
subscriber. However, if they need to speak to the subscriber, they are
instructed to press keys to activate the subscriber's Constant Touch Service.
Upon activation, the service requires the caller to state the caller's name for
recordation in the voice mailbox. The messaging system immediately dials several
numbers simultaneously to try to reach the subscriber. Typically the system will
dial a mobile phone number, a pager number, a home telephone number and an
office direct line. If the subscriber is reached, the messaging system plays the
name of the caller on hold and awaits instructions. Then, by selecting the
appropriate key, the subscriber may elect to connect immediately with the
caller, to reject the call but request that the caller leave a message, or to
terminate the call without offering the opportunity to leave a message. By using
Constant Touch Service, the subscriber makes it very simple for callers to reach
the subscriber, yet maintains complete control over who reaches the subscriber.
If the subscriber is not reached, the messaging system will wait up to two
minutes and then advise the caller that the subscriber could not be reached and
request the caller to leave a message.
Over the next few years, management expects this "one number" technology
will revolutionize the way business people communicate. It will no longer be
necessary to guess where the person called may be at any given time. The work of
finding the subscriber will be undertaken by the messaging system. In time, as
communications practices change, management believes subscribers will give out
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their voice mail number as the primary contact number and all callers will leave
messages or use the one number technology. The use of the messaging system as a
primary contact point will eliminate the interruption of non-urgent calls and
should increase productivity.
Calling Card Functionality/Call Origination Capability. The voice messaging
system can act as a communications hub for subscribers who travel extensively.
Subscribers access their messaging system from anywhere in the United States by
using a dedicated "800" number. After listening to their messages, they may
elect to obtain a dial tone and make a call from within the voice mailbox. When
they terminate each call, they are returned to the mailbox and may continue
listening to other messages or make further calls. Management believes that this
service is less expensive and more convenient than most calling cards.
Multi-Link's messaging systems offer this service capability now, although
Multi-Link has not yet begun marketing this product on a commercial basis.
Multi-Link expects to begin marketing this service in the near future.
Unified Messaging Service for Voice, Fax and Internet Based e-mail.
Management believes that unified messaging is the best publicized of the new
technologies which are expected to change the messaging industry over the next
few years. Unified messaging is the term used to describe a messaging service
that can store voice messages, fax messages and Internet e-mail messages in one
mailbox. The service should also allow retrieval of any type of message over a
telephone, fax machine or personal computer, no matter what the original form of
the message might have been.
Unified messaging technology is still in the early stages of development
and, although some equipment has been deployed commercially, management believes
that revenues from unified messaging services are still very small. Management
expects that unified messaging services will be particularly popular among
traveling executives. Multi-Link currently provides unified voice and fax
messaging service. In calendar 1999, Multi-Link plans to offer a unified
messaging service which will include integration with Internet based e-mail
service.
Voice Activated Commands. At the present time, almost all voice-messaging
systems respond to tones created by key presses on the Dial Tone Modulated
Frequency or DTMF keypad. The exclusive use of the DTMF keypad has significant
disadvantages to the mobile user who may often wish to use the messaging system
when driving or performing other complex tasks. The use of speech recognition
technology will allow subscribers to simply speak commands to the messaging
system rather than using key presses. In addition to the benefits to mobile
users, the use of speech recognition will facilitate faster navigation through
complex menus and offer more intuitive access to less frequently used functions
of the messaging system. Management believes that speech recognition technology
is one of the most exciting developments in the messaging industry. Multi-Link
expects to market speech recognition technology in calendar 1999.
Distribution Methods
Multi-Link engages approximately 20 independent commissioned sales agents
or agencies to procure subscribers for voice messaging services. Multi-Link's
sales agents include retail telecommunications stores, vendors of telephone
system hardware, vendors of long distance services and other telecommunications
related businesses.
During the three months ended December 31, 1998, Multi-Link procured
approximately 86% of its new customer subscriptions from Telcom Sales
Associates, Inc., an independent sales agency specializing in the sale of a
broad range of telecommunications services to small and medium sized businesses.
Telcom is owned by a former employee of Multi-Link. Following this offering,
Multi-Link plans to increase the number of independent sales agents offering
Multi-Link's services.
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Multi-Link's management believes that the introduction of unified messaging
in 1999 will open up new distribution channels allowing Multi-Link to forge
distribution alliances with Internet service providers and other companies
involved in the provision of Internet based e-mail services. Multi-Link's
management plans to provide Internet based e-mail services and other Internet
related services in calendar 1999. Multi-Link plans to use similar distribution
methods in connection with expanding its acquisitions described in " - Industry
Consolidation and Geographic Expansion Strategy."
Customer Base
Multi-Link's customer base consists predominantly of small and medium sized
businesses that have between one and 50 employees. This customer base includes
diverse businesses. Multi-Link's customer base includes approximately 5,000
business customers that have approximately 16,000 users. Multi-Link's average
business customer pays approximately $30 per month. Multi-Link currently
provides services in the Denver metropolitan area.
Technology
Equipment. Multi-Link's voice messaging systems are manufactured by
Glenayre. Each Glenayre system has capacity for approximately 12,000
subscribers. Currently, Multi-Link has two Glenayre systems. As a result,
Multi-Link could theoretically provide service to an additional 8,000
subscribers before additional equipment is required. The Glenayre systems are
reliable, easy to maintain and have historically experienced minimal downtime.
Multi-Link finances its Glenayre system purchases through term loans and makes
no expenditures on research and development of any kind. Multi-Link employs
technicians who provide support for the Glenayre systems. In addition, under
Multi-Link's maintenance agreement, Glenayre provides technical support via a
direct modem link when necessary and provides periodic free software upgrades to
insure that Multi-Link continues to offer updated services. Glenayre has advised
Multi-Link that Glenayre expects to offer a fully functional unified messaging
upgrade in the second quarter of 1999 that will enable Multi-Link to offer
unified messaging services to its customers soon afterwards.
Interconnection with Public Switched Networks. Voice messaging systems are
linked to the public switched telephone network using digital two-way direct
inward dial trunks with call transfer capability. These interconnection services
are provided by U S West under a ten year agreement which includes a price cap
that expires in 2008. Following the deregulation of the telecommunications
industry in 1996, Multi-Link now has several possible providers of
interconnection facilities and may benefit from price competition over the next
few years.
Competition
A recent industry survey estimates that the baby bells have an 85% share of
the United States voice messaging services market. The baby bells are
considerably larger and better financed than Multi-Link and have extensive
marketing experience. The survey states that the remaining 15% of the United
States voice messaging market is shared by approximately 4,200 voice messaging
service providers including Multi-Link.
Competitive Strategy
Multi-Link obtains most of its business customers by offering voice
messaging services which the management of Multi-Link believes compare favorably
with those provided by the baby bells in the following ways:
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[ ] Multi-Link has consolidated messaging service, one number service and other
applications and features which are not currently offered by the baby
bells.
[ ] Multi-Link's independent sales agents conduct a comprehensive analysis of
every prospective customer's needs and custom design a Multi-Link voice
messaging service to meet those specific needs. Generally, the baby bells
do not offer this type of analysis in the voice messaging market.
[ ] Management believes that Multi-Link's average voice messaging service
includes more standard features than its largest current competitor.
[ ] Multi-Link sends out customer trainers to teach new subscribers how to best
use its messaging services. The baby bells offer only telephone based
support.
[ ] Multi-Link maintains a well-trained customer service staff who are experts
in providing messaging services. By comparison, the baby bells' customer
service staff generally deal with a wide range of telephone line issues
and, therefore, might not be as knowledgeable as Multi-Link's specialist
voice messaging group.
[ ] Multi-Link provides help in reorganizing service configurations, adding
staff members to, or deleting staff members from, a network or simply
understanding the best way to use the voice messaging services.
[ ] Multi-Link charges up to 48% less than its largest competitor for what
management believes is overall a superior voice messaging service.
Management believes that the technological changes taking place in the
voice messaging industry will enable messaging service providers like Multi-Link
to capture a part of the baby bells' market share of the voice messaging
industry. The new services described above require the provider of the messaging
services to maintain complex messaging networks which interact with a broad
range of other telecommunications services supplied by a wide range of service
providers. Management believes that the provision and maintenance of the new
services involves a level of complexity that is unattractive to the baby bells
and that they may be unwilling to compete aggressively in this service category.
Industry Consolidation and Geographic Expansion Strategy
Management believes that most of the 4,200 independent voice mail providers
offer only basic voice messaging services that are similar to, and in
competition with, the baby bells. Management believes that the opportunity
exists to acquire several voice mail providers in major urban markets in the
United States. Multi-Link intends to use a significant portion of the proceeds
raised from this offering to acquire some of these voice messaging companies.
Multi-Link will provide technology, capital and marketing expertise to each
business acquired. In addition to the benefits derived from Multi-Link's
technological, capital and marketing expertise, management believes that savings
can be achieved as a result of the centralization of purchasing, accounting,
administration, marketing, telemarketing and other core functions of these voice
mail providers.
Facilities
Multi-Link's corporate office and principal operating facility is located
at 811 Lincoln Street, Suite 500, Denver, Colorado 80203. Multi-Link occupies
approximately 4,100 square feet of office space that is leased on a
month-to-month basis. Multi-Link is currently negotiating a lease for a larger
facility with approximately 6,000 square feet at a different location.
Multi-Link expects to experience an increase in occupancy costs of approximately
$4,500 per month and a substantial one time expense in moving its operations
during fiscal 1999.
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Employees
As of January 30, 1999, Multi-Link employed 13 people, all of whom were
employed on a full time basis. There are no union or collective bargaining
agreements between Multi-Link and its employees and employee relations are
considered by management to be excellent.
Legal Proceedings
Multi-Link currently is not a party to any legal proceedings of any kind.
MANAGEMENT
Directors and Executive Officers
The directors and officers of Multi-Link are as follows:
Name Age Position
---- --- --------
Nigel V. Alexander ....... 37 Director, Chief Executive Officer,
Secretary and Treasurer
Shawn B. Stickle ......... 33 Director, President and Chief
Operating Officer
Keith R. Holder .......... 54 Director
R. Brad Stillahn ......... 45 Director
David J. Cutler .......... 43 Chief Financial Officer
The directors are elected for a three-year term, with approximately
one-third of the board of directors standing for election each year. Each
director holds office until the expiration of the director's term, until the
director's successor has been duly elected and qualified or until the earlier of
their resignation, removal or death. All of Multi-Link's officers devote
full-time to Multi-Link's business and affairs.
Nigel V. Alexander - Chief Executive Officer, Secretary and Treasurer. Mr.
Alexander co-founded Multi-Link in 1996. Mr. Alexander has served since that
time as a Managing Director and now as the Chief Executive Officer of Multi-Link
with responsibility for financing and strategic planning. From September 1994
until founding Multi-Link, Mr. Alexander conducted research into the
telecommunications industry to identify the business opportunity now being
pursued by Multi-Link. From April 1991 to September 1994, Mr. Alexander was an
executive officer of SnowRunner, Inc. a public company involved in the
distribution of winter sports products. Mr. Alexander is an Associate of the
British Chartered Institute of Bankers. He has over 15 years experience in
merchant banking, mergers and acquisitions and corporate finance, including ten
years as a merchant banker in London, England and Geneva, Switzerland with Henry
Ansbacher & Co. and the Paribas Group.
Shawn B. Stickle - President and Chief Operating Officer. Mr. Stickle
co-founded Multi-Link in 1996. Mr. Stickle has served since that time as a
Managing Director and now as the President and Chief Operating Officer of
Multi-Link with direct responsibility for all of Multi-Link's operations. From
February 1995 until January 1996, Mr. Stickle was employed as Executive Vice
President of Voice Services, Inc. From 1987 to December 1994, Mr. Stickle was
Sales and Marketing Manager for T.A. Pelsue Company, a manufacturer of
telecommunications products. Mr. Stickle holds a bachelor's degree from the
University of Colorado in marketing and is a certified ISO 9000 Quality
Assurance Advisor.
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Keith R. Holder - Director. Mr. Holder became a director of Multi-Link in
February 1999. Since January 1998, Mr. Holder has been the Chief Executive
Officer of Recovery Specialists Inc., a regional environmental company. From
March 1990 to January 1998, Mr. Holder was the founder, Chief Executive Officer
and Director of Triumph Fuels Corporation, a gasoline refining, distribution and
retailing company. Mr. Holder received his Bachelor of Science degree in Geology
from the University of London in 1969.
R. Brad Stillahn - Director. Mr. Stillahn became a director of Multi-Link
in February 1999. Since January 1991, Mr. Stillahn has been the owner, Chairman
and Chief Executive Officer of West Tape & Label, Inc., a national custom label
printer. From 1987 to 1991, Mr. Stillahn was the Director of Corporate Marketing
for Menasha Corporation, a diversified holding company. Mr. Stillahn received
his Masters of Business Administration from Washington University in 1976 and in
1974 received a Bachelor of Arts degree in Economics from the University of
Missouri.
David J. Cutler - Chief Financial Officer. Mr. Cutler joined Multi-Link in
March 1998 and has served as its Chief Financial Officer since that time. From
March 1993 until joining Multi-Link, Mr. Cutler was a self employed consultant
providing accounting and financial advice to small and medium sized companies in
the United Kingdom and the United States. Mr. Cutler has more than 20 years
experience in international finance, accounting and business administration. He
held senior positions with multi-national companies such as Reuters Plc and the
Schlumberger Group and has served as a director for two British publicly quoted
companies -Charterhall Plc and Reliant Group Plc. Mr. Cutler has a masters
degree from St. Catherine College in Cambridge, England and qualified as a
British Chartered Accountant and as an Associate of the Institute of Taxation
with Arthur Andersen & Co. in London. He was subsequently admitted as a Fellow
of the UK Institute of Chartered Accountants. In early 1998, he passed the CPA
examination in the United States.
Committees of the Board of Directors
The board of directors maintains a compensation committee and an audit
committee. The compensation committee is composed of Keith R. Holder and R. Brad
Stillahn, both non-employee directors. The audit committee is composed of Keith
R. Holder and R. Brad Stillahn. The primary function of the compensation
committee is to review and make recommendations to the board of directors with
respect to the compensation, including bonuses, of Multi-Link's officers and to
administer the grants under Multi-Link's stock option plan. The functions of the
audit committee are to review the scope of the audit procedures employed by
Multi-Link's independent auditors, to review with the independent auditors
Multi-Link's accounting practices and policies and recommend to whom reports
should be submitted within Multi-Link, to review with the independent auditors
their final audit reports, to review with Multi-Link's internal and independent
auditors Multi-Link's overall accounting and financial controls, to be available
to the independent auditors during the year for consultation, to approve the
audit fee charged by the independent auditors, to report to the board of
directors with respect to such matters and to recommend the selection of the
independent auditors.
Compensation of Directors
As compensation for serving as directors of Multi-Link, Multi-Link pays
Keith R. Holder and R. Brad Stillahn $250 for each meeting of the board of
directors they attend in person or by telephone. In addition, on the date of
this prospectus, Keith R. Holder and R. Brad Stillahn each received 10 year
options to purchase 10,000 shares of Multi-Link's common stock at $6.00 per
share. The options vest over a three year period commencing one year from the
date of this prospectus. Directors are reimbursed for expenses incurred by them
in attending meetings of the board of directors or its committees.
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Executive Compensation
The following table sets forth the compensation paid by Multi-Link for
services rendered during the fiscal years ended September 30, 1998, 1997 and
1996 to Nigel V. Alexander and Shawn B. Stickle. No executive officer of
Multi-Link earned or was paid compensation of more than $100,000 for the year
ended September 30, 1998.
On January 1, 1999, Nigel V. Alexander became the Chief Executive Officer
of Multi-Link and Shawn B. Stickle became the President and Chief Operating
Officer of Multi-Link in place of each being a Managing Director of Multi-Link.
Multi-Link pays consulting fees to Octagon Strategies, Inc. for consulting
services rendered by Nigel V. Alexander to Multi-Link. "Octagon" is a company
wholly-owned by Nigel V. Alexander. All amounts reflected in the salary column
in the following table paid to Mr. Alexander are consulting fees paid to Octagon
for Mr. Alexander's benefit.
Summary Compensation Table
Fiscal Annual Compensation
Year Ended --------------------
Name and Principal Position September 30, Salary Bonus
--------------------------- ------------ ------ -----
Nigel V. Alexander ............ 1998 $40,000 --
Managing Director 1997 $39,960 --
Secretary and Treasurer 1996 $34,042 --
Shawn B. Stickle .............. 1998 $36,000 --
Managing Director 1997 $36,000 --
1996 $29,000 --
Effective January 1, 1999, Multi-Link entered into a three-year consulting
agreement with Octagon and a three-year employment agreement with Shawn B.
Stickle pursuant to which Multi-Link pays Octagon and Mr. Stickle an annual
consulting fee and an annual salary of $53,333 and $48,000, respectively. Any
future increases in compensation under the agreements will be determined by the
compensation committee of the board of directors. The consulting agreement and
the employment agreement require that Messrs. Alexander and Stickle devote their
full business time to Multi-Link and may only be terminated by Multi-Link for
"cause" (as defined in the agreements). If the agreements are terminated,
Octagon and Mr. Stickle are also entitled to receive lump sum payments equal to
the greater of the compensation payable pursuant to the agreements for the
remaining terms thereof or one year's annual payments. The consulting agreement
and employment agreement also contain confidentiality and noncompete provisions.
Life Insurance Policies
Multi-Link intends to obtain key man life insurance policies in the face
amounts of $1,000,000 each on both Nigel V. Alexander and Shawn B. Stickle
following the closing of the offering. The proceeds of these policies will be
payable to Multi-Link.
Stock Option Plan
Multi-Link adopted its stock option plan in 1996 pursuant to which an
aggregate of 300,000 shares of common stock are currently reserved for issuance.
The stock option plan provides for the granting of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code and non-qualified
stock options, reload options and stock appreciation rights. Non-qualified stock
options may be granted to employees, directors and consultants of Multi-Link,
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<PAGE>
while incentive stock options may be granted only to employees. The stock option
plan is currently administered by the compensation committee of the board of
directors, which determines the terms and conditions of the options granted
under the stock option plan, including the exercise price, the number of shares
subject to a particular option and the exercisability thereof.
The exercise price of all incentive stock options granted under the stock
option plan must be at least equal to the fair market value of Multi-Link's
common stock on the date of grant and must be 110% of fair market value when
granted to a 10% or more stockholder. The exercise price of all non-qualified
stock options granted under the stock option plan may be less than the fair
market value of the common stock on the date of grant. The term of all options
granted under the stock option plan may not exceed ten years, except the term of
incentive stock options granted to a 10% or more stockholder may not exceed five
years. The stock option plan may be amended or terminated by the board of
directors, but no such action may impair the rights of a participant under a
previously granted option.
The stock option plan provides the board of directors or the compensation
committee with the discretion to determine when options granted under the stock
option plan shall become exercisable and the vesting period of such options.
The following table provides information with respect to the stock options
that are currently outstanding:
Number of Shares Exercise Expiration
Grant Date Underlying Options Price Date
---------- ------------------ -------- ---------
January 15, 1997 72,000 $ 0.02 January 14, 2007
January 15, 1997 7,410 $ 0.17 January 14, 2007
June 30, 1997 16,605 $ 0.42 June 29, 2007
December 30, 1997 23,580 $ 2.45 December 29, 2007
June 30, 1998 35,070 $ 4.17 June 29, 2008
December 31, 1998 10,335 $ 6.00 December 30, 2008
No options to purchase shares of common stock have been granted by
Multi-Link to Nigel V. Alexander, Shawn B. Stickle or Octagon during the year
ended September 30, 1998, and none of such persons owned any options to purchase
common stock on September 30, 1998. Multi-Link expects to issue options to
purchase 20,000 shares of common stock to the two non-management directors upon
the successful completion of the offering.
No reload options or stock appreciation rights have been granted pursuant
to the stock option plan.
Multi-Link has no other bonus, profit sharing, pension, retirement, stock
purchase, deferred compensation, or other incentive plan.
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<PAGE>
Certain Transactions
In January 1996, Octagon and Shawn B. Stickle each purchased 600,000 shares
of common stock from Multi-Link for $0.0083 per share. In March 1997, Octagon
sold 450,000 shares of common stock to the Blackhawk Trust and 150,000 shares of
common stock to Nigel V. Alexander, for $0.017 per share.
In January 1996, Octagon loaned Multi-Link $41,000. Such loan was
unsecured, had an interest rate of 10% per annum and was repaid in September
1998.
In April 1996, CS Capital provided Multi-Link with a factoring facility of
$500,000. Multi-Link issued 61,200 shares of common stock to CS Capital at the
time the facility was obtained. The factoring facility was secured by all of the
assets of Multi-Link, was guaranteed by Nigel V. Alexander and Shawn B. Stickle
and had an implied interest rate of 52% per annum, exclusive of value
attributable to common stock or warrants issued to CS Capital.
In January 1997, Multi-Link issued 68,118 shares of common stock to CS
Capital in connection with a $250,000 loan that CS Capital made to Multi-Link.
The loan was secured by all of the assets of Multi-Link, was guaranteed by Nigel
V. Alexander and Shawn B. Stickle and had an interest rate of 40% per annum.
In January 1997, Multi-Link issued 13,320 shares of common stock to Ronald
Stickle, the father of Shawn B. Stickle, in connection with a $25,000 loan that
Ronald Stickle made to Multi-Link in June 1996. Such loan was unsecured, had an
interest rate of 35% per annum and was repaid in September 1998.
In January 1997, Multi-Link issued 26,640 shares of common stock to Harbour
Settlement in connection with a $60,000 loan that Harbour Settlement made to
Multi-Link in May 1996. Such loan was unsecured, had an interest rate of 15% per
annum and was guaranteed by Nigel V. Alexander and Shawn B. Stickle. The loan
was repaid in September 1998. Harbour Settlement is a trust established for the
benefit of the children of Keith R. Holder, a director of Multi-Link.
In June 1997, Multi-Link issued 28,610 shares of common stock to CS Capital
in connection with a $300,000 loan that CS Capital made to Multi-Link. The loan
was secured by Multi-Link's assets, was guaranteed by Nigel V. Alexander and
Shawn B. Stickle and had an interest rate of 30% per annum.
In January 1998, CS Capital loaned Multi-Link $700,000. The loan was
secured by all of the assets of Multi-Link, was guaranteed by Nigel V. Alexander
and Shawn B. Stickle and had an interest rate of 30% per annum.
In May 1998, all of the outstanding balances on the factoring facility and
the loans that CS Capital had made to Multi-Link were consolidated into a
$1,698,000 term loan that was secured by the assets of Multi-Link, was
guaranteed by Nigel V. Alexander and Shawn B. Stickle, had an interest rate of
25% per annum and was payable in fixed payments of principal and interest
through June 30, 2001.
In September 1998, Westburg loaned Multi-Link $2,100,000. The loan has a
five-year term and bears interest at a current rate of 10.75% per annum as of
December 31, 1998. The loan is payable interest only until September 25, 1999,
and thereafter the outstanding principal balance and accrued interest will be
payable monthly and amortized over ten years. The outstanding principal balance
and all accrued interest thereon will be payable in full on October 31, 2003.
The loan is collateralized by all of the assets of Multi-Link and is guaranteed
personally by Nigel V. Alexander and Shawn B. Stickle. In connection with the
loan, Multi-Link issued Westburg a warrant to purchase 150,000 shares of common
stock of Multi-Link at a price of $4.17 per share. In addition, Nigel V.
Alexander and Shawn B. Stickle have pledged 480,000 shares each of Multi-Link's
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<PAGE>
common stock owned by them as collateral for the loan. Westburg has agreed to
release such shares from pledge upon the closing of this offering.
In September 1998, Multi-Link paid CS Capital $900,000 on the term loan and
CS Capital converted $300,000 of the term loan into 72,000 shares of
Multi-Link's common stock and warrants to purchase 36,000 shares of Multi-Link's
common stock at a price of $4.17 per share. The warrants are exercisable from
November 17, 1999 through May 17, 2001. The conversion price paid by CS Capital
for the shares of common stock and warrants was the same price that was paid by
nonaffiliated persons to Multi-Link in a private offering that was being
conducted by Multi-Link at that time. Multi-Link paid CS Capital an additional
$328,000 on the loan and $48,000 of accrued interest in November 1998. The
remaining $173,000 balance of the CS Capital term loan bears interest at 15% per
annum until September 30, 1999, at which time the interest rate increases to 25%
per annum. The loan is payable interest only with the principal balance due on
the earlier of June 30, 2001 or the date Multi-Link receives proceeds from this
offering. See "Use of Proceeds."
In January 1999, Nigel V. Alexander purchased 431,250 shares of common
stock from The Blackhawk Trust for $6.00 per share. Mr. Alexander gave The
Blackhawk Trust a promissory note secured by the 431,250 shares in payment of
the purchase price. The promissory note bears interest at a rate of 6% per annum
and is payable on the earlier of January 31, 2009 or the sale of the 431,250
shares by Mr. Alexander.
On February 1, 1999, Multi-Link reduced the exercise price of the warrants
issued to CS Capital from $5.00 to $2.50 per share at the same time Multi-Link
reduced the exercise price of outstanding warrants held by other persons
unaffiliated with Multi-Link who had acquired warrants from Multi-Link at
approximately the same time CS Capital acquired its warrants. As a result of the
3-for-5 reverse split of Multi-Link's outstanding common stock on February 2,
1999, the exercise price of the warrants held by CS Capital and such other
persons was increased to a post-split price of $4.17 per share.
Limitation of Liability and Indemnification
Pursuant to the provisions of the Colorado Business Corporation Act,
Multi-Link has adopted provisions in its restated articles of incorporation
which provide that its directors shall not be personally liable for monetary
damages to Multi-Link or its stockholders for a breach of fiduciary duty as a
director, except for liability as a result of:
o a breach of the director's duty of loyalty to Multi-Link or its
stockholders;
o acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law;
o voting for or assenting to a distribution, which, after giving effect
to the distribution, would result in (a) Multi-Link not being able to
pay its debts as they become due, or (b) Multi-Link's total assets
being less than the sum of its total liabilities plus amounts needed
to satisfy preferential rights upon dissolution of Multi-Link, but
only if it is established that the director did not perform his duties
in good faith, with the care of an ordinary prudent person in a like
position under similar circumstances, and in a manner the director
believed to be in the best interest of Multi-Link, provided that the
personal liability of a director in this circumstance is limited to
the amount of the distribution which exceeds that which could have
been distributed without violation of this paragraph; or
o any transaction from which the director directly or indirectly derives
an improper personal benefit.
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<PAGE>
Multi-Link's restated articles of incorporation state that Multi-Link shall
indemnify, to the maximum extent permitted by law, any person who is or was a
director or officer of Multi-Link, and may indemnify any other person, against
any claim, liability or expense arising against or incurred by such person made
party to a proceeding because the person is or was a director, officer, agent ,
fiduciary, or employee of Multi-Link or because the person is or was serving
another entity as a director, officer, partner, trustee, employee, fiduciary or
agent at Multi-Link's request. The restated articles of incorporation also
permit Multi-Link to purchase and maintain insurance providing such
indemnification, advance expenses to persons indemnified by Multi-Link, and
provide indemnification to any person by general or specific action of the board
of directors under the bylaws of Multi-Link, by contract or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and control persons
of Multi-Link pursuant to the foregoing provisions, or otherwise, Multi-Link has
been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Multi-Link's common stock, as of the date of this prospectus, and
as adjusted to reflect the sale of the units offered by this prospectus, by:
o each person who is known by Multi-Link to own beneficially more than
5% of Multi-Link's outstanding common stock,
o each of Multi-Link's executive officers and directors, and
o all executive officers and directors as a group.
Shares of common stock not outstanding but deemed beneficially owned by
virtue of the right of an individual to acquire the shares of common stock
within 60 days are treated as outstanding only when determining the amount and
percentage of common stock owned by such individual. Except as noted below the
table, each person has sole voting and investment power with respect to the
shares of common stock shown. Unless otherwise shown, the address of each person
is 811 Lincoln Street, Suite 500, Denver, Colorado 80203.
<TABLE>
<CAPTION>
Shares of
Common Stock Beneficially
Owned Prior to the Offering
--------------------------- Percentage Owned
Name and Address of Beneficial Owner Number Percent After the Offering
- ------------------------------------ ------ ------- ------------------
<S> <C> <C> <C>
Nigel V. Alexander ............................ 581,250 34.4% 20.5%
Shawn B. Stickle .............................. 581,250 34.4% 20.5%
Keith R. Holder
107 Country Club Park Drive
Grand Junction, Colorado 81503 ................ 26,640 1.6% 0.9%
R. Brad Stillahn
3845 Forest
Denver, Colorado .............................. -0- -0- 0%
All officers and directors as a group
(5 persons) ................................... 1,204,140 70.6% 42.2%
CS Capital Corp. ..............................
8301 E. Prentice Ave, #200
Englewood, Colorado 80111 ..................... 229,928 13.6% 8.1%
Westburg Media Capital LP
200 First Avenue West, Suite 400
Seattle, Washington 98119 ..................... 150,000 8.1% 5.0%
</TABLE>
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<PAGE>
In the foregoing table the common stock beneficially owned by:
o Keith R. Holder, represents shares beneficially owned by Harbour
Settlement, a Jersey Channel Islands Trust established for the benefit
of Mr. Holder's children;
o all of the officers and directors as a group, includes 15,000 shares
underlying presently exercisable options but does not include 35,000
shares underlying options that are not exercisable for the next 60
days;
o CS Capital Corp, does not include 36,000 shares underlying options
that are not exercisable for the next 60 days; and
o Westburg Media Capital LP, represents 150,000 shares underlying
presently exercisable warrants.
Escrow Shares
The underwriters' representative, or "representative," has required Nigel
V. Alexander and Shawn B. Stickle to each deposit 100,000 shares of common stock
of Multi-Link owned by such stockholders in an escrow account pursuant to an
escrow agreement with American Securities Transfer & Trust, Inc. The common
stock deposited in the escrow account will be subject to release to the
stockholders on the earlier to occur of:
o Multi-Link achieving basic income of at least $0.75 per share and the
common stock having a bid price of at least $15.00 per share for the
year ended and as of September 31, 2000;
o Multi-Link achieving basic net income of at least $1.25 per share and
a bid price of at least $25.00 per share for the year ended and as of
September 30, 2001;
o exchange, or sale of all or substantially all of the assets or stock
of Multi-Link if any such transaction is approved by the holders of a
majority of the outstanding shares of common stock (excluding the
shares in escrow); or
o seven years after the date of this prospectus.
For purposes of determining the release from escrow, net income will
include the effects of any extraordinary items and will be based on basic net
income per share and on the audited financial statements of Multi-Link for the
respective periods. The shares of common stock held in escrow are not
transferable or assignable, although they may be voted by the stockholders. The
earnings levels and per share prices set forth above were determined by
negotiation between Multi-Link and the representative and should not be
construed to imply or predict any future earnings by Multi-Link or the market
price of the common stock.
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<PAGE>
DESCRIPTION OF SECURITIES
The following summary description of Multi-Link's securities is not
complete and is qualified in its entirety by reference to Multi-Link's restated
articles of incorporation and bylaws.
The authorized capital stock of Multi-Link consists of 20,000,000 shares of
no par value common stock and 5,000,000 shares of $0.01 par value preferred
stock, which Multi-Link may issue in one or more series as determined by the
board of directors. There currently are 1,691,542 shares of common stock issued
and outstanding that are held of record by 32 shareholders.
Units
Each unit being offered in this prospectus consists of one share of common
stock and one warrant. The common stock and warrants are separately
transferable.
Common Stock
Each holder of record of common stock is entitled to one vote for each
share held on all matters properly submitted to the stockholders for their vote.
Cumulative voting in the election of directors is not authorized by the restated
articles of incorporation.
Holders of outstanding shares of common stock are entitled to those
dividends declared by the board of directors out of legally available funds and,
in the event of liquidation, dissolution or winding up of the affairs of
Multi-Link, holders are entitled to receive, pro rata, the net assets of
Multi-Link available to the stockholders. Holders of outstanding common stock
have no preemptive, conversion or redemption rights. All of the issued and
outstanding shares of common stock are, and all unissued shares of common stock,
when offered and sold will be, duly authorized, validly issued, fully paid and
nonassessable. To the extent that additional shares of common stock may be
issued in the future, the relative interests of the then existing stockholders
may be diluted.
There is currently no trading market for the common stock or warrants of
Multi-Link, and there can be no assurance that a trading market will develop in
the future. Further, the outstanding shares of common stock are restricted
securities as that term is defined in Rule 144 under the Securities Act of 1933,
as amended, and cannot be resold without registration under the Securities Act
of 1933, as amended, or an exemption from registration.
Preferred Stock
Multi-Link's board of directors is authorized to issue from time to time,
without stockholder authorization, in one or more designated series, any or all
of the authorized but unissued shares of preferred stock with such dividend,
redemption, conversion, and exchange provisions as may be provided by the board
of directors with regard to such particular series. Any series of preferred
stock may possess voting, dividend, liquidation, and redemption rights superior
to those of the common stock. The rights of the holders of common stock will be
subject to and may be adversely affected by the rights of the holders of any
preferred stock that may be issued in the future. Issuance of a new series of
preferred stock could make it more difficult for a third party to acquire, or
discourage a third party from acquiring, the outstanding shares of common stock
of Multi-Link and make removal of the board of directors more difficult. No
shares of preferred stock are currently issued and outstanding, and Multi-Link
has no present plans to issue any shares of preferred stock.
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<PAGE>
Warrants
Two warrants will entitle the holder to purchase one share of common stock
at an exercise price of $9.00 for a period of 36 months from the date hereof
subject to Multi-Link's redemption rights described below. The warrants will be
issued pursuant to the terms of a warrant agreement between Multi-Link and the
"warrant agent," American Securities Transfer & Trust, Incorporated. Multi-Link
has authorized and reserved for issuance the shares of common stock issuable on
exercise of the warrants. The warrants are exercisable to purchase a total of
575,000 shares of common stock of Multi-Link unless the underwriter's
over-allotment option relating to the warrants is exercised, in which case the
warrants are exercisable to purchase a total of 661,250 shares of common stock.
The warrant exercise price and the number of shares of common stock
purchasable upon exercise of the warrants are subject to adjustment in the event
of, among other events, a stock dividend on, or a subdivision, recapitalization
or reorganization of, the common stock, or the merger or consolidation of
Multi-Link with or into another corporation or business entity.
Commencing one year from the date of this prospectus and until the
expiration of the warrants, Multi-Link, may redeem outstanding warrants, in
whole but not in part, upon not less than 30 days' notice, at a price of $0.05
per warrant, provided that the closing bid price of the common stock equals or
exceeds 125% of the warrant exercise price ($9.00 per share) for 20 consecutive
trading days. The redemption notice must be provided not more than five business
days after conclusion of the 20 consecutive trading days in which the closing
bid price of the common stock equals or exceeds 125% of the warrant exercise
price per share. In the event Multi-Link exercises its right to redeem the
warrants, the warrants will be exercisable until the close of business on the
date fixed for redemption in such notice. If any warrant called for redemption
is not exercised by such time, it will cease to be exercisable and the holder
thereof will be entitled only to the redemption price.
Multi-Link must have on file a current registration statement with the SEC
pertaining to the common stock underlying the warrants in order for a holder to
exercise the warrants or in order for the warrants to be redeemed by Multi-Link.
The shares of common stock underlying the warrants must also be registered or
qualified for sale under the securities laws of the states in which the warrant
holders reside. Multi-Link intends to use its best efforts to keep the
registration statement incorporating this prospectus current, but there can be
no assurance that such registration statement (or any other registration
statement filed by Multi-Link covering shares of common stock underlying the
warrants) can be kept current. In the event the registration statement covering
the underlying common stock is not kept current, or if the common stock
underlying the warrants is not registered or qualified for sale in the state in
which a warrant holder resides, the warrants may be deprived of any value.
Multi-Link is not required to issue any fractional shares of common stock
upon the exercise of warrants or upon the occurrence of adjustments pursuant to
anti-dilution provisions. Multi-Link will pay to holders of fractional interests
an amount equal to the cash value of such fractional interests based upon the
then-current market price of a share of common stock.
The warrants may be exercised upon surrender of the certificate
representing such warrants on or prior to the expiration date (or earlier
redemption date) of such warrants at the offices of the warrant agent with the
form of "Election to Purchase" on the reverse side of the warrant certificate
completed and executed as indicated, accompanied by payment of the full exercise
price by check payable to the order of Multi-Link for the number of warrants
being exercised. Shares of common stock issued upon exercise of warrants for
which payment has been received in accordance with the terms of the warrants
will be fully paid and nonassessable.
The warrants do not confer upon the warrantholder any voting or other
rights of a shareholder of Multi-Link. Upon notice to the warrantholders,
Multi-Link has the right to reduce the exercise price or extend the expiration
date of the warrants. Although this right is intended to benefit warrantholders,
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<PAGE>
to the extent Multi-Link exercises this right when the warrants would otherwise
be exercisable at a price higher than the prevailing market price of the common
stock, the likelihood of exercise, and the resultant increase in the number of
shares outstanding, may impede or make more costly a change in control of
Multi-Link.
Anti-Takeover Provisions
Multi-Link's restated articles of incorporation and bylaws contain
provisions that may make it more difficult for a third party to acquire, or may
discourage acquisition bids for, Multi-Link. The board of directors of
Multi-Link is authorized, without action of its shareholders, to issue
authorized but unissued common stock and preferred stock. The existence of
undesignated preferred stock and authorized but unissued common stock enables
Multi-Link to discourage or to make it more difficult to obtain control of
Multi-Link by means of a merger, tender offer, proxy contest or otherwise. The
restated articles of incorporation and bylaws provide further that:
o directors may be elected for three-year terms, with approximately
one-third of the board of directors standing for election each year;
o to alter or repeal the staggered board provision or other measures in
the restated articles of incorporation and bylaws relating to the
matters listed in this paragraph, the affirmative vote of the holders
of not less than two-thirds of the votes entitled to be cast by the
holders of all stock entitled to vote in the election of directors is
required;
o the unanimous vote of the board of directors or the affirmative vote
of the holders of not less than two-thirds of the votes entitled to be
cast by the holders of all stock entitled to vote in the election of
directors is required to change the size of the board of directors;
and
o directors may only be removed for cause by holders of not less than
two-thirds of the common stock.
Transfer Agent, Warrant Agent and Registrar
Multi-Link has retained American Securities Transfer & Trust, Inc. to serve
as the transfer agent and registrar for the common stock and warrant agent for
the warrants.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
On completion of this offering, Multi-Link will have 2,841,542 shares of
common stock outstanding, assuming no warrants are exercised. If the
underwriters' over-allotment option is exercised in full, 3,014,042 shares of
common stock will be outstanding. Of these shares, the 1,150,000 shares of
common stock sold in this offering and any shares sold by Multi-Link upon
exercise of the underwriters' over-allotment option will be freely transferable
by persons other than "affiliates" of Multi-Link as that term is defined under
the Securities Act of 1933, as amended, without restriction or further
registration.
The remaining 1,691,542 outstanding shares of common stock are "restricted
securities" within the meaning of Rule 144 under the Securities Act of 1933, as
amended, and may not be sold in the absence of registration unless an exemption
from registration is available, including the exemption contained in Rule 144.
All of such shares become eligible for sale under Rule 144 commencing 90 days
after the date of this prospectus through November 1999. Pursuant to the terms
of the underwriting agreement, the representative has required that the shares
of common stock owned by officers, directors and the current shareholders may
not be sold until at least 12 months from the date of this prospectus without
its prior written consent. Of the shares owned by Nigel V. Alexander and Shawn
B. Stickle, 200,000 shares are subject to an escrow arrangement and may, under
certain circumstances, be released as late as seven years after the date of this
prospectus. In the absence of agreements with the representative, the
outstanding restricted common stock could be sold in accordance with Rule 144 as
described above. See "Underwriting" for a more in depth description of the
underwriting agreement.
In general, under Rule 144 as currently in effect, a shareholder who has
beneficially owned shares of common stock for at least one year is entitled to
sell, within any three-month period, a number of "restricted" shares that does
not exceed the greater of 1% of the then outstanding shares of common stock or
the average weekly trading volume during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about Multi-Link. Rule 144(k) provides that a shareholder who is not
deemed to be an "affiliate" and who has beneficially owned shares of common
stock for at least two years is entitled to sell such shares at any time under
Rule 144(k) without regard to the limitations described above.
In addition to the shares of common stock that are currently outstanding, a
total of 300,000 shares of common stock have been reserved for issuance upon
exercise of options granted under the stock option plan, under which options to
acquire 165,000 shares of common stock at exercise prices of between $0.017 and
$4.17 per share have been granted and are exercisable at various times through
2008 and options to purchase an additional 20,000 shares of Multi-Link's common
stock at $6.00 per share have been granted and are exercisable until 2009.
Ninety days after the date of this prospectus, Multi-Link plans to file a
registration statement on Form S-8 to register the shares of common stock that
have been reserved for issuance upon exercise of options granted under the stock
option plan. Once registered, the shares of common stock issued upon exercise of
such options will be freely tradable without restriction under the Securities
Act 1933, as amended, except for shares held by an "affiliate" of Multi-Link,
which shares will remain subject to certain restrictions. In addition, the
representative has required all holders of options to agree not to sell,
transfer, hypothecate or convey any shares of common stock issued upon exercise
of stock options for a period of 13 months after the date hereof, except as
specified below. Multi-Link may permit the sale from time to time of common
stock issued upon exercise of stock options by persons who are not directors or
officers of Multi-Link; provided that such sales shall not exceed an aggregate
of 30,000 shares of common stock during the 13 month period after this offering.
All sales of common stock issued upon exercise of stock options within the 13
month period must be made through the representative.
Multi-Link also has outstanding warrants to purchase 133,500 shares of
common stock that are not exercisable until November 17, 1999. These warrants
are exercisable at a price of $5.00 per share as to 15,000 shares and at a price
of $4.17 per share as to 118,500 shares. Multi-Link has agreed to register these
shares of common stock for public resale.
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Multi-Link also has outstanding warrants to purchase 150,000 shares of
common stock at a price of $4.17 per share that expire on the date of this
prospectus.
Multi-Link is unable to estimate the number of shares that may be sold in
the future by the existing holders of shares of Multi-Link's common stock or
holders of options or warrants that are outstanding or the effect, if any, that
sales of shares of common stock by such persons will have on the market price of
the common stock prevailing from time to time. Sales of substantial amounts of
common stock by such persons could adversely affect the then prevailing market
prices.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, for which Schneider Securities, Inc. is acting as the
underwriters' representative, or "representative," have agreed to purchase from
Multi-Link the number of units set forth opposite their names, and will purchase
the units at the price to public less underwriting discount set forth on the
cover page of this prospectus:
Number
Underwriter of Units
----------- --------
Schneider Securities, Inc. ............................
---------
Total ................................................. 1,150,000
=========
The underwriting agreement provides that the underwriters' obligations are
subject to conditions precedent and that the underwriters are committed to
purchase all units offered hereby (other than those covered by the
over-allotment option described below) if the underwriters purchase any such
securities.
The representative has advised Multi-Link that the underwriters propose to
offer the units offered hereby directly to the public at the price to public set
forth on the cover page of this prospectus, and that they may allow to certain
dealers which are members of the National Association of Securities Dealers,
Inc., concessions not in excess of $-----------. After the initial public
distribution of the units is completed, the price of the shares of common stock
and warrants may change as a result of market conditions. No change in such
terms will change the amount of proceeds to be received by Multi-Link as set
forth on the cover page of this prospectus. The representative has further
advised Multi-Link that the underwriters do not intend to confirm sales to any
accounts over which any of them exercises discretionary authority.
Multi-Link has agreed to pay the representative a nonaccountable expense
allowance of 3% of the aggregate public offering price of the units offered,
including units sold on exercise of the over-allotment option, of which $45,000
has been previously paid to the representative. Multi-Link has also agreed to
pay all expenses in connection with qualifying the units offered hereby for sale
under the laws of such states as the representative may designate.
Multi-Link has granted the underwriters an option, exercisable for 45 days
after the date of this prospectus, to purchase up to 172,500 additional units at
the same price as the initial units offered. The underwriters may purchase the
units solely to cover over-allotments, if any, in connection with the sale of
the units offered hereby. If the over-allotment option is exercised in full, the
total public offering price, underwriting discounts and commissions and proceeds
to Multi-Link will be $7,935,000, $793,500 and $7,141,500, respectively.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended. Over-allotment involves
syndicate sales in excess of the offering size, which create a syndicate short
position Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the securities in the open
market after the distribution has been completed in order to cover syndicate
45
<PAGE>
short positions. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the securities originally sold by such
syndicate member are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the common stock or
warrants to be higher than they would otherwise be in the absence of such
transactions.
Neither Multi-Link nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock or warrants. In
addition, neither Multi-Link nor any of the underwriters makes any
representation that the underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Multi-Link's officers, directors and shareholders owning 1% or more of the
outstanding common stock (including derivative securities of Multi-Link), have
agreed not to offer, sell or otherwise dispose of any shares of common stock or
derivative securities of Multi-Link for a period of 13 months after the date of
this prospectus without the prior written consent of the representative. All
officers, directors and holders of 5% or more of the common stock of Multi-Link
have further agreed not to offer, sell or otherwise dispose of any capital stock
or derivative securities of Multi-Link through a "Regulation S" transaction for
a minimum period of five years from the date of this prospectus without the
prior written consent of the representative. Each of the shareholders of
Multi-Link who owns less than 1% of the outstanding shares of common stock of
Multi-Link has also agreed not to offer, sell or otherwise dispose of any shares
of common stock for a period of 12 months after the date of this prospectus
without the prior written consent of the representative. Collectively, these
periods in which the common stock or derivative securities of Multi-Link cannot
be offered, sold or otherwise disposed of, are referred to in this prospectus as
the "lock-up period." The representative has no present intention to waive or
shorten the lock-up period.
Multi-Link will sell to the representative on completion of the offering,
for a total purchase price of $100, the representative's option for the purchase
of units entitling the representative or its assigns to purchase one unit for
each 10 units sold to the public (excluding the units sold in the over-allotment
option). The representative's option will be exercisable commencing one year
from the date of this prospectus and will expire five years from such date. Two
of the warrants included in the units underlying the representative's option
will be exercisable to purchase one share of common stock at an exercise price
of $9.00 per share during the three year term of the warrants. The
representative's option will contain certain anti-dilution provisions and
provide for the cashless exercise of the representative's option utilizing
securities of Multi-Link (which may include the implicit value of the
representative's option or warrants being surrendered). The exercise price of
the representative's option to purchase units is 120% of the public offering
price or $7.20 per unit.
Multi-Link will set aside and at all times have available a sufficient
number of securities to be issued upon exercise of the representative's option.
The representative's option and underlying securities will be restricted from
sale, transfer, assignment or hypothecation for a period of one year after the
date of this prospectus, except to officers of the representative,
co-underwriters, selling group members and their officers, employees or
partners. Thereafter, the representative's option and underlying units will be
transferable provided such transfer is in accordance with the provisions of the
Securities Act of 1933, as amended. Subject to certain limitations and
exclusions, Multi-Link has agreed, at the request of representative, to register
the common stock included in the units and underlying the warrants included in
the units issuable upon exercise of the representative's option.
Upon any solicited exercise of the warrants after one year from the date of
this prospectus, Multi-Link will pay the representative a fee of 5% of the
aggregate exercise price for warrant exercises if:
46
<PAGE>
o the market price of the common stock on the date the warrant is
exercised is greater than the then exercise price of the warrant;
o the exercise of the warrant was solicited by a member of the National
Association of Securities Dealers, Inc. as designated in writing on
the warrant certificate subscription form (provided that any request
for exercise will be presumed to be unsolicited unless the customer
states in writing that the transaction was solicited and designates
the broker-dealer to receive compensation);
o the warrant is not held in a discretionary account;
o disclosure of compensation arrangements was made both at the time of
the offering and at the time of exercise of the warrant; and
o the solicitation of exercise of the warrant was not in violation of
Regulation M promulgated under the Securities Exchange Act of 1934, as
amended.
A portion of the 5% fee may be reallowed by the representative to participating
broker-dealers.
Regulation M prohibits the representative from engaging in any market
making activities with regard to Multi-Link's securities during the period
commencing as of the date on which the representative becomes a participant in
the solicitation of the exercise of warrants until the termination of such
solicitation activity. As a result, the representative may be unable to make a
market in Multi-Link's securities during certain periods while the warrants are
exercisable.
For a period of three years from the date hereof, the representative has a
preferential right to purchase for its account or to sell for the account of
Multi-Link (or any successors), or any subsidiaries of Multi-Link, any
securities with respect to which any of them may seek to sell, publicly or
privately, for cash other than transactions with a lending institution.
Multi-Link and the representative have entered into a non-exclusive
agreement which provides that, if the representative arranges for the purchase
or sale of substantially all of the assets of Multi-Link, or for a merger,
consolidation or acquisition accepted by Multi-Link during the five-year period
commencing on the date of this prospectus, the representative will receive a fee
based on a sliding scale ranging from 5% of the first $1 million of
consideration and decreasing to 3% of consideration in excess of $2 million.
Multi-Link and the representative have entered into an agreement which
provides that for a period of three years from the date of this prospectus, all
public sales of Multi-Link's securities by officers, directors and shareholders
of Multi-Link at the time of this prospectus shall be effected through or with
the representative on an exclusive basis, provided that the representative
offers the best price reasonably available. In addition, for a period of three
years commencing two years from the date of this prospectus, in the case of
private transactions in Multi-Link's common stock, such selling security holders
specified above shall offer the representative the exclusive opportunity to
purchase or sell the common stock on terms at least as favorable as the selling
security holder can obtain elsewhere.
For a period of five years after the date hereof, the representative has
the right to have an observer attend meetings of Multi-Link's board of directors
and receive the same compensation (excluding grants of options) and expenses
paid to Multi-Link's directors.
Prior to this offering, there has not been a public market for Multi-Link's
securities. The public offering price of the units and the exercise price of the
warrants has been determined by arms-length negotiation between Multi-Link and
the representative. There is no direct relation between the offering price of
the units and the assets, book value or net worth of Multi-Link. Among the
47
<PAGE>
factors considered by Multi-Link and the representative in pricing the units and
in determining the exercise price of the warrants were the results of
operations, the current financial condition and future prospects of Multi-Link,
the experience of management, the amount of ownership to be retained by present
stockholders, the general condition of the economy and the securities markets
and the demand for securities of companies considered comparable to Multi-Link.
In connection with this offering, Multi-Link and the underwriters have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and if such
indemnification is unavailable or insufficient, Multi-Link and the underwriters
have agreed to damage contribution arrangements based upon relative benefits
received from this offering and relative fault resulting in such damage.
48
<PAGE>
LEGAL MATTERS
The validity of the common stock and warrants offered hereby will be passed
upon by Smith McCullough, P.C. Certain legal matters will be passed upon for the
representative by Berliner Zisser Walter & Gallegos, P.C.
EXPERTS
The consolidated balance sheet of Multi-Link as of September 30, 1998 and
the consolidated statements of operations and comprehensive income (loss),
stockholders' equity and cash flows for the year ended September 30, 1998
included in this prospectus have been included herein in reliance on the report
of HEIN + ASSOCIATES LLP, independent certified public accountants, given on the
authority of that firm as experts in auditing and accounting.
The consolidated statements of operations and comprehensive income (loss),
stockholder's equity and cash flows for the year ended September 30, 1997 and
for the period from January 22, 1996 to September 30, 1996 included in this
prospectus have been included herein in reliance on the report of James E.
Scheifley & Associates, PC, independent certified public accountants, given on
the authority of that firm as experts in auditing and accounting.
With respect to the unaudited interim consolidated financial information
for the three months ended December 31, 1997 and 1998, the independent certified
public accountants have not audited such consolidated financial information and
have not expressed an opinion or any other form of assurance with respect to
such consolidated financial information.
On December 16, 1998, Multi-Link engaged HEIN & ASSOCIATES LLP as
Multi-Link's principal independent accountant in place of James E. Scheifley &
Associates, PC. On December 16, 1998, Multi-Link requested and received the
resignation of James E. Scheifley & Associates, PC. There were no disagreements
between Multi-Link and James E. Scheifley & Associates, PC on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of James E.
Scheifley & Associates, PC, would have caused James E. Scheifley & Associates,
PC to make reference in its reports to the subject matter of such disagreements.
The opinion of James E. Scheifley & Associates, PC on Multi-Link's consolidated
financial statements for the fiscal year ended September 30, 1997, and for the
period from January 22, 1996 to September 30, 1996 contained no adverse opinion
or disclaimer of opinion, nor was such opinion qualified as to uncertainty,
audit scope or accounting principles. The decision to change accountants was
approved by Multi-Link's board of directors.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------
PAGE
----
Independent Auditors' Reports............................................... F-2
Consolidated Balance Sheets - September 30, 1998 and
December 31, 1998 (Unaudited).......................................F-4
Consolidated Statements of Operations and Comprehensive Income (Loss) - For the
Period from Inception (January 22, 1996) to September 30, 1996, for the
Years Ended September 30, 1997 and 1998, and for the Three Months Ended
December 31, 1997 and
1998 (Unaudited)................................................... F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit) - For the
Period from Inception (January 22, 1996) to September 30, 1996, for the
Years Ended September 30, 1997 and 1998, and for the Three Months Ended
December 31, 1998 (Unaudited)...................................... F-6
Consolidated Statements of Cash Flows - For the Period from Inception (January
22, 1996) to September 30, 1996, for the Years Ended September 30, 1997
and 1998, and for the Three Months Ended December 31, 1997 and 1998
(Unaudited).........................................................F-7
Notes to Consolidated Financial Statements.................................. F-8
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Multi-Link Telecommunications, Inc. and Subsidiary
Denver, Colorado
We have audited the accompanying consolidated balance sheet of Multi-Link
Telecommunications, Inc. and subsidiary as of September 30, 1998 and the related
consolidated statements of operations and comprehensive income (loss), changes
in stockholders' equity (deficit), and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Multi-Link Telecommunications, Inc. and subsidiary as of September 30, 1998 and
of the results of their operations and their cash flows for the year then ended,
in conformity with generally accepted accounting principles.
/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
January 21, 1999, except for Note 4 for which the
date is February 10, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Multi-Link Holdings, Inc. and Subsidiary
We have audited the consolidated balance sheet of Multi-Link Holdings, Inc. and
Subsidiary as of September 30, 1997 and 1996 and the accompanying related
consolidated statements of operations and comprehensive loss, stockholders'
equity, and cash flows for the year ended September 30, 1997 and the period from
inception (January 22, 1996) to September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Multi-Link Holdings, Inc. and
Subsidiary as of September 30, 1997 and 1996, and of the results of its
operations and comprehensive loss and cash flows for the year ended September
30, 1997 and the period ended September 30, 1996, in conformity with generally
accepted accounting principles.
/s/ James E. Scheifley & Associates, PC
James E. Scheifley & Associates, PC
Certified Public Accountants
Englewood, Colorado
February 13, 1998
F-3
<PAGE>
<TABLE>
<CAPTION>
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1998 1998
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................ $ 555,852 $ 188,574
Accounts receivable - trade, net of allowance for doubtful
accounts of $46,563 and $43,438 (unaudited), respectively ........... 104,284 198,042
Note receivable .......................................................... -- 204,453
----------- -----------
Total current assets ............................................ 660,136 591,069
PROPERTY AND EQUIPMENT, net .................................................. 683,966 688,844
OTHER ASSETS:
Deferred financing and offering costs .................................... 161,369 111,324
Intangible assets, less amortization of $349,160 and $376,555
(unaudited), respectively ........................................... 241,244 286,580
----------- -----------
TOTAL ASSETS ................................................................. $ 1,746,715 $ 1,677,817
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable ......................................................... $ 153,432 $ 33,123
Accrued expenses ......................................................... 199,639 95,108
Deferred revenue ......................................................... 161,431 148,876
Notes payable - related parties, current portion ......................... 421,167 179,916
Notes payable and current portion of long-term debt ...................... 179,829 179,452
----------- -----------
Total current liabilities ....................................... 1,115,498 636,475
NOTES PAYABLE - RELATED PARTIES, LESS CURRENT PORTION ........................ 247,807 113,570
LONG-TERM DEBT, LESS CURRENT PORTION ......................................... 2,222,065 2,301,721
COMMITMENTS (Note 7)
STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued ......................................................... -- --
Common stock, no par value; 20,000,000 shares authorized,
1,570,152 and 1,691,542 (unaudited) shares issued and
outstanding, respectively ........................................... 442,591 822,771
Accumulated deficit ...................................................... (2,281,246) (2,196,720)
----------- -----------
Total stockholders' deficit ..................................... (1,838,655) (1,373,949)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT .................................. $ 1,746,715 $ 1,677,817
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE
PERIOD FROM
INCEPTION FOR THE THREE
(JANUARY 22, 1996) FOR THE YEARS ENDED MONTHS ENDED
TO SEPTEMBER 30, DECEMBER 31,
SEPTEMBER 30, --------------------- -----------------------
1996 1997 1998 1997 1998
---------------- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET REVENUES .............................. $ 221,824 $ 1,154,161 $ 1,859,276 $ 413,046 $ 512,714
COST OF SERVICES AND PRODUCTS ............. 82,572 348,413 371,391 92,933 95,994
----------- ----------- ----------- ----------- -----------
GROSS MARGIN .............................. 139,252 805,748 1,487,885 320,113 416,720
OPERATING EXPENSES:
Sales and advertising ................. 306,979 692,247 155,270 114,547 10,017
General and administrative ............ 313,957 847,807 742,527 190,385 169,954
Depreciation .......................... 30,263 61,943 80,513 20,368 21,694
Amortization .......................... 2,916 5,000 41,674 1,250 27,395
Impairment of goodwill ................ 299,570 -- -- -- --
----------- ----------- ----------- ----------- -----------
Total operating expenses .......... 953,685 1,606,997 1,019,984 326,550 229,060
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS ............. (814,433) (801,249) 467,901 (6,437) 187,660
INTEREST INCOME (EXPENSE), net ........ (60,749) (437,198) (635,518) (137,656) (103,134)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) ............. $ (875,182) $(1,238,447) $ (167,617) $ (144,093) $ 84,526
=========== =========== =========== =========== ===========
NET INCOME (LOSS) PER
COMMON SHARE:
Basic ................................. $ (.71) $ (.89) $ (.11) $ (.10) $ .05
=========== =========== =========== =========== ===========
Diluted ............................... $ (.71) $ (.89) $ (.11) $ (.10) $ .05
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic ................................. 1,229,640 1,392,568 1,496,905 1,490,698 1,632,325
=========== =========== =========== =========== ===========
Diluted ............................... 1,229,640 1,392,568 1,496,905 1,490,698 1,750,020
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (JANUARY 22, 1996) TO SEPTEMBER 30, 1996,
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1998, AND
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
COMMON STOCK
------------------------ Accumulated
Shares Amount Deficit Total
------ ------ ----------- -----
<S> <C> <C> <C> <C>
BALANCES, January 22, 1996 ................... -- $ -- $ -- $ --
Common stock for cash .................... 1,200,000 10,000 -- 10,000
Common stock issued for services ......... 61,200 1,020 -- 1,020
Net loss ................................. -- -- (875,182) (875,182)
----------- ----------- ----------- -----------
BALANCES, September 30, 1996 ................. 1,261,200 11,020 (875,182) (864,162)
Common stock issued for services ......... 92,810 14,191 -- 14,191
Common stock issued for loans ............ 136,688 23,940 -- 23,940
Net loss ................................. -- -- (1,238,447) (1,238,447)
----------- ----------- ----------- -----------
BALANCES, September 30, 1997 ................. 1,490,698 49,151 (2,113,629) (2,064,478)
Warrants issued for loans ................ -- 73,440 -- 73,440
Common stock issued in exchange for debt . 79,454 320,000 -- 320,000
Net loss ................................. -- -- (167,617) (167,617)
----------- ----------- ----------- -----------
BALANCES, September 30, 1998 ................. 1,570,152 442,591 (2,281,246) (1,838,655)
Common stock issued for private placement
(unaudited) ........................ 141,600 350,901 -- 350,901
Common stock issued in exchange for debt
(unaudited) ........................ 8,400 35,000 -- 35,000
Shares repurchased (unaudited) ........... (28,610) (5,721) -- (5,721)
Net income (unaudited) ................... -- -- 84,526 84,526
----------- ----------- ----------- -----------
BALANCES, December 31, 1998 (Unaudited) ...... 1,691,542 $ 822,771 $(2,196,720) $(1,373,949)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
PERIOD FROM
INCEPTION FOR THE THREE
(JANUARY 22, 1996) FOR THE YEARS ENDED MONTHS ENDED
TO SEPTEMBER 30, DECEMBER 31,
SEPTEMBER 30, -------------------- --------------------
1996 1997 1998 1997 1998
---------------- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..................................... $ (875,182) $(1,238,447) $ (167,617) $ (144,093) $ 84,526
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization .................... 33,179 66,943 122,187 21,618 49,089
Impairment of goodwill ........................... 299,570 -- -- -- --
Amoritization of debt discount and
issuance costs ................................. -- -- -- -- 7,175
Common stock issued for services
and loans ...................................... 1,020 38,131 -- -- --
Bad debt expense ................................. 8,929 64,038 95,299 23,850 25,514
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable .............................. (30,680) (186,647) (49,190) (2,771) (103,093)
Deferred factoring costs and other
prepayments ................................... (52,709) (54,871) 107,492 18,948 (16,179)
Increase (decrease) in:
Accounts payable ................................. 157,519 305,494 (63,449) 17,107 (120,309)
Accrued expenses ................................. 55,209 49,128 (214,471) (41,453) (104,531)
Deferred revenue ................................. 36,177 (40,559) 60,318 (8,235) (12,555)
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities ............... (366,968) (966,790) (109,431) (115,029) (190,363)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subscriber accounts ....................... -- -- (265,834) -- (72,731)
Sale (purchase) of fixed assets ....................... 800 (38,446) -- -- (26,572)
Advance of note receivable ............................ -- -- -- -- (204,453)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities ........................... 800 (38,446) (265,834) -- (303,756)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issue costs ...................................... -- -- (70,154) -- --
Offering costs ........................................ -- -- (91,215) -- (192,557)
Payment of related party notes payable ................ (14,472) (364,035) (1,546,938) (383,567) (448,594)
Advances under related party notes payable ............ 325,817 1,342,913 1,673,641 555,253 79,283
Advances under notes payable .......................... 80,000 36,241 1,197,215 5,971 150,000
Payment of notes payable .............................. (12,500) (15,580) (248,412) (60,140) (45,570)
Repurchase of outstanding shares ...................... -- -- -- -- (5,721)
Proceeds from issuance of common stock ................ 10,000 -- -- -- 590,000
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities .......... 388,845 999,539 914,137 117,517 126,841
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ...................................... 22,677 (5,697) 538,872 2,488 (367,278)
CASH AND CASH EQUIVALENTS,
at beginning of period ................................ -- 22,677 16,980 16,980 555,852
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
at end of period ...................................... $ 22,677 $ 16,980 $ 555,852 $ 19,468 $ 188,574
=========== =========== =========== =========== ===========
<PAGE>
<CAPTION>
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE
PERIOD FROM
INCEPTION FOR THE THREE
(JANUARY 22, 1996) FOR THE YEARS ENDED MONTHS ENDED
TO SEPTEMBER 30, DECEMBER 31,
SEPTEMBER 30, -------------------- --------------------
1996 1997 1998 1997 1998
---------------- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF CASH
FLOW INFORMATION:
Cash paid for interest ................................ $ 73,508 $ 298,331 $ 652,199 $ 59,381 $ 125,041
=========== =========== =========== =========== ===========
Cash paid for taxes ................................... $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
Equipment acquired through capital leases ............. $ 17,465 $ 14,295 $ -- $ -- $ --
=========== =========== =========== =========== ===========
Equipment acquired through debt ....................... $ 281,050 $ 475,444 $ 23,016 $ -- $ --
=========== =========== =========== =========== ===========
Conversion of notes payable to equity ................. $ -- $ -- $ 320,000 $ -- $ 35,000
=========== =========== =========== =========== ===========
Fair value of warrants granted for loans .............. $ -- $ -- $ 73,440 $ -- $ --
=========== =========== =========== =========== ===========
Liabilities assumed in business combination
accounted for as a purchase .......................... $ 315,485 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations - Multi-Link Telecommunications, Inc.
(Telecommunications) was incorporated in the state of Colorado in January
1996 under the name Multi-Link Holdings, Inc. Multi-Link Holdings, Inc. was
renamed Multi-Link Telecommunications, Inc. in May 1998. On February 15,
1996, Telecommunications acquired 97.5% of the issued common stock of Voice
Services, Inc., a Colorado corporation. Voice Services Inc. was renamed
Multi-Link Communications, Inc. (Communications) in April 1996. In May
1996, Communications purchased a Glenayre Modular Voice Processor and
launched a new range of custom designed voice and fax messaging products
targeted at business users in the Denver and Boulder local calling areas.
Principles of Consolidation - The consolidated financial statements include
the accounts of Telecommunications and its 97.5% owned subsidiary,
Communications (collectively the "Company"). All significant intercompany
transactions and accounts have been eliminated. As a result of the
stockholders' deficiency in Communications, the minority interest currently
has no book value.
Cash and Cash Equivalents - Cash and cash equivalents consist of cash and
highly liquid debt instruments with original maturities of less than three
months.
Property and Equipment - Property and equipment acquired on the purchase of
Communications have been stated at fair value. Otherwise, property and
equipment are stated at cost. Depreciation of property and equipment is
calculated using the straight - line method over the estimated useful lives
of the assets. The estimated useful lives are as follows:
Computer equipment - 3 years
Motor vehicles - 3 years
Plant and equipment - 3 years
Voice messaging equipment - 15 years
Intangible Assets - Direct and incremental external costs associated with
the acquisition of subscriber accounts are capitalized. The Company's
personnel and related support costs incurred in support of acquiring and
transitioning subscriber accounts are expensed as incurred. Costs related
to the sales and marketing for subscriber accounts internally generated are
expensed as incurred. Through December 1997, all subscriber accounts were
internally generated and, accordingly, sales and marketing costs were
expensed as incurred. Beginning January 1998, the Company acquired its
subscriber accounts primarily through independent, third-party sales
organizations and, accordingly, these direct and incremental costs have
been capitalized.
The costs of capitalized subscriber accounts acquired are amortized on a
straight-line basis over the lesser of 3 years or the estimated economic
life of the subscriber account.
F-8
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
Goodwill represents the excess of the purchase price over the value of net
assets/liabilities acquired in business acquisitions accounted for as a
purchase. Goodwill is amortized over 5 years on a straight-line basis.
Deferred Financing and Offering Costs - Costs incurred with respect to the
Company's factoring facility have been capitalized and are amortized over
the twelve month term of a customer contract using the straight line
method, which approximates the interest rate method.
Costs incurred with respect to the Company's debt financing have been
capitalized and are amortized over the respective lives of associated debt
using the straight-line method, which approximates the interest rate
method.
Deferred offering costs, totaling $91,714 at September 30, 1998, were
offset against the proceeds of a private offering completed during the
three months ended December 31, 1998. As of December 31, 1998, the Company
has incurred $40,820 of deferred offering costs relating to a proposed
public offering (see Note 10). These costs will be offset against the
offering proceeds if it is successfully completed or otherwise will be
expensed.
Impairment of Long-Lived and Intangible Assets - In the event that facts
and circumstances indicate that the cost of long-lived and intangible
assets may be impaired, an evaluation of recoverability would be performed.
If an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value
is required.
Concentration of Credit Risk and Significant Vendors - Concentration of
credit risk is limited to trade accounts receivable and notes receivable.
The nature of the Company's business is such that no single customer
represents more than 2% of net accounts receivable. The Company does not
require collateral or other security to support customer's receivables but
conducts periodic reviews of customer payment practices to minimize
collection risk on trade accounts receivable. Allowances are maintained for
potential credit losses and such losses have been within management's
expectations.
At December 31, 1998, the note receivable was from one corporation, totaled
$204,453, and was uncollateralized. The note was repaid in full during
February 1999.
The Company currently uses services provided by US West for interconnection
to the public telephone network. There are other local telephone companies
which could provide the Company with a similar interconnection. However, in
the event that US West was to experience difficulties in providing the
Company with interconnection in its present configuration, it could
materially adversely affect the Company's business in the short-term. An
appropriate time period would be required to enable the Company to
establish a new interconnection to the public telephone network.
F-9
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
During the year ended September 30, 1998, the Company began using
independent agents to obtain new subscriber accounts. One agent accounted
for approximately 45% of the Company's new revenue growth during the fiscal
year 1998 which represents a cumulative monthly revenue of approximately
$37,000.
Financial Instruments - The estimated fair values for financial instruments
are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined
with precision. The carrying amounts of note receivable, accounts
receivable, accounts payable, and accrued liabilities approximate fair
value because of the short-term maturities of these instruments. The fair
value of notes payable approximates their carrying value as generally their
interest rates reflect the Company's current effective annual borrowing
rate.
Income Taxes - The Company currently accounts for income taxes under the
liability method, which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Deferred Revenue and Revenue Recognition - Revenues are recognized at the
time services are performed or products are delivered, net of refunds.
Deferred revenues primarily represent customer prepayments which are
recognized as income when earned.
Comprehensive Income (Loss) - Comprehensive income is defined as all
changes in stockholders' equity (deficit), exclusive of transactions with
owners, such as capital investments. Comprehensive income includes net
income or loss, changes in certain assets and liabilities that are reported
directly in equity such as translation adjustments on investments in
foreign subsidiaries, and certain changes in minimum pension liabilities.
The Company's comprehensive income (loss) was equal to its net income
(loss) for all periods presented in these financial statements.
Income (Loss) Per Share - The income (loss) per share is presented in
accordance with the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share (FAS 128). FAS 128 replaced the
presentation of primary and fully diluted earnings (loss) per share (EPS)
with a presentation of basic EPS and diluted EPS. Basic EPS is calculated
by dividing the income or loss available to common stockholders by the
weighted average number of common stock outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock. Basic and diluted EPS were the same for fiscal 1996, 1997, and 1998
as the Company had losses from operations and, therefore, the effect of all
additional potential common stock was antidilutive. During the three months
ended December 31, 1998, included in diluted EPS are common equivalent
shares outstanding totaling 117,695, determined using the treasury stock
method consisting of stock options and warrants.
F-10
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
Stock-Based Compensation - In fiscal 1997, the Company adopted Financial
Accounting Standards Board No. 123, Accounting for Stock-Based Compensation
(FAS 123). FAS 123 encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on fair value. Companies that do not adopt
the fair value accounting rules must disclose the impact of adopting the
new method in the notes to the financial statements. Transactions in equity
instruments with non-employees for goods or services must be accounted for
on the fair value method. The Company has elected not to adopt the fair
value accounting prescribed by FAS 123 for employees, and is subject only
to the disclosure requirements prescribed by FAS 123.
Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements - SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998.
This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. This statement is effective for the Company's financial statements
for the year ended September 30, 2001 and the adoption of this standard is
not expected to have a material effect on the Company's financial
statements.
SFAS No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits, was issued in February 1998. This statement
revises the disclosure requirement for pensions and other postretirement
benefits. This statement is effective for the Company's financial
statements for the year ended September 30, 1999 and the adoption of this
standard is not expected to have a material effect on the Company's
financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, was issued in June 1997. This statement establishes standards
for the way public business enterprises report information about operating
segments. It also establishes standards for related disclosure about
products and services, geographical areas and major customers. This
statement is effective for the Company's financial statements for the year
ended September 30, 1999 and the adoption of this standard is not expected
to have a material effect on the Company's financial statements.
Unaudited Information - The consolidated balance sheet as of December 31,
1998 and the consolidated statements of operations for the three-month
period ended December 31, 1997 and 1998 were taken from the Company's books
and records without audit. However, in the opinion of management, such
information includes all adjustments (consisting only of normal recurring
accruals) which are necessary to properly reflect the consolidated
financial position of the Company as of December 31, 1998 and the results
of operations for the three months ended December 31, 1997 and 1998.
F-11
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
Reclassifications - Certain reclassifications have been made so that the
financial statements for the period from inception (January 22, 1996) to
September 30, 1996 and the year ended September 30, 1997 conform to the
presentation adopted in fiscal 1998. The reclassifications had no effect on
net income (loss).
2. ACQUISITION:
On February 15, 1996, Telecommunications acquired 97.5% of the common stock
of Communications for $140,000. The Company used the purchase method to
account for this acquisition. The results of Communications have been
included in Telecommunications' consolidated statements of operation from
the date of acquisition. The excess of the total acquisition costs and
related fees over the fair market value of the net liabilities acquired
totaling $324,570 has been recorded as goodwill which, is being amortized
over a five-year period on a straight-line basis. Effective September 30,
1996, the Company recognized an impairment of goodwill totaling $299,570,
as a result of management's re-evaluation of the acquired technology,
customer base and anticipated future cash flows.
3. PROPERTY AND EQUIPMENT:
Property and equipment comprise the following as of September 30, 1998:
Computer equipment $ 79,980
Motor vehicles 17,426
Plant and equipment 2,905
Voice messaging equipment 756,374
---------
856,685
Accumulated depreciation (172,719)
---------
$ 683,966
=========
4. NOTE RECEIVABLE:
In November 1998, Communications entered into a $250,000 line-of-credit
agreement with one of the Company's independent agents. As of December 31,
1998, the amount drawn on the line-of-credit was $204,453. During February
1999, all outstanding principal and accrued interest was paid and the
line-of-credit was terminated.
F-12
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
5. INTANGIBLE ASSETS:
Intangible assets comprise the following as of September 30, 1998:
Goodwill $ 324,570
Subscriber accounts 265,834
---------
590,404
Amortization (349,160)
---------
$ 241,244
=========
6. NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable and long-term debt consist of the following as of September
30, 1998:
Related Parties:
Note payable to a stockholder (previously the Company's factor)
with interest at 15% until September 30, 1999, then increasing
to 25%. Repayment of principal is required from net proceeds of
all subsequent debt and equity financing until the balance is
repaid in full. Interest is payable monthly and principal
payments of $25,000 begin October 30, 1999 and continue until
the balance is repaid in full. This note is collateralized by
all the assets of the Company with the personal guarantees of
certain officers/directors/stockholders and is subordinated to
the Westburg Loan (see other notes payable). During the three
months ended December 31, 1998, the Company made $374,237 of
principal and interest payments from the private placement which
occurred in November 1998. The Company also issued warrants for
the purchase of 36,000 shares of common stock to the lender as
consideration for converting part of the loan to equity (see
Note 8). $ 547,807
Notes payable to an entity owned by a stockholder/director of
the Company with 10% interest, payable on demand. This note is
unsecured. 43,923
Notes payable to a stockholder/director of the Company, with 10%
interest, payable on demand. This note is unsecured. 77,244
---------
668,974
Less current portion (421,167)
---------
$ 247,807
=========
Total interest expense to these related parties for the period from
inception (January 22, 1996) to September 30, 1996, for the years ended
September 30, 1997 and 1998 and for the three months ended December 31,
1997 and 1998 was $17,844, $255,446, $376,344, $101,159, and $17,008,
respectively.
F-13
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
Other
Communications has entered into various loan agreements to
purchase motor vehicles, computer and voice messaging equipment.
The loans require varying monthly payments and mature through
June 2003. Interest is charged at rates between 12.5% and 13.9%.
The loans are collateralized by the underlying assets and are
personally guaranteed by certain officers/directors/stockholders
of the Company. $ 621,308
Note payable to a commercial lender (the Westburg Loan) with
interest charged at 3% above prime (11.25% as of September 30,
1998) monthly payments of interest only through September 1999
after which date monthly principal and interest payments to be
made on the basis of a 10-year amortization with all unpaid
principal and accrued interest due October 2003. Certain
officers/directors/stockholders have pledged 960,000 shares of
their common stock as collateral for the loan. Additionally,
this note is collateralized by all the assets of the Company and
guaranteed by certain officers/directors/stockholders of the
Company. The Westburg Loan is a $2,100,000 term credit facility
of which $1,800,000 and $1,950,000 have been drawn as of
September 30, 1998 and December 31, 1998, respectively. Under
the terms of the Westburg Loan, the Company is required to
maintain certain financial ratios and has certain other
restrictions including limits on total indebtedness, payment of
dividends, and capital expenditures. As of September 30, 1998,
the Company was not in compliance with the debt ratio covenant
and received a waiver from Westburg. Th Company was in
compliance with all debt covenants as of December 31, 1998. The
Company also issued warrants for the purchase of 150,000 shares
of common stock to the lender as consideration for the loan. The
estimated fair value of the warrants is treated as a discount on
the long-term debt and is being amortized over the 5-year term
of the loan.
Face value $1,800,000
Unamortized discount (73,440)
---------
1,726,560
Note payable to a private individual with interest charged at
15% which was unsecured cured and which was due to mature June
30, 1999. The principal balance was converted to equity in
November 1998. 35,849
Other 18,177
---------
2,401,894
Less current portion (179,829)
---------
$2,222,065
=========
F-14
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
Principal payments on the above obligations at September 30, 1998, net of
the discount on the Westburg Loan, are due as follows:
Related
Parties Other
------- -----
1999 $ 421,167 $ 179,829
2000 247,807 248,460
2001 -- 273,756
2002 -- 233,977
2003 -- 153,376
Thereafter -- 1,312,496
---------- -----------
$ 668,974 $ 2,401,894
========== ==========
7. COMMITMENTS:
The Company leases certain equipment under lease agreements classified as
operating leases. Minimum future equipment rental payments are as follows:
1999 $ 8,575
2000 7,664
2001 6,535
2002 4,635
2003 1,545
----------
$ 28,954
==========
The Company leases its office facility for monthly payments of $2,200 and
intends to vacate this facility and lease a new facility in 1999.
Rent expense for the period from inception (January 22, 1996) to September
30, 1996, for the years ended September 30, 1997 and 1998 and for the three
months ended December 31, 1997 and 1998 was $12,655, $18,150, $20,712,
$5,134, and $6,501, respectively.
8. STOCKHOLDERS' EQUITY:
Preferred Stock - The Company has the authority to issue 5,000,000 shares
of preferred stock. The Board of Directors has the authority to issue such
preferred stock in series and determine the rights and preferences of the
shares.
F-15
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
Common Stock - During 1997, the Company declared a 200 for 1 stock split.
The Company also declared a 3 for 5 reverse stock split effective in
February 1999. Accordingly, all amounts for common stock reflected in the
financial statements and accompanying notes reflect the effect of these
splits.
Warrants - During fiscal 1998, the Company issued warrants for the purchase
of 36,000 shares of common stock to an entity in consideration for
converting part of its debt with the Company to equity. These warrants
expire May 2000 and as of December 31, 1998, were exercisable at $8.33 per
share. Effective February 1999, these warrants were repriced at $4.17 per
share.
During the year ended September 30, 1998, the Company issued a warrant for
the purchase of 150,000 shares of common stock to the lender in
consideration for advancing the Westburg Loan (see Note 6). The expiration
date of the warrants will be earlier of (i) the date all amounts are repaid
under the Westberg loan, (ii) the date of the sale of the Company or
substantially all of its assets, or (iii) the effective date of a
registration statement filed under the Securities Act in connection with a
$5,000,000 or greater firm commitment underwriting for common stock of the
Company. These warrants are exercisable at $4.17 per share.
In connection with the private placement and debt conversion in November
1998, the Company issued warrants to purchase 75,000 shares of common
shares which, as of December 31, 1998, were exercisable at $8.33 per share.
Effective February 1999, these warrants were repriced at $4.17 per share.
The warrants expire in May 2000 and are redeemable under certain
circumstances by the Company.
In November 1998, the placement agent of the private placement was issued
warrants to purchase 15,000 and 7,500 shares of common stock at $5 and
$4.17 per share, respectively. The warrants are exercisable under the same
terms as the warrants issued in the private placement. The placement agent
options are exercisable after November 1999 and expire in November 2003.
Stock Options - In 1997, the Company adopted a stock option plan (the
"Plan") that authorizes the issuance of up to 300,000 shares of common
stock. Pursuant to the Plan, the Company may grant "incentive stock
options" (intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended) or "nonqualified stock options."
Incentive and nonqualified stock options shall be granted at fair market
value, to be determined by the Board of Directors, at the date of grant
(except for holders of more than 10% of common stock, in which case the
exercise price must be at least 110% of the fair market value at the date
of grant for incentive stock options). The term of the options shall not
exceed ten years and the vesting date is determined by the Board of
Directors. As of September 30, 1998, the Company had granted options under
the Plan to purchase 164,295 shares, of which no options have been
exercised and 9,630 have been forfeited or canceled.
F-16
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
The following is a table of activity under the Plan:
1997 1998
------------------- -------------------
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
--------- -------- --------- --------
Outstanding, beginning of year -- $ -- 101,355 $ .105
Granted:
Employees and others -- -- 25,200 2.450
Employees and others -- -- 35,490 4.167
Employees 72,000 .017 -- --
Employees 13,110 .167 -- --
Employees 18,495 .417 -- --
Forfeited/Canceled (2,250) .220 (7,380) .943
------- ----- ------ -----
Outstanding, end of year 101,355 $.105 154,665 $ 1.384
======= ===== ======= =====
For all options granted during fiscal 1997 and 1998, the weighted average
market price of the Company's common stock on the grant date was
approximately equal to the weighted average exercise price. Because the
shares are not registered and publicly traded, for the purpose of pricing
the grants, the fair market value of the Company's common stock is
determined by the Company's management and the Board of Directors.
The weighted average contractual life for all options as of September 30,
1998 was approximately 9 years, with the exercise prices ranging from $.017
to $4.167. At September 30, 1998, options for 12,015 shares were
exercisable and options for the remaining shares become exercisable pro
rata through fiscal 2000. If not previously exercised, options outstanding
at September 30, 1998, will expire as follows:
Weighted
Average
Number Exercise
Fiscal Year of Shares Price
----------- --------- --------
2007 72,000 $ .017
2007 7,410 .167
2007 16,605 .417
2008 23,580 2.450
2008 35,070 4.166
------- ------
154,665 $1.384
======= ======
F-17
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
On December 31, 1998, the Company issued a total of 10,335 options at an
exercise price of $6.00 per share to employees of the Company and others.
The Company will issue options for the purchase of 20,000 shares of common
stock at an exercise price of $6.00 per share to two independent directors
of the Company if the public offering is successful (see Note 10).
Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for its stock options
which are granted to employees. Accordingly, no compensation cost has been
recognized for grants of options to employees since the exercise prices
were not less than the fair value of the Company's common stock on the
grant dates. Had compensation cost been determined based on the fair value
at the grant dates for awards under the Plan consistent with the method of
FAS 123, the Company's net income and earnings per share would have been
reduced to the pro forma amount indicated below.
Years Ended
September 30,
--------------------
1997 1998
---- ----
Net loss applicable to common shareholders:
As reported $(1,238,447) $(167,617)
Pro forma (1,239,410) (184,033)
Net loss per common share, basic and diluted:
As reported $ (.89) $ (.11)
Pro forma (.89) (.12)
For purposes of this disclosure, the weighted average fair value of the
options granted was $.033 and $1.117 in fiscal 1997 and 1998, respectively.
The fair value of each employee option granted in fiscal year 1997 and
1998, was estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
Years Ended
September 30,
---------------------
1997 1998
---- ----
Expected volatility 0% 0%
Risk-Free interest rate 6.5% 5.6%
Expected dividends -- --
Expected terms (in years) 4 4
F-18
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
9. INCOME TAXES:
The Company's actual effective tax rate differs from U.S. Federal corporate
income tax rate of 34% as follows:
Period from
Inception
(January 22, 1996) Years Ended
to September 30,
September 30, ----------------
1996 1997 1998
---------------- ---- ----
Statutory rate (34.0%) (34.0%) (34.0%)
State income taxes, net of Federal income (3.3%) (3.3%) (3.3%)
tax benefit
Increase (reduction) in valuation allowance
related to of net operating loss
carryforwards and change in temporary
differences 37.3% 37.3% 37.3%
---- ---- ----
-0-% -0-% -0-%
==== ==== ====
The components of the net deferred tax asset recognized as of September 30
are as follows:
1996 1997 1998
---- ---- ----
Long-term deferred tax assets (liabilities):
Net operating loss carryforwards $ 300,000 $ 740,000 $ 756,000
Goodwill 107,000 99,000 96,000
Capitalized subscriber accounts -- -- (86,000)
Other -- -- (45,000)
Valuation allowance (407,000) (839,000) (721,000)
-------- -------- --------
Net long-term deferred tax asset $ -- $ -- $ --
======== ======== ========
The Company currently has a net operating loss carryforward for Federal tax
purposes of approximately $2,025,000, which, unless utilized, expires from
2011 through 2018. Certain of the loss carryforwards will be subject to
restrictions upon completion of the public offering (see Note 10).
F-19
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to September 30, 1998 is Unaudited)
10. INITIAL PUBLIC OFFERING:
Letter of Intent for a Public Offering - On December 14, 1998, the Company
signed a letter of intent with an underwriter to provide for a public
offering consisting of 1,150,000 units to provide gross proceeds to the
Company of approximately $6,900,000. The Company anticipates that the
offering price will be $6.00 per unit. Each unit will consist of one share
of common stock and one common stock purchase warrant. Two warrants will
allow the holder to purchase one share of common stock at an exercise price
of 150% of the offering price for a period of three years after the date of
the offering. The warrants are redeemable by the Company at $.05 per
warrant upon 30 days notice if the market price of the common stock for 20
consecutive trading days within the 30-day period preceding the date the
notice is given equals or exceeds 125% of the public offering price. The
representative of the underwriters has a 45-day option (over-allotment
option) to purchase up to 172,500 units at the offering price. The Company
will also sell to the representative of the underwriters at the close of
the public offering warrants, at a total purchase price of $100, to
purchase 115,000 units. The underwriters warrants will be exercisable for
four years beginning one year after the effective date of the registration
statement at 120% of the offering price. The letter of intent is subject to
change and cancellation by either party.
F-20
<PAGE>
[GRAPHIC OMITTED]
MULTI-LINK
TELECOMMUNICATIONS, INC.
Multi-Link has not authorized any dealer,
salesperson or other person to give any
information or represent anything not
contained in this prospectus. You must not
rely on any unauthorized information. This
prospectus does not offer to sell or buy any 1,150,000 UNITS
units in any jurisdiction where it is
unlawful. The information in this prospectus
is current only as of its date.
-------------
PROSPECTUS
-------------
[GRAPHIC OMITTED]
Until ______________, all dealers that effect
transactions in these securities, whether or
not participating in this offering, may be
required to deliver a prospectus. This is in SCHNEIDER SECURITIES, INC.
addition to the dealers' obligation to
deliver a prospectus when acting as _____________, 1999
underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 7-109-102 of the Colorado Business Corporation Act permits a
Colorado corporation to indemnify any director against liability if such person
acted in good faith and, in the case of conduct in an official capacity with the
corporation, that the director's conduct was in the corporation's best interests
and, in all other cases, that the director's conduct was at least not opposed to
the best interests of the corporation or, with regard to criminal proceedings,
the director had no reasonable cause to believe the director's conduct was
unlawful.
Section 7-109-102 of the Colorado Business Corporation Act provides that,
unless limited by its articles of incorporation, a Colorado corporation shall
indemnify a person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was a party because the person is
or was a director, against reasonable expenses incurred by him or her in
connection with the proceeding.
Article V.A. of Multi-Link's Restated Articles of Incorporation, filed as
Exhibit 3.1, hereto, provides that Multi-Link shall indemnify, to the maximum
extent permitted by law, any person who is or was a director or officer of
Multi-Link, and may indemnify any other person, against any claim, liability or
expense arising against or incurred by such person made party to a proceeding
because he is or was serving another entity as a director, officer, partner,
trustee, employee, fiduciary or agent at Multi-Link's request. Multi-Link shall
further have the authority, to the maximum extent permitted by law, to purchase
and maintain insurance providing such indemnification, advance expenses to
persons indemnified by Multi-Link, and provide indemnification to any person by
general or specific action of the board of directors, the bylaws of Multi-Link,
contract or otherwise.
Article V.B. of Multi-Link's Restated Articles of Incorporation, filed as
Exhibit 3.1, hereto, provides that no director of Multi-Link shall have any
personal liability to Multi-Link or its shareholders for monetary damages for
breach of his fiduciary duty as a director, except that this provision shall not
eliminate or limit the personal liability of a director to Multi-Link or to its
shareholders for monetary damages for: (i) any breach of the director's duty of
loyalty to Multi-Link or to its shareholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) voting for or assenting to a distribution which, after giving effect to
the distribution, would result in (a) Multi-Link not being able to pay its debts
as they become due, or (b) Multi-Link's total assets being less than the sum of
its total liabilities plus amounts needed to satisfy preferential rights upon
dissolution of Multi-Link, but only if it is established that the director did
not perform his duties in good faith, with the care of an ordinary prudent
person in a like position under similar circumstances, and in a manner he
believed to be in the best interests of Multi-Link, provided that the personal
liability of a director in this circumstance shall be limited to the amount of
the distribution which exceeds what could have been distributed without
violation of this paragraph; or (iv) any transaction from which the director
directly or indirectly derives an improper personal benefit. Article V.B. also
provides that if the Colorado Business Corporation Act is amended or superseded
and such amendment or superseding statute eliminates or limits further, or
allows Multi-Link to eliminate or limit further, the liability of a director,
then in addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent permitted by the Colorado Business Corporation
Act, as so amended, or such superseding statute. Nothing contained in Article
V.B. is to be construed to deprive any director of his right to all defenses
ordinarily available to a director nor will anything herein be construed to
deprive any director of any right he may have for contribution from any other
director or other person.
Section 8(b) of the form of underwriting agreement filed as Exhibit 1.1
hereto provides that the underwriter agrees to indemnify and hold harmless
Multi-Link, each director of Multi-Link, each officer of Multi-Link who has
signed the registration statement, each other person, if any, who controls
Multi-Link within the meaning of Section 15 of the Securities Act of 1933, as
amended, or Section 20(a) of the Securities Exchange Act of 1934, as amended,
with respect to statements or omissions, if any, made in any preliminary
prospectus, the registration statement or the prospectus, or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
II-1
<PAGE>
with written information furnished to Multi-Link with respect to the
underwriters, by or on behalf of the underwriters expressly for inclusion in any
such document. Section 8(c) provides for contribution in circumstances where the
indemnity provisions are unavailable.
Item 25. Other Expenses of Issuance and Distribution.
Expenses payable by us in connection with the issuance and distribution of
the securities being registered hereby are as follows:
SEC Registration Fee .................... $ 4,236
NASD Filing Fee ......................... $ 2,024
Nasdaq SmallCap Market Filing Fee ....... $ 10,000
Accounting Fees and Expenses ............ $ 50,000*
Legal Fees and Expenses ................. $ 80,000*
Blue Sky Fees and Expenses .............. $ 20,000*
Representative's Non-Accountable
Expense Allowance ................. $207,000*
Printing, Freight and Engraving ......... $ 80,000*
Miscellaneous ........................... $ 11,480*
-------
Total ............................. $465,000*
=======
*Estimated.
Item 26. Recent Sales of Unregistered Securities.
The following is information as to all securities of Multi-Link sold by
Multi-Link within the past three years which were not registered under the
Securities Act of 1933, as amended ("1933 Act").
(a) In January 1996, Multi-Link issued 600,000 shares of its common stock
to each of Octagon Strategies, Inc. and Shawn B. Stickle for $0.0083 per share.
Multi-Link issued the shares in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. Such persons represented to Multi-Link
that they acquired the shares for their own account and not with a view to
distribution and that they had available to them all material information
concerning Multi-Link. The certificates evidencing the shares bear a restrictive
legend under the 1933 Act. No underwriter was involved in the transaction.
(b) In May 1996, Multi-Link issued 61,200 shares of its common stock to CS
Capital Corp. as an equity addition to a $500,000 factoring facility. Multi-Link
issued the shares in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. Such company represented to Multi-Link that it
acquired the shares for its own account and not with a view to distribution and
that it had available to it all material information concerning Multi-Link. The
certificates evidencing the shares bear a restrictive legend under the 1933 Act.
No underwriter was involved in the transaction.
(c) In January 1997, Multi-Link issued 61,200 shares of its common stock to
Telemessaging Services, Inc. for consulting services. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such company represented to Multi-Link that it acquired the
shares for its own account and not with a view to distribution and that it had
available to it all material information concerning Multi-Link. The certificates
evidencing the shares bear a restrictive legend under the 1933 Act. No
underwriter was involved in the transaction.
(d) In January 1997, Multi-Link issued 26,640 shares of its common stock to
Harbour Settlement as an equity addition to a $60,000 loan. Multi-Link issued
the shares in reliance upon the exemption from registration provided by Section
4(2) of the 1933 Act. Such company represented to Multi-Link that it acquired
the shares for its own account and not with a view to distribution and that it
had available to it all material information concerning Multi-Link. The
certificates evidencing the shares bear a restrictive legend under the 1933 Act.
No underwriter was involved in the transaction.
II-2
<PAGE>
(e) In January 1997, Multi-Link issued 13,320 shares of its common stock to
Ron Stickle as an equity addition to a $25,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such person represented to Multi-Link that he acquired the
shares for his own account and not with a view to distribution and that he had
available to him all material information concerning Multi-Link. The
certificates evidencing the shares bear a restrictive legend under the 1933 Act.
No underwriter was involved in the transaction.
(f) In January 1997, Multi-Link issued 68,118 shares of its common stock to
CS Capital Corp. as an equity addition to a $250,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such company represented to Multi-Link that it acquired the
shares for its own account and not with a view to distribution and that it had
available to it all material information concerning Multi-Link. The certificates
evidencing the shares bear a restrictive legend under the 1933 Act. No
underwriter was involved in the transaction.
(g) In June 1997, Multi-Link issued 28,610 shares of its common stock to CS
Capital Corp. as an equity addition to a $300,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such company represented to Multi-Link that it acquired the
shares for its own account and not with a view to distribution and that it had
available to it all material information concerning Multi-Link. The certificates
evidencing the shares bear a restrictive legend under the 1933 Act. No
underwriter was involved in the transaction.
(h) In July 1997, Multi-Link issued 3,000 shares of its common stock to
David E. Peri for consulting services. Multi-Link issued the shares in reliance
upon the exemption from registration provided by Section 4(2) of the 1933 Act.
Such person represented to Multi-Link that he acquired the shares for his own
account and not with a view to distribution and that he had available to him all
material information concerning Multi-Link. The certificates evidencing the
shares bear a restrictive legend under the 1933 Act. No underwriter was involved
in the transaction.
(i) In July 1997, Multi-Link issued 28,610 shares of its common stock to
Corporate Finance Group, Inc. for corporate finance and other consulting
services. Multi-Link issued the shares in reliance upon the exemption from
registration provided by Section 4(2) of the 1933 Act. Such company represented
to Multi-Link that it acquired the shares for its own account and not with a
view to distribution and that it had available to it all material information
concerning Multi-Link. The certificates evidencing the shares bear a restrictive
legend under the 1933 Act. No underwriter was involved in the transaction. The
28,610 shares of common stock were repurchased by Multi-Link in November 1998.
(j) In January 1998, Multi-Link issued 7,454 shares of its common stock to
Robert and Lynne Williams on conversion of a $20,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such persons represented to Multi-Link that they acquired the
shares for their own account and not with a view to distribution and that they
had available to them all material information concerning Multi-Link. The
certificates evidencing the shares bear a restrictive legend under the 1933 Act.
No underwriter was involved in the transaction.
(k) In September 1998, Multi-Link issued warrants to purchase 150,000 of
its common stock at an exercise price of $4.17 per share to Westburg Media
Capital LLP in connection with a $2,100,000 term credit facility furnished by
Westburg to Multi-Link. The expiration date of the warrants is the earlier of
(i) the date all amounts are repaid under the Westburg loan, (ii) the date of
the sale of Multi-Link or substantially all of its assets, (iii) the effective
date of a registration statement filed under the 1933 Act in connection with a
firm commitment underwriting for common stock of Multi-Link seeking to raise
gross proceeds of at least $5,000,000 at a price of not less than $5.00 per
share or (iv) October 21, 2003. Multi-Link issued the warrants in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act.
Westburg had available to it all material information concerning Multi-Link. The
certificate evidencing the warrants bears a restrictive legend under the 1933
Act. No underwriter was involved in the transaction.
(l) Between May and November 1998, Multi-Link sold 150,000 shares of its
Common Stock and warrants to purchase 75,000 shares of its common stock at an
exercise price of $4.17 per share to various investors pursuant to a private
placement for an aggregate of $625,000. The warrants are exercisable from
November 17, 1999 through May 17, 2001. Multi-Link issued the shares and
warrants in reliance upon the exemption from registration provided by Rule 506
promulgated under Regulation D of the 1933 Act. Such persons represented to
Multi-Link that they acquired the shares for their own account and not with a
view to distribution and that they had available to them all material
II-3
<PAGE>
information concerning Multi-Link. The certificates evidencing the shares bear a
restrictive legend under the 1933 Act. The selling agent was Spencer Edwards,
Inc. which received (together with participating dealers) commissions and
expense reimbursements of $93,750 and warrants to purchase 15,000 shares of
common stock at an exercise price of $5.00 per share and warrants to purchase
7,500 shares of common stock at an exercise price of $4.17 per share.
(m) In September 1998, Multi-Link issued 72,000 shares of its common stock
and warrants to purchase 36,000 shares of its common stock at an exercise price
of $4.17 per share to CS Capital Corp. for conversion of a $300,000 loan. The
warrants are exercisable from November 17, 1999 through May 17, 2001. Multi-Link
issued the shares and warrants in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. Such company represented to Multi-Link
that it acquired the shares for its own account and not with a view to
distribution and that it had available to it all material information concerning
Multi-Link. The certificates evidencing the shares bear a restrictive legend
under the 1933 Act. No underwriter was involved in the transaction.
(n) Since January 15, 1997, Multi-Link has issued several ten year options
to its employees and others to purchase an aggregate of 165,000 shares of
Multi-Link's common stock at exercise prices ranging from $0.017 per share to
$6.00 per share. Multi-Link issued the options in reliance on the exemption from
registration under Rule 701 of the 1933 Act. Such persons represented to
Multi-Link that they acquired the option for their own account and not with a
view to distribution and that they had available to them all material
information concerning Multi-Link. The certificates evidencing the options bear
a restrictive legend under the 1933 Act. No underwriter was involved in the
transaction.
Item 27. Exhibits.
The following is a list of all exhibits filed as part of this Registration
Statement:
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
1.1 Form of Underwriting Agreement.
1.2 Form of Selected Dealers Agreement.
3.1 Restated Articles of Incorporation filed on May 18, 1998.
3.2 Amendments to Restated Articles of Incorporation filed on
February 2, 1999.
3.3 Bylaws as amended through January 1, 1999.
4.1 Borrowing Agreement dated September 25, 1998, between Westburg
Media Capital LP, the Registrant, Multi-Link Telecommunications,
Inc., Nigel V. Alexander, Shawn B. Stickle and The Blackhawk
Trust.
4.2 Form of Commercial Installment Contract between the Registrant
and Associates Commercial Corporation.
4.3 Form of Security Agreement between the Registrant and Associates
Commercial Corporation.
4.4 Warrant Agreement between the Registrant and American Securities
Transfer & Trust, Inc.
4.5 Form of Escrow Agreement.
II-4
<PAGE>
4.6 Forms of Lock-Up Agreements.
4.7 Form of Representative's Option for the purchase of units.
4.8 Form of Warrant Exercise Fee Agreement between Schneider
Securities, Inc. and the Registrant.
5.1 Opinion of Smith McCullough, P.C. on legality.*
10.1 Stock Option Plan.
10.2 First Amendment to Stock Option Plan.
10.3 Agreement dated January 1, 1999, between the Registrant and
Telecom Sales Associates, Inc. as amended on February 3, 1999.
10.4 Form of Customer Agreement.
10.5 US West Communications Digital Switched Service Rate Stability
Plan Agreements.
10.6 Consulting Agreement between the Registrant and Octagon
Strategies, Inc.
10.7 Employment Agreement between the Registrant and Shawn B. Stickle.
16.1 Letter from James E. Scheifley & Associates, PC confirming the
circumstances pursuant to which James E. Scheifley & Associates,
PC resigned as Registrant's principal independent accountants
21 Subsidiaries of the Registrant.
23.1 Consent of HEIN + ASSOCIATES LLP.
23.2 Consent of James E. Scheifley & Associates, PC.
23.4 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).*
27 Financial Data Schedule.
*To be filed by amendment.
Item 28. Undertakings.
The undersigned small business issuer will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution. (2) For determining liability under the Securities
Act, treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-5
<PAGE>
The small business issuer will provide to the underwriter at the closing
specified in the underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange SEC such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned small business issuer will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this registration statement as of the
time the SEC declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City and County
of Denver, State of Colorado on February 22, 1999.
MULTI-LINK TELECOMMUNICATIONS, INC.
/s/ Nigel V. Alexander
-------------------------------------------
Nigel V. Alexander, Chief Executive Officer
and Principal Executive Officer
/s/ Shawn B. Stickle
-------------------------------------------
Shawn B. Stickle, President
and Chief Operating Officer
/s/ David J. Cutler
-------------------------------------------
David J. Cutler, Chief Financial Officer
and Principal Accounting Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
- --------- ----- ----
/s/ Shawn B. Stickle
- --------------------
Shawn B. Stickle Director February 22, 1999
/s/ Nigel V. Alexander
- ----------------------
Nigel V. Alexander Director February 22, 1999
/s/ Keith R. Holder
- -------------------
Keith R. Holder Director February 22, 1999
/s/ R. Brad Stillahn
- --------------------
R. Brad Stillahn Director February 22, 1999
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description and Method of Filing Page No.
- ---------- -------------------------------- -------
<S> <C> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Selected Dealers Agreement.
3.1 Restated Articles of Incorporation filed on May 18, 1998.
3.2 Amendments to Restated Articles of Incorporation filed on
February 2, 1999.
3.3 Bylaws as amended through January 1, 1999.
4.1 Borrowing Agreement dated September 25, 1998, between Westburg
Media Capital LP, the Registrant, Multi-Link Telecommunications,
Inc., Nigel V. Alexander, Shawn B. Stickle and The Blackhawk
Trust.
4.2 Form of Commercial Installment Contract between the Registrant
and Associates Commercial Corporation.
4.3 Form of Security Agreement between the Registrant and Associates
Commercial Corporation.
4.4 Warrant Agreement between the Registrant and American Securities
Transfer & Trust, Inc.
4.5 FormS of Escrow Agreement.
4.6 Forms of Lock-Up Agreements.
4.7 Form of Representative's Option for the purchase of units.
4.8 Form of Warrant Exercise Fee Agreement between Schneider
Securities, Inc. and the Registrant.
5.1 Opinion of Smith McCullough, P.C. on legality.* N/A
10.1 Stock Option Plan.
10.2 First Amendment to Stock Option Plan.
10.3 Agreement dated January 1, 1999, between the Registrant and
Telecom Sales Associates, Inc. as amended on February 3, 1999.
10.4 Form of Customer Agreement.
10.5 US West Communications Digital Switched Service Rate Stability
Plan Agreements.
10.6 Consulting Agreement between the Registrant and Octagon
Strategies, Inc.
10.7 Employment Agreement between the Registrant and Shawn B. Stickle.
16.1 Letter from James E. Scheifley & Associates, PC confirming the
circumstances pursuant to which James E. Scheifley & Associates,
PC resigned as Registrant's principal independent accountants
21 Subsidiaries of the Registrant.
23.1 Consent of HEIN + ASSOCIATES LLP.
23.2 Consent of James E. Scheifley & Associates, PC.
23.4 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).* N/A
27 Financial Data Schedule.
</TABLE>
*To be filed by amendment.
1,150,000 Units
consisting of
1,150,000 Shares of Common Stock
and
1,150,000 Warrants
MULTI-LINK TELECOMMUNICATIONS, INC.
UNDERWRITING AGREEMENT
________, 1999
Schneider Securities, Inc.
1120 Lincoln Street
Suite 900
Denver, Colorado 80203
Dear Sirs:
Multi-Link Telecommunications, Inc., a Colorado corporation (the "Company")
hereby confirms its agreement with you (who are sometimes hereinafter referred
to as the "Representative") and with the other members of the underwriting group
(the "Underwriters") named on Schedule 1 hereto as follows:
1. Introductory. Subject to the terms and conditions contained herein, the
Company proposes to issue and sell to the Underwriters 1,150,000 Units (the
"Units"), comprised of 1,150,000 shares of common stock (the "Common Stock") and
1,150,000 redeemable warrants (the "Warrants"). The Common Stock and Warrants
shall be immediately separately transferable and the Units shall not be listed
for trading on the Nasdaq SmallCap Market. For the purpose of this Agreement,
references hereinafter to Common Stock and Warrants shall be deemed to include,
where appropriate, the Units. In addition, solely for the purpose of covering
over-allotments, the Company grants to the Representative the option to purchase
up to an additional 172,500 Units (the "Additional Securities"), which option to
purchase shall be exercisable, in whole or in part, from time to time during the
forty-five (45) day period commencing on the date on which the Registration
Statement (as hereinafter defined) is initially declared effective (the
"Effective Date") by the Securities and Exchange Commission (the "Commission").
Unless otherwise noted, the Common Stock, together with the additional 172,500
shares of Common Stock issuable on exercise of the over-allotment option, is
referred to hereinafter as the "Common Stock" and the Warrants and the 172,500
Warrants issuable on exercise of the over-allotment option are referred to
hereinafter as the "Warrants".
Two Warrants will entitle the holder to purchase one share of Common Stock
(a "Warrant Share") at a price of $9.00 during the thirty-six (36) month
exercise period of the Warrants, subject to the Company's right of redemption.
The Warrants may be redeemed by the Company commencing one year from the
Effective Date of the Registration Statement upon at least 30 days prior written
notice, in whole but not in part, at a price of $.05 per Warrant provided the
closing bid price for the Company's Common Stock is at least 125% of the
exercise price of the Warrant during each day of the twenty (20) trading day
period ending five days preceding the date of the written notice. During the one
year period commencing on the Effective Date, the Company shall not lower the
exercise price of the Warrants without the Representative's prior consent, which
will not be unreasonably withheld. The terms and provisions of the Warrants
shall be governed by a warrant agreement between the Company and its transfer
agent (the "Warrant Agreement"), which Warrant Agreement will contain, among
<PAGE>
other provisions, anti-dilution protection for warrant holders on terms
acceptable to the Representative. The Common Stock, Warrants and Additional
Securities are more fully described in the Prospectus referred to below. All
references to the Company below shall be deemed to include, where appropriate,
the Company's subsidiaries, if any.
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters that:
a. The Company has filed with the Commission a registration statement,
and may have filed one or more amendments thereto, on Form SB-2
(Registration No. 333-______), including in such registration statement and
each such amendment a facing sheet, the information called for by Part I,
audited consolidated financial statements for the past two fiscal years or
such other period as may be appropriate, the information called for by Part
II, the undertakings to deliver certificates, file reports and file
post-effective amendments, the required signatures, consents of experts,
exhibits, a related preliminary prospectus (a "Preliminary Prospectus") and
any other information or documents which are required for the registration
of the Units, Common Stock and Warrants, the Warrant Shares, the purchase
options referred to in Section 2(n) (the "Representative's Options"), and
the securities referred to in Section 2(n) underlying the Representative's
Options (the "Representative's Option Securities"), under the Securities
Act of 1933, as amended (the "Act"). As used in this Agreement, the term
"Registration Statement" means such registration statement, including
incorporated documents, all exhibits and consolidated financial statements
and schedules thereto, as amended, when it becomes effective, and shall
include the information with respect to the Units, the Common Stock, the
Warrants, the Warrant Shares, the Representative's Options, and the
Representative's Option Securities and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant
to Rule 430A of the General Rules and Regulations promulgated under the Act
(the "Regulations"), which information is deemed to be included therein
when it becomes effective as provided by Rule 430A; the term "Preliminary
Prospectus" means each prospectus included in the Registration Statement,
or any amendments thereto, before it becomes effective under the Act and
any prospectus filed by the Company with the consent of the Representative
pursuant to Rule 424(a) of the Regulations; and the term "Prospectus" means
the final prospectus included as part of the Registration Statement, except
that if the prospectus relating to the securities covered by the
Registration Statement in the form first filed on behalf of the Company
with the Commission pursuant to Rule 424(b) of the Regulations shall differ
from such final prospectus, the term "Prospectus" shall mean the prospectus
as filed pursuant to Rule 424(b) from and after the date on which it shall
have first been used.
b. When the Registration Statement becomes effective, and at all times
subsequent thereto, to and including the Closing Date (as defined in
Section 3) and each Additional Closing Date (as defined in Section 3), and
during such longer period as the Prospectus may be required to be delivered
in connection with sales by the Representative or any dealer, and during
such longer period until any post-effective amendment thereto shall become
effective, the Registration Statement (and any post-effective amendment
thereto) and the Prospectus (as amended or as supplemented if the Company
shall have filed with the Commission any amendment or supplement to the
Registration Statement or the Prospectus) will contain all statements which
are required to be stated therein in accordance with the Act and the
Regulations, will comply with the Act and the Regulations, and will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and no event will have occurred which
should have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not then been set forth
in such an amendment or supplement; and no Preliminary Prospectus, as of
the date filed with the Commission, included any untrue statement of a
material fact or omitted to state any material fact required to be stated
2
<PAGE>
therein or necessary to make the statements therein not misleading; except
that no representation or warranty is made in this Section 2(b) with
respect to statements or omissions made in reliance upon and in conformity
with written information furnished to the Company as stated in Section 8(b)
with respect to the Underwriters by or on behalf of the Underwriters
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto.
c. Neither the Commission nor the "blue sky" or securities authority
of any jurisdiction have issued an order (a "Stop Order") suspending the
effectiveness of the Registration Statement, preventing or suspending the
use of any Preliminary Prospectus, the Prospectus, the Registration
Statement, or any amendment or supplement thereto, refusing to permit the
effectiveness of the Registration Statement, or suspending the registration
or qualification of the Units, the Common Stock, the Warrants, the Warrant
Shares, the Representative's Options, or the Representative's Option
Securities, nor has any of such authorities instituted or threatened to
institute any proceedings with respect to a Stop Order.
d. Any contract, agreement, instrument, lease, or license required to
be described in the Registration Statement or the Prospectus has been
properly described therein. Any contract, agreement, instrument, lease, or
license required to be filed as an exhibit to the Registration Statement
has been filed with the Commission as an exhibit to or has been
incorporated as an exhibit by reference into the Registration Statement.
e. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Colorado, with full power
and authority, and all necessary consents, authorizations, approvals,
orders, licenses, certificates, and permits of and from, and declarations
and filings with, all federal, state, local, and other governmental
authorities and all courts and other tribunals, to own, lease, license, and
use its properties and assets and to carry on the business in the manner
described in the Prospectus. The Company is duly qualified to do business
and is in good standing in every jurisdiction in which its ownership,
leasing, licensing, or use of property and assets or the conduct of its
business makes such qualifications necessary. The Company has no
subsidiaries except as disclosed in the Prospectus.
f. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, of which 1,691,542 shares of Common Stock are
issued and outstanding, 165,000 shares of Common Stock are reserved for
issuance upon the exercise of currently outstanding options, 135,000 shares
of Common Stock are reserved for issuance upon the exercise of the
remaining options authorized under the Company's option plan and 283,500
shares of Common Stock are reserved for issuance upon the exercise of
outstanding warrants; and 5,000,000 shares of Preferred Stock, none of
which are issued or outstanding. Of the outstanding shares of Common Stock,
200,000 shares are subject to a custody agreement, release under which will
occur upon the earlier of (i) the Company achieving designated financial
performance criteria as set forth in the custody agreement, or (ii)
________, 2006 (seven years from the date of the Prospectus), all as more
fully set forth in a custody agreement (the "Custody Agreement") by and
among Shawn B. Stickle, Nigel V. Alexander, American Securities Transfer &
Trust, Inc., the Company and the Representative. Each outstanding share of
Common Stock is validly authorized, validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and has not been issued and is not owned or held in violation of
any preemptive rights of stockholders. There is no commitment,
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plan, or arrangement to issue, and no outstanding option, warrant, or other
right calling for the issuance of, any share of capital stock of the
Company or any security or other instrument which by its terms is
convertible into, exercisable for, or exchangeable for capital stock of the
Company, except as set forth above, and as may be properly described in the
Prospectus.
g. The consolidated financial statements of the Company included in
the Registration Statement and the Prospectus fairly present with respect
to the Company the consolidated financial position, the results of
operations, and the other information purported to be shown therein at the
respective dates and for the respective periods to which they apply. Such
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles, except to the extent that certain
footnote disclosures regarding any stub period may have been omitted in
accordance with the applicable rules of the Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), consistently applied
throughout the periods involved, are correct and complete, and are in
accordance with the books and records of the Company. The accountants whose
reports on the audited consolidated financial statements are filed with the
Commission as a part of the Registration Statement are, and during the
periods covered by their reports included in the Registration Statement and
the Prospectus were, independent certified public accountants with respect
to the Company within the meaning of the Act and the Regulations. No other
financial statements are required by Form SB-2 or otherwise to be included
in the Registration Statement or the Prospectus. There has at no time been
a material adverse change in the consolidated financial condition, results
of operations, business, properties, assets, liabilities, or future
prospects of the Company from the latest information set forth in the
Registration Statement or the Prospectus, except as may be properly
described in the Prospectus.
h. There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, or, to the
knowledge of the Company, threatened, or in prospect with respect to the
Company or any of its operations, businesses, properties, or assets, except
as may be properly described in the Prospectus or such as individually or
in the aggregate do not now have and will not in the future have a material
adverse effect upon the operations, business, properties, or assets of the
Company. The Company is not in violation of, or in default with respect to,
any law, rule, regulation, order, judgment, or decree except as may be
properly described in the Prospectus or such as in the aggregate do not now
have and will not in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company; nor is the
Company required to take any action in order to avoid any such violation or
default.
i. The Company has good and marketable title in fee simple absolute to
all real properties and good title to all other properties and assets which
the Prospectus indicates are owned by it, free and clear of all liens,
security interests, pledges, charges, encumbrances, and mortgages except as
may be properly described in the Prospectus or such as in the aggregate do
not now have and will not in the future have a material adverse effect upon
the operations, business, properties, or assets of the Company. No real
property owned, leased, licensed, or used by the Company lies in an area
which is, or to the knowledge of the Company will be, subject to zoning,
use, or building code restrictions which would prohibit, and no state of
facts relating to the actions or inaction of another person or entity or
his or its ownership, leasing, licensing, or use of any real or personal
property exists or will exist which would prevent, the continued effective
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ownership, leasing, licensing, or use of such real property in the business
of the Company as presently conducted or as the Prospectus indicates it
contemplates con ducting, except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business,
properties, or assets of the Company.
j. Neither the Company nor any other party is now or is expected by
the Company to be in violation or breach of, or in default with respect to
complying with, any material provision of any contract, agreement,
instrument, lease, license, arrangement, or understanding which is material
to the Company, and each such contract, agreement, instrument, lease,
license, arrangement, and understanding is in full force and is the legal,
valid, and binding obligation of the parties thereto and is enforceable as
to them in accordance with its terms. The Company enjoys peaceful and
undisturbed possession under all leases and licenses under which it is
operating. The Company is not a party to or bound by any contract,
agreement, instrument, lease, license, arrangement, or understanding, or
subject to any charter or other restriction, which has had or may in the
future have a material adverse effect on the financial condition, results
of operations, business, properties, assets, liabilities, or future
prospects of the Company. The Company is not in violation or breach of, or
in default with respect to, any term of its Articles of Incorporation (or
other charter document) or by-laws.
k. All patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, franchises,
technology, know-how and other intangible properties and assets (all of the
foregoing being herein called "Intangibles") that the Company owns or has
pending, or under which it is licensed, are in good standing and
uncontested. Except as otherwise disclosed in the Registration Statement,
the Intangibles are owned by the Company, free and clear of all liens,
security interests, pledges, and encumbrances. The Company has filed an
application with the United States Patent and Trademark Office to register
"Multi-Link" as a registered servicemark used by the Company to identify
its services. There is no right under any Intangible necessary to the
business of the Company as presently conducted or as the Prospectus
indicates it contemplates conducting (except as may be so designated in the
Prospectus). The Company has not infringed, is not infringing, and has not
received notice of infringement with respect to asserted Intangibles of
others. To the knowledge of the Company, there is no infringement by others
of Intangibles of the Company. To the knowledge of the Company, there is no
Intangible of others which has had or may in the future have a materially
adverse effect on the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of the Company.
l. Neither the Company nor any director, officer, agent, employee, or
other person associated with or acting on behalf of the Company has,
directly or indirectly: used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended by the International
Anti-Bribery Act of 1998; or made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment. The Company has not accepted
any material advertising allowances or marketing allowances from suppliers
to the Company and, to the extent any advertising allowance has been
accepted, the Company has provided proper documentation to the supplier
with respect to advertising as to which the advertising allowance has been
granted.
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m. The Company has all requisite power and authority to execute and
deliver, and to perform thereunder each of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee Agreement described
in Section 5(ff) (the "Warrant Exercise Fee Agreement") and the Custody
Agreement. All necessary corporate proceedings of the Company have been
duly taken to authorize the execution and delivery, and performance
thereunder by the Company of this Agreement, the Warrants, the
Representative's Options, the Warrant Exercise Fee Agreement and the
Custody Agreement. This Agreement has been duly authorized, executed, and
delivered by the Company, is a legal, valid, and binding obligation of the
Company, and is enforceable as to the Company in accordance with its terms.
Each of the Warrants, the Representative's Options, the Warrant Exercise
Fee Agreement and the Custody Agreement has been duly authorized by the
Company and, when executed and delivered by the Company, will each be a
legal, valid, and binding obligation of the Company, and will be
enforceable against the Company in accordance with its respective terms. No
consent, authorization, approval, order, license, certificate, or permit of
or from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by the
Company for the execution and delivery, or performance thereunder by the
Company of this Agreement, the Warrants or the Representative's Options
except filings under the Act which have been or will be made before the
Closing Date and such consents consisting only of consents under "blue sky"
or securities laws which are required in connection with the transactions
contemplated by this Agreement and which have been obtained at or prior to
the date of this Agreement. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to
which the Company is a party, or to which any of its properties or assets
are subject, is required for the execution or delivery, or performance
thereunder of this Agreement, the Warrants, the Representative's Options,
the Warrant Exercise Fee Agreement or the Custody Agreement; and the
execution and delivery, and performance thereunder of this Agreement, the
Warrants, the Representative's Options, the Warrant Exercise Fee Agreement
and the Custody Agreement will not violate, result in a breach of, conflict
with, or (with or without the giving of notice or the passage of time or
both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement, or
understanding, or violate or result in a breach of any term of the Articles
of Incorporation or by-laws of the Company, or violate, result in a breach
of, or conflict with any law, rule, regulation, order, judgment, or decree
binding on the Company or to which any of its operations, businesses,
properties, or assets are subject.
n. The Common Stock, the Warrants, the Warrant Shares, the
Representative's Options and the Representative's Option Securities are
validly authorized and reserved for issuance. The Common Stock, when issued
and delivered in accordance with this Agreement, the Warrant Shares, when
issued and delivered upon exercise of the Warrants, the Representative's
Option Securities, when issued and delivered upon exercise of the
Representative's Options and the Representative's Option Shares issuable on
exercise of warrants included in the Representative's Option Securities,
upon payment of the exercise price therefor, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, and will not be issued in violation of any preemptive
rights of stockholders, and the Underwriters will receive good title to the
Common Stock and the Warrants purchased, the Representative will receive
good title to the Representative's Options purchased and any purchaser of
the Warrant Shares or Representative's Option Securities will receive good
title thereto, all such title free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders' agreements, and
voting trusts.
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o. The Units, the Common Stock, the Warrants, the Warrant Shares, the
Representative's Options and the Representative's Option Securities conform
to all statements relating thereto contained in the Registration Statement
and the Prospectus.
p. Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as may
otherwise be properly described in the Prospectus, the Company has not (i)
issued any securities or incurred any liability or obligation, primary or
contingent, for borrowed money, (ii) entered into any transaction not in
the ordinary course of business, or (iii) declared or paid any dividend on
its capital stock.
q. Neither the Company nor any of its officers, directors, or
affiliates (as defined in the Regulations), has taken or will take,
directly or indirectly, prior to the termination of the distribution of
securities contemplated by this Agreement, any action designed to stabilize
or manipulate the price of any security of the Company, or which has caused
or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any
security of the Company, to facilitate the sale or resale of the Units,
Common Stock and Warrants.
r. The Company has not incurred any liability for a fee, commission,
or other compensation on account of the employment of a broker or finder in
connection with the trans actions contemplated by this Agreement.
s. The Company has obtained from each officer, director and person or
entity that beneficially owns 1% or more of the Company's capital stock or
derivative securities convertible into shares of the Company's capital
stock his, her or its enforceable written agreement that for a period of 13
months from the Effective Date, he, she or it will not, without the
Representative's prior written consent, offer, pledge, sell, contract to
sell, grant any option for the sale of, enter into any swap or other
arrangement that transfers all or a portion of the economic consequences
associated with the ownership of the Company's capital stock, or otherwise
dispose of, directly or indirectly, any shares of capital stock or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for shares of Common Stock (except that,
subject to compliance with applicable securities laws, any such officer,
director or stockholder may transfer his or her stock pursuant to a bona
fide gift or gifts, provided that any such transferee shall agree, as a
condition to such transfer, to be bound by the restrictions set forth in
this Agreement and further provided that the transferor, except in the case
of the transferor's death, shall continue to be deemed the beneficial owner
of such shares in accordance with Regulation 13d-(3) of the Exchange Act).
The Company has obtained from each officer, director and person or entity
that beneficially owns less than 1% of the Company's capital stock or
derivative securities convertible into shares of the Company's capital
stock his, her or its enforceable written agreement that for a period of 12
months from the Effective Date, he, she or it will not, without the
Representative's prior written consent, offer, pledge, sell, contract to
sell, grant any option for the sale of, enter into any swap or other
arrangement that transfers all or a portion of the economic consequences
associated with the ownership of the Company's capital stock, or otherwise
dispose of, directly or indirectly, any shares of capital stock or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for shares of Common Stock (except that,
subject to compliance with applicable securities laws, any such officer,
director or stockholder may transfer his or her stock pursuant to a bona
fide gift or gifts, provided that any such transferee shall agree, as a
condition to such transfer, to be bound by the restrictions set forth in
this Agreement and further provided that the transferor, except in the case
of the transferor's death, shall continue to be deemed the beneficial owner
of such shares in accordance with Regulation 13d-(3) of the Exchange Act).
For a period of three (3) years, commencing 12 or 13 months from the
Effective Date, as the case may be, all public sales of the Company's
securities by officers, directors and stockholders of the Company shall be
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effected through or with the Representative on an exclusive basis, provided
that the Representative offers the best price reasonably available to the
selling stockholders. In addition, for a period of three years commencing
12 or 13 months, as the case may be, from the Effective Date in the case of
private transactions in the Company's Common Stock, each such selling
security holder specified above shall offer the Representative the
exclusive opportunity to purchase or sell the securities on terms at least
as favorable as the selling security holder can obtain elsewhere. If the
Representative fails to accept in writing any such proposal for sale by the
selling security holders within three (3) business days after receipt of a
notice containing such proposal, then the Representative shall have no
claim or right with respect to any such sales contained in such notice. If,
thereafter, such proposal is modified in any material respect, the selling
security holders shall adopt the same procedure as with respect to the
original proposal. An appropriate legend shall be marked on the face of the
certificates representing all of such securities restricting transfers
which are not in compliance with this section. Public or private sales of
Common Stock by such persons shall not include gifts, intra-family
transfers or transfers for estate planning purposes, which shall be exempt
from the foregoing provisions. The Company, on behalf of itself, and all
officers, directors and holders of five percent or more of the Common Stock
of the Company, have provided the Representative their enforceable written
agreements not to sell, transfer, or hypothecate capital stock or
derivative securities of the Company through a "Regulation S" transaction
for a minimum period of five years from the Effective Date without the
prior written consent of the Representative, and the Company has provided
the Representative with the Company's enforceable written agreement not to
sell capital stock or derivative securities of the Company through a
"Regulation D" transaction for a minimum period of 24 months from the
Effective Date.
t. Except as otherwise provided in the Registration Statement, no
person or entity has the right to require registration of shares of Common
Stock or other securities of the Company because of the filing or
effectiveness of the Registration Statement.
u. The Company is eligible to use Form SB-2 for registration of the
Units, the Common Stock, the Warrants, the Warrant Shares, the
Representative's Options and the Representative's Option Securities.
v. No unregistered securities of the Company, of an affiliate of the
Company or of a predecessor of the Company have been sold within three
years prior to the date hereof, except as described in the Registration
Statement.
w. Except as set forth in the Registration Statement, there is and at
the Closing Date there will be no action, suit or proceeding before any
court, arbitration tribunal or governmental agency, authority or body
pending or, to the knowledge of the Company, threatened which might result
in judgments against the Company not adequately covered by insurance or
which collectively might result in any material adverse change in the
condition (financial or otherwise), the business or the prospects of the
Company or would materially affect the properties or assets of the Company.
x. The Company has filed all federal and state tax returns which are
required to be filed by it and has paid all taxes shown on such returns and
all assessments received by it to the extent such taxes have become due.
All taxes with respect to which the Company is obligated have been paid or
adequate accruals have been set up to cover any such unpaid taxes.
y. Except as set forth in the Registration Statement:
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i. The Company has obtained all permits, licenses and other
authorizations which are required under the Environmental Laws for the
ownership, use and operation of each location operated or leased by
the Company (the "Property"), all such permits, licenses and
authorizations, if any, obtained are in effect, no appeal nor any
other action is pending to revoke any such permit, license or
authorization, and the Company is in full compliance with all terms
and conditions of all such permits, licenses and authorizations, if
any, obtained by the Company.
ii. To the best knowledge of the Company's executive officers,
the Company and the Property are in compliance with all Environmental
Laws including, without limitation, all restrictions, conditions,
standards, limitations, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder.
iii. The Company has not, and to the best knowledge of the
Company's executive officers, no other person has, released, placed,
stored, buried or dumped any Hazardous Substances, Oils, Pollutants or
Contaminants or any other wastes produced by, or resulting from, any
business, commercial, or industrial activities, operations, or
processes, on, beneath, or adjacent to the Property or any property
formerly owned, operated or leased by the Company except for
inventories of such substances to be used, and wastes generated
therefrom, in the ordinary course of business of the Company (which
inventories and wastes, if any, were and are stored or disposed of in
accordance with applicable laws and regulations and in a manner such
that there has been no release of any such substances into the
environment).
iv. Except as provided to the Representative, there exists no
written or tangible report, synopsis or summary of any asbestos, toxic
waste or Hazardous Substances, Oils, Pollutants or Contaminants
investigation made with respect to all or any portion of the assets of
the Company (whether or not prepared by experts and whether or not in
the possession of the executive officers of the Company).
v. Definitions: As used herein:
(1) Environmental Laws means all federal, state and local
laws, regulations, rules and ordinances relating to pollution or
protection of the environment, including, without limitation,
laws relating to Releases or threatened Releases of Hazardous
Substances, Oils, Pollutants or Contaminants into the indoor or
outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata)
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or
handling of Hazardous Substances, Oils, Pollutants or
Contaminants.
(2) Hazardous Substances, Oils, Pollutants or Contaminants
means all substances defined as such in the National Oil and
Hazardous Substances Pollutant Contingency Plan, 40 C.F.R.
ss.300.6, or defined as such under any Environmental Law.
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(3) Release means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environmental (including, without limitation, ambient air,
surface water, groundwater, and surface or subsurface strata) or
into or out of any property, including the movement of Hazardous
Substances, Oils, Pollutants or Contaminants through or in the
air, soil, surface water, groundwater or any property.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
3. Purchase, Sale, and Delivery of the Units. On the basis of the
representations, warranties, covenants, and agreements of the Company herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriters, severally and not jointly, and the
Underwriters, severally and not jointly, agree to purchase from the Company the
number of Units set forth opposite the Underwriters' names in Schedule 1 hereto.
The purchase price per Unit to be paid by the Underwriters shall be $5.40.
The initial public offering price of the Units shall be $6.00.
Payment for the Units by the Underwriters shall be made by certified or
official bank check in clearing house funds, payable to the order of the Company
at the offices of Schneider Securities, Inc., 1120 Lincoln Street, Suite 900,
Denver, Colorado 80203, or at such other place in Denver, Colorado as the
Representative shall determine and advise the Company by at least two full days'
notice in writing, upon delivery of the Units to the Representative. Such
delivery and payment shall be made at 10:00 a.m., Mountain Time, on the third
business day following the time of the initial public offering, as defined in
Section 10(a) hereof, unless the Commission declares the Registration Statement
effective after 4:30 p.m. Eastern time, in which event delivery and payment
shall be made on the fourth (4th) business day following the time of the initial
public offering. The time and date of such delivery and payment are herein
called the "Closing Date."
In addition, the Company hereby grants to the Representative the option to
purchase all or a portion of the Additional Securities as may be necessary to
cover over-allotments, at the same purchase price per Additional Security as the
price per share of Common Stock or Warrant provided for in this Section 3. The
Representative may purchase Common Stock and/or Warrants when exercising such
option, in its sole discretion. This option may be exercised by the
Representative on the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, at any time and from time to time on or before the
45th day following the Effective Date of the Registration Statement, by written
notice by the Representative to the Company. Such notice shall set forth the
aggregate number of Additional Securities as to which the option is being
exercised, and the time and date, as determined by the Representative, when such
Additional Securities are to be delivered (such time and date are herein called
an "Additional Closing Date"); provided, however, that no Additional Closing
Date shall be earlier than the Closing Date nor earlier than the third business
day after the date on which the notice of the exercise of the option shall have
been given nor later than the eighth business day after the date on which such
notice shall have been given; and further provided, that not more than two
Additional Closings shall be noticed and held following purchase of Additional
Securities by the Representative.
Payment for the Additional Securities shall be made by certified or
official bank check in clearing house funds payable to the order of the Company
at the offices of Schneider Securities, Inc., 1120 Lincoln Street, Suite 900,
Denver, Colorado, or at such other place in Denver, Colorado as you shall
determine and advise the Company by at least two full days' notice in writing,
upon delivery of certificates representing the Additional Securities to you.
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Certificates for the Common Stock and Warrants and any Additional
Securities purchased shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Closing Date or Additional Closing Date, as
applicable. The Company shall permit you to examine and package such
certificates for delivery at least one full business day prior to any such
closing with respect thereto.
If for any reason one or more Underwriters shall fail or refuse (otherwise
than for a reason sufficient to justify the termination of this Agreement under
the provisions of Section 10 hereof) to purchase and pay for the number of Units
agreed to be purchased by such Underwriter, the Company shall immediately give
notice thereof to the Representative, and the non-defaulting Underwriters shall
have the right within 24 hours after the receipt by the Representative of such
notice, to purchase or procure one or more other Underwriters to purchase, in
such proportions as may be agreed upon among the Representative and such
purchasing Underwriter or Underwriters and upon the terms herein set forth, the
Units which such defaulting Underwriter or Underwriters agreed to purchase. If
the non-defaulting Underwriters fail so to make such arrangements with respect
to all such Units, the number of Units which each non-defaulting Underwriter is
otherwise obligated to purchase under the Agreement shall be automatically
increased pro rata to absorb the remaining Units which the defaulting
Underwriter or Underwriters agreed to purchase; provided, however, that the
non-defaulting Underwriters shall not be obligated to purchase the Units which
the defaulting Underwriter or Underwriters agreed to purchase in excess of 10%
of the total number of Units which such non-defaulting Underwriter agreed to
purchase hereunder, and provided further that the non-defaulting Underwriters
shall not be obligated to purchase any Units which the defaulting Underwriter or
Underwriters agreed to purchase if such additional purchase would cause the
Underwriter to be in violation of the net capital rule of the Commission or
other applicable law. If the total number of Units which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company shall have
the right, within 24 hours next succeeding the 24-hour period above referred to,
to make arrangements with other underwriters or purchasers satisfactory to the
Representative for the purchase of such Units on the terms herein set forth. In
any such case, either the Representative or the Company shall have the right to
postpone the Closing for not more than seven business days after the date
originally fixed as the Closing in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If neither the non-defaulting Underwriters nor the Company shall
make arrangements within the 24-hour periods stated above for the purchase of
all the Units which the defaulting Underwriter or Underwriters agreed to
purchase hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company to any non-defaulting
Underwriter, except the Company shall be liable for actual expenses incurred by
the Representative as provided in Section 10 hereof, and without any liability
on the part of any non-defaulting Underwriter to the Company.
Nothing contained herein shall relieve any defaulting Underwriter of its
liability, if any, to the Company or to the remaining Underwriters for damages
occasioned by its default hereunder.
4. Offering. The Underwriters are to make a public offering of the Units as
soon, on or after the effective date of the Registration Statement, as the
Representative deems it advisable so to do. The Units are to be initially
offered to the public at the initial public offering price as provided for in
Section 3 (such price being herein called the "public offering price"). After
the initial public offering, you may from time to time increase or decrease the
prices of the Units, Common Stock and/or Warrants, in your sole discretion, by
reason of changes in general market conditions or otherwise.
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5. Covenants of the Company. The Company covenants that it will:
a. Use its best efforts to cause the Registration Statement to become
effective as promptly as possible. If the Registration Statement has become
or becomes effective with a form of Prospectus omitting certain information
pursuant to Rule 430A of the Regulations, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to you of such timely
filing.
b. Notify you immediately, and confirm such notice in writing, (i)
when the Registration Statement and any post-effective amendment thereto
become effective, (ii) of the receipt of any comments from the Commission
or the "blue sky" or securities authority of any jurisdiction regarding the
Registration Statement, any post-effective amendment thereto, the
Prospectus, or any amendment or supplement thereto, and (iii) of the
receipt of any notification with respect to a Stop Order or the initiation
or threatening of any proceeding with respect to a Stop Order. The Company
will use its best efforts to prevent the issuance of any Stop Order and, if
any Stop Order is issued, to obtain the lifting thereof as promptly as
possible.
c. During the time when a prospectus relating to the Units, Common
Stock and Warrants or the Additional Securities is required to be delivered
hereunder or under the Act or the Regulations, comply so far as it is able
with all requirements imposed upon it by the Act, as now existing and as
hereafter amended, and by the Regulations, as from time to time in force,
so far as necessary to permit the continuance of sales of or dealings in
the Common Stock and Warrants and Additional Securities in accordance with
the provisions hereof and the Prospectus. If, at any time when a prospectus
relating to the Units, Common Stock and Warrants or Additional Securities
is required to be delivered hereunder or under the Act or the Regulations,
any event shall have occurred as a result of which, in the reasonable
opinion of counsel for the Company or counsel for the Representative, the
Registration Statement or the Prospectus, as then amended or supplemented,
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or if, in the opinion of either of such
counsel, it is necessary at any time to amend or supplement the
Registration Statement or the Prospectus to comply with the Act or the
Regulations, the Company will immediately notify you and promptly prepare
and file with the Commission an appropriate amendment or supplement (in
form and substance satisfactory to you) which will correct such statement
or omission or which will effect such compliance and will use its best
efforts to have any such amendment declared effective as soon as possible.
d. Deliver without charge to you such number of copies of each
Preliminary Prospectus as you may reasonably request and, as soon as the
Registration Statement or any amendment thereto becomes effective or a
supplement is filed, deliver without charge to you two signed copies of the
Registration Statement or such amendment thereto, as the case may be,
including exhibits, and two copies of any supplement thereto, and deliver
without charge to you such number of copies of the Prospectus, the
Registration Statement, and amendments and supplements thereto, if any,
without exhibits, as you may reasonably request for the purposes
contemplated by the Act.
e. Endeavor in good faith, in cooperation with you, at or prior to the
time the Registration Statement becomes effective, to qualify the Units,
Common Stock and Warrants and Additional Securities for offering and sale
under the "blue sky" or securities laws of such jurisdictions as you may
designate; provided, however, that no such qualification shall be required
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in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction to which it is not then
subject. In each jurisdiction where such qualification shall be effected,
the Company will, unless you agree in writing that such action is not at
the time necessary or advisable, file and make such statements or reports
at such times as are or may be required by the laws of such jurisdiction.
f. Make generally available (within the meaning of Section 11(a) of
the Act and the Regulations) to its security holders as soon as
practicable, but not later than fifteen (15) months after the date of the
Prospectus, an earnings statement (which need not be certified by
independent certified public accountants unless required by the Act or the
Regulations, but which shall satisfy the provisions of Section 11(a) of the
Act and the Regulations) covering a period of at least 12 months beginning
after the effective date of the Registration Statement.
g. For a period of 13 months after the date of the Prospectus, not,
without your prior written consent, offer, issue, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any shares of Common Stock (or any security or other instrument
which by its terms is convertible into, exercisable for, or exchangeable
for shares of Common Stock) except as provided in Section 3 and except for
(i) the issuance of Warrant Shares issuable upon the exercise of Warrants
or issuance of Common Stock underlying options and warrants outstanding on
the date hereof which are properly described in the Prospectus, (ii) the
issuance of the Representative's Option Securities, or (iii) the grant of
options pursuant to the Company's existing stock option plan, or (iv) the
issuance of capital stock in connection with any acquisitions undertaken by
the Company.
h. For a period of five years after the Effective Date of the
registration statement, furnish you, without charge, the following:
i. Within 105 days after the end of each fiscal year, three
copies of consolidated financial statements certified by independent
certified public accountants, including a balance sheet, statement of
operations, and statement of cash flows of the Company and its then
existing subsidiaries, with supporting schedules, prepared in
accordance with generally accepted accounting principles, at the end
of such fiscal year and for the 12 months then ended;
ii. As soon as practicable after they have been sent to
stockholders of the Company or filed with the Commission, three copies
of each annual and interim financial and other report or communication
sent by the Company to its stockholders or filed with the Commission;
iii. As soon as practicable, two copies of every press release
and every material news item and article in respect of the Company or
its affairs which was released by the Company;
iv. Notice of any regular quarterly or special meeting of the
Company's Board of Directors concurrently with the sending of such
notice to the Company's directors; and
v. Such additional documents and information with respect to the
Company and its affairs and the affairs of any of its subsidiaries as
you may from time to time reasonably request.
i. Designate an Audit Committee and a Compensation Committee, the
members of which shall be subject to your reasonable approval, which will
generally supervise the financial affairs of the Company and review
executive compensation, respectively.
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j. Furnish to you as early as practicable prior to the Closing Date
and any Additional Closing Date, as the case may be, but not less than two
full business days prior thereto, a copy of the latest available unaudited
interim consolidated financial statements of the Company which have been
read by the Company's independent certified public accountants, as stated
in their letters to be furnished pursuant to Section 7(e).
k. File no amendment or supplement to the Registration Statement or
Prospectus at any time, whether before or after the Effective Date of the
Registration Statement, unless such filing shall comply with the Act and
the Regulations and unless you shall previously have been advised of such
filing and furnished with a copy thereof, and you and counsel for the
Representative shall have approved such filing in writing within a
reasonable time of receipt thereof.
l. Comply with all periodic reporting and proxy solicitation
requirements which may from time to time be applicable to the Company as a
result of the Company's registration under the Exchange Act on a
registration statement on Form 8-A .
m. Comply with all provisions of all undertakings contained in the
Registration Statement.
n. Prior to the Closing Date or any Additional Closing Date, as the
case may be, issue no press release or other communication, directly or
indirectly, and hold no press conference and grant no interviews with
respect to the Company, the financial condition, results of operations,
business, properties, assets, or liabilities of the Company, or this
offering, without your prior written consent.
o. Appoint American Securities Transfer & Trust, Inc. as its transfer
agent.
p. On or prior to the Closing Date, sell to the Representative for a
total purchase price of $100, Representative's Options entitling the
Representative or its assigns to purchase 115,000 Units at a price equal to
120% of the public offering price of the Units, with the terms of the
Representative's Options, including exercise period, anti-dilution
provisions, exercise price, exercise provisions, transferability, and
registration rights, to be in the form filed as an exhibit to the
Registration Statement.
q. Until expiration of the Representative's Options, keep reserved
sufficient Units, Common Stock and Warrants for issuance upon exercise of
the Representative's Options, and shares of Common Stock for issuance upon
exercise of the warrants contained in the Representative's Options.
r. If the Representative, any employee of the Representative or any
company controlled by or under control with the Representative acts as the
introducing broker or finder during the five year period commencing on the
Effective Date with regard to (i) the sale of all or substantially all of
the assets and properties of the Company, (ii) the merger or consolidation
of the Company (other than a merger or consolidation effected for the
purpose of changing the Company's domicile) or (iii) the acquisition by the
Company of the assets or stock of another business entity, which agreement
or understanding is thereafter consummated during such five-year period or
within one year of expiration of such five-year period, pay to the
Representative or such person(s) as the Representative may designate an
amount equal to 5% of the first $1,000,000 or portion thereof in value or
consideration received or paid by the Company, 4% of the second $1,000,000
or portion thereof in value or consideration received or paid by the
Company and 3% of such value or consideration received by the Company in
excess of the first $2,000,000 of such value or consideration received or
paid by the Company. The fee payable to the Representative will be in the
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same form of consideration as that paid by or to the Company, as the case
may be, in any such transaction. It is understood that the designation of
the Representative to act as a finder is not exclusive and that the
Representative shall not be entitled to the foregoing amounts unless it
participates in the introduction.
s. Within three months of the Closing Date, engage a financial public
relations firm to assist the Company in preparing regular announcements and
disseminating such information to the financial community, such engagement
to extend for a period of at least one year from the date of retention of
such firm.
t. Adopt procedures for the application of the net proceeds it
receives from the sale of the Units and apply the net proceeds from the
sale of the Units substantially in the manner set forth in the Registration
Statement, which does not contemplate repayment of debt to officers,
directors, stockholders or affiliates of the Company (except to CS Capital,
Inc.), unless any deviation from such application is in accordance with the
Registration Statement and occurs only after approval by the Board of
Directors of the Company and then only after the Board of Directors has
obtained the written opinion of recognized legal counsel experienced in
federal and state securities laws as to the propriety of any such
deviation.
u. Within the time period which the Prospectus is required to be
delivered under the Act, comply, at its own expense, with all requirements
imposed upon it by the Act, as now or hereafter amended, by the Rules and
Regulations, as from time to time may be enforced, and by any order of the
Commission, so far as necessary to permit the continuance of sales or
dealing in the Units, Common Stock and Warrants.
v. At the Closing, deliver to the Representative true and correct
copies of the Articles of Incorporation of the Company and all amendments
thereto, all such copies to be certified by the Secretary of the Company;
true and correct copies of the by-laws of the Company and of the minutes of
all meetings of the directors and stockholders of the Company held prior to
the Closing which in any way relate to the subject matter of this Agreement
or the Registration Statement.
w. Use all reasonable efforts to comply or cause to be complied with
the conditions precedent to the several obligations of the Underwriters in
Section 7 hereof.
x. File with the Commission all required information concerning use of
proceeds of the Public Offering in Forms 10-QSB and 10-KSB in accordance
with the provisions of the Exchange Act and to provide a copy of such
reports to the Representative and its counsel.
y. Supply to the Representative and the Representative's counsel at
the Company's cost, two bound volumes each containing material documents
relating to the offering of the Units within a reasonable time after the
Closing, not to exceed 90 days.
z. As soon as possible prior to the Effective Date, and as a condition
of the Underwriter's obligations hereunder, (i) if requested by the
Representative, have the Company listed on an accelerated basis, and to
maintain such listing for not less than ten years from the Closing Date, in
Standard & Poor's Standard Corporation Records; and (ii) have the Common
Stock and Warrants quoted on The Nasdaq SmallCap Market_ as of the
Effective Date, on the Closing Date, on the Additional Closing Date and
thereafter for at least ten years provided the Company is in compliance
with The Nasdaq SmallCap Market_ maintenance requirements.
aa. At such time as the Company qualifies for listing on the Nasdaq
National Market, take all steps necessary to have the Company's Common
Stock and Warrants, to the extent eligible, listed on the Nasdaq National
Market.
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bb. Continue, for a period of at least five years following the
Effective Date of the Registration Statement, to appoint such auditors as
are reasonably acceptable to the Representative, which auditors shall (i)
prepare consolidated financial statements in accordance with Regulation S-B
or, if applicable, Regulation S-X under the General Rules and Regulations
of the Act and (ii) examine (but not audit) the Company's consolidated
financial statements for each of the first three (3) fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-QSB quarterly report and the mailing of quarterly financial
information to security holders.
cc. Within 90 days of the Effective Date of the Registration
Statement, obtain "key man" life insurance policies in the amount of
$1,000,000 each on the life of Nigel V. Alexander and on the life of Shawn
B. Stickle, with the Company designated as the beneficiary of such policy,
and pay the annual premiums thereon for a period of not less than five
years from the Effective Date of the Registration Statement.
dd. Cause its transfer agent to furnish the Representative a duplicate
copy of the daily transfer sheets prepared by the transfer agent during the
six-month period commencing on the Effective Date of the Registration
Statement and instruct the transfer agent to timely provide, upon the
request of the Representative, duplicate copies of such transfer sheets
and/or a duplicate copy of a list of stockholders, all at the Company's
expense, for a period of 4 1/2 years after such six-month period.
ee. Refrain from filing a Form S-8 registration statement for a period
of 90 days from the Effective Date of the Registration Statement without
the Representative's prior written consent. If the Company files a
registration statement on Form S-8 at any time thereafter through and until
13 months from the Effective Date, the Company shall obtain reaffirmation
of previously executed, or new, lock-up agreements under which all
officers, directors and stockholders of the Company owning in excess of
1,000 shares of Common Stock of the Company on the Effective Date shall
agree not to sell, transfer, hypothecate or convey any such shares of
Common Stock for the period through 13 months from the Effective Date.
After the registration statement on Form S-8 is declared effective, the
Company may permit the sale from time to time of Common Stock issued on
exercise of options by stockholders who are not officers or directors and
who own less than 1,000 shares of Common Stock of the Company, subject to
the Company's agreement that such sales shall not exceed an aggregate of
30,000 shares of Common Stock of the Company during the period of 13 months
from the Effective Date. Any such sales of Common Stock issued upon
exercise of stock options within such 13 month period shall be made through
the Representative. The Company will also obtain from each holder of
options to acquire Common Stock of the Company such person's written
enforceable agreement not to sell shares of Common Stock pursuant to the
exemption afforded by Rule 701 under the 1933 Act for a minimum period of
13 months from the Effective Date without the prior written consent of the
Representative.
ff. On the Closing Date, enter into a Warrant Exercise Fee Agreement
with the Representative whereby the Company will agree to pay the
Representative a fee of 5% of the aggregate exercise price of each Warrant
exercised commencing one year after the Effective Date, of which a portion
may be allowed by the Representative to the dealer who solicited the
exercise (which may also be the Representative), subject to applicable NASD
guidelines.
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gg. Afford the Representative the right, but not the obligation,
commencing on the Effective Date and surviving for a period of five years,
to designate an observer to attend meetings of the Board of Directors. The
designee, if any, and the Representative will receive notice of each
meeting of the Board of Directors in accordance with Colorado law, of which
no less than four meetings will be held in person or by video conference
each year. Any such designee will receive reimbursement for all reasonable
costs and expenses incurred in attending meetings of the Board of
Directors, including but not limited to, food, lodging and transportation,
together with such other fee or compensation as is paid by the Company to
other members of the Board of Directors. Moreover, to the extent permitted
by law, the Representative and its designee shall be indemnified for the
actions of such designee as an observer to the Board of Directors and in
the event the Company maintains a liability insurance policy affording
coverage for the acts of its officers and/or directors, to the extent
permitted under such policy, each of the Representative and its designee
shall be an insured under such policy.
hh. Refrain from granting any options or warrants to any member of the
Board of Directors appointed by Spencer Edwards, Inc. or make any cash or
other payment to such member of the Board of Directors for such person's
service on the Board of Directors unless the Company shall have secured the
prior written approval of the Representative and the Representative shall
have confirmed with the NASD that the payment of any such compensation
shall not cause any reduction in the allowable compensation to the
Representative in connection with any past, present or future transactions
involving the Company.
ii. That for a period of three years after the Effective Date of the
Registration Statement the Representative shall have a right of first
refusal to purchase for its account or to sell for the account of the
Company or any of its subsidiaries, any debt or equity securities of the
Company with respect to which the Company or any of its subsidiaries or
successors (other than a successor entity which has acquired the Company
and in which the stockholders of the Company own less than 25% of the
outstanding shares) may seek to offer and sell pursuant to a registration
statement under the Act or in a private transaction other than with a
lending institution. The Company and its subsidiaries will consult the
Representative with regard to any such offering and will offer the
Representative the opportunity to purchase or sell any such securities on
terms not more favorable to the Company than it can secure elsewhere. If
the Representative fails to accept in writing such proposal for financing
made by the Company or its subsidiaries within thirty (30) days after the
receipt by the Representative of a notice containing such proposal, then
the Representative shall have no further claim or right with respect to the
financing proposal contained in such notice. If, thereafter, such proposal
is modified, the Company and its subsidiaries shall adopt the same
procedure as with respect to the original proposals, except that upon
re-presentation, such term for response by the Representative shall be 15
days. The Company agrees that any breach by the Company of the
Representative's rights of first refusal shall be enforceable through
injunctive relief.
6. Payment of Expenses. The Company hereby agrees to pay all expenses
(subject to the last sentence of this Section 6) in connection with the
offering, including but not limited to (a) the preparation, printing, filing,
distribution, and mailing of the Registration Statement and the Prospectus,
including NASD, SEC, Nasdaq filing and/or application fees, and the printing,
filing, distribution, and mailing of this Agreement, any Agreement Among
Underwriters, Selected Dealers Agreement, preliminary and final Blue Sky
Memorandums, material to be circulated to the Underwriters by you and other
incidental or related documents, including the cost of all copies thereof and of
the Preliminary Prospectuses and of the Prospectus, and any amendments or
supplements thereto, supplied to the Representative in quantities as herein
above stated, (b) the issuance, sale, transfer, and delivery of the Common Stock
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and Warrants, the Additional Securities, the Warrant Shares, the
Representative's Options and the Representative's Option Securities, including,
without limitation, any original issue, transfer or other taxes payable thereon
and the costs of preparation, printing and delivery of certificates representing
such securities, as applicable, (c) the qualification of the Units, Common Stock
and Warrants, Additional Securities, Representative's Options, Representative's
Option Securities, and Warrant Shares under state or foreign "blue sky" or
securities laws, which qualification shall be undertaken by counsel to the
Representative at the Company's expense, (d) the fees and disbursements of
counsel for the Company and the accountants for the Company, (e) the listing of
the Common Stock and Warrants on The Nasdaq SmallCap Market_, and (f) the
Representative's non-accountable expense allowance equal to 3% of the aggregate
gross proceeds from the sale of the Units and the Additional Securities. Prior
to or immediately following the Closing Date, the Company shall bear the costs
of tombstone announcements not to exceed $3,000, if requested to do so by the
Representative. The Company and the Representative shall pay their own expenses
incurred in connection with any road shows.
The Company has previously remitted to the Representative the sum of
$45,000, which sum has been credited as a partial payment in advance of the
non-accountable expense allowance provided for in Section 6(f) above.
7. Conditions of Underwriters' Obligations. The Underwriters' obligation to
purchase and pay for the Units and the Additional Securities, as provided
herein, shall be subject to the continuing accuracy of the representations and
warranties of the Company contained herein and in each certificate and document
contemplated under this Agreement to be delivered to you, as of the date hereof
and as of the Closing Date (or the Additional Closing Date, as the case may be),
to the performance by the Company of its obligations hereunder, and to the
following conditions:
a. The Registration Statement shall have become effective not later
than 5:00 p.m., Mountain time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you.
b. At the Closing Date and any Additional Closing Date, you shall have
received the favorable opinion of Smith McCullough, P.C., counsel for the
Company, dated the date of delivery, addressed to you, and in form and
scope satisfactory to your counsel, to the effect that:
i. The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Colorado, with
full power and authority, and, after reasonable investigation, counsel
has no knowledge that the Company does not have all necessary
consents, authorizations, approvals, orders, certificates, and permits
of and from, and declarations and filings with, all federal, state,
local, and other governmental authorities and all courts and other
tribunals, to own, lease, license, and use its properties and assets
and to conduct its business in the manner described in the Prospectus.
The Company is duly qualified to do business and is in good standing
in every jurisdiction in which its ownership, leasing, licensing, or
use of property and assets or the conduct of its business makes such
qualification necessary;
ii. The authorized capital stock of the Company as of the date of
this Agreement consisted of 20,000,000 shares of Common Stock, of
which 1,691,542 shares of Common Stock are issued and outstanding,
448,500 shares of Common Stock are reserved for issuance upon the
exercise of outstanding options and warrants and 135,000 shares of
Common Stock are reserved for issuance upon the exercise of the
remaining options authorized under the Company's option plan; and
5,000,000 shares of Preferred Stock, none of which are issued and
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outstanding; and there have been no changes in the authorized and
outstanding capital stock of the Company since the date of this
Agreement, except as contemplated by the Registration Statement and
the Prospectus. Each outstanding share of capital stock is validly
authorized, validly issued, fully paid, and nonassessable, with no
personal liability attaching to the ownership thereof, has not been
issued and is not owned or held in violation of any preemptive right
of stockholders. There is no commitment, plan, or arrangement to
issue, and no outstanding option, warrant, or other right calling for
the issuance of, any share of capital stock of the Company or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of the Company,
except as set forth above, and except as is properly described in the
Prospectus. There is outstanding no security or other instrument which
by its terms is convertible into or exchangeable for capital stock of
the Company, except as described in the Prospectus;
iii. To the knowledge of counsel, after reasonable investigation,
there is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened,
or in prospect (or any basis therefor) with respect to the Company or
any of its respective operations, businesses, properties, or assets,
except as may be properly described in the Prospectus or such as
individually or in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business,
properties, or assets of the Company. To the knowledge of counsel, the
Company is not in violation of, or in default with respect to, any
law, rule, regulation, order, judgment, or decree, except as may be
properly described in the Prospectus or such as in the aggregate have
been disclosed to the Representative and do not now have and will not
in the future have a material adverse effect upon the operations,
business, properties, or assets of the Company; nor is the Company
required to take any action in order to avoid any such violation or
default;
iv. Based upon the certificates received from the Company's
officers, neither the Company nor any other party is now or is
expected by the Company to be in violation or breach of, or in default
with respect to, complying with any material provision of any
contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company;
v. The Company is not in violation or breach of, or in default
with respect to, any term of its Articles of Incorporation or by-laws;
vi. The Company has all requisite power and authority to execute
and deliver and to perform thereunder this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee Agreement and
the Custody Agreement. All necessary corporate proceedings of the
Company have been taken to authorize the execution and delivery and
performance thereunder by the Company of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee Agreement and
the Custody Agreement. Each of this Agreement, the Warrants, the
Representative's Options, the Warrant Exercise Fee Agreement and the
Custody Agreement have been duly authorized, executed and delivered by
the Company, and is a legal, valid, and binding obligation of the
Company, and (subject to applicable bankruptcy, insolvency, and other
laws affecting the enforceability of creditors' rights generally)
enforceable as to the Company in accordance with its respective terms.
No consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state,
local, or other governmental authority or any court or other tribunal
is required by the Company for the execution or delivery, or
performance thereunder by the Company of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee Agreement and
the Custody Agreement (except filings under the Act which have been
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made prior to the Closing Date and consents consisting only of
consents under "blue sky" or securities laws which are required in
connection with the transactions contemplated by this Agreement, and
which counsel has been advised by counsel to the underwriters have
been obtained on or prior to the date the Registration Statement
becomes effective under the Act). No consent of any party to any
contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Company is a party, or to which any of its
properties or assets are subject, is required for the execution or
delivery, or performance thereunder of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee Agreement or
the Custody Agreement; and the execution and delivery and performance
thereunder of this Agreement, the Warrants, the Representative's
Options, the Warrant Exercise Fee Agreement and the Custody Agreement
will not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such contract,
agreement, instrument, lease, license, arrangement, or understanding,
or violate or result in a breach of any term of the Articles of
Incorporation or by-laws of the Company, or violate, result in a
breach of, or conflict with any law, rule, regulation, order,
judgment, or decree binding on the Company or to which any of its
operations, businesses, properties, or assets are subject;
vii. The shares of Common Stock are, the shares of Common Stock
issuable on exercise of the Warrants will be upon exercise of the
Warrants, the shares of Common Stock underlying the Representative's
Options will be upon exercise of the Representative's Options, and the
Representative's Option Shares will be upon exercise of the Warrants
underlying the Representative's Options, validly authorized, validly
issued, fully paid, and nonassessable and will not have been issued in
violation of any preemptive rights of stockholders, and the
Underwriters have received good title to the Units and Additional
Securities purchased by them from the Company, free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts; upon payment for the
Warrant Shares and the Representative's Option Securities, the holders
thereof will receive good title to such securities, free and clear of
all liens, security interests, pledges, charges, encumbrances,
stockholders' agreement and voting trusts. The Units, the Common
Stock, the Warrants, the Warrant Shares, the Representative's Options
and the Representative's Option Securities conform in all material
respects to all statements relating thereto contained in the
Registration Statement or the Prospectus;
viii. The Warrant Shares have been duly and validly reserved for
issuance pursuant to the terms of the Warrant Agreement between the
Company and its transfer agent, and the Representative's Option
Securities have been duly and validly reserved for issuance pursuant
to the terms of the Representative's Options or the Warrant Agreement,
as the case may be;
ix. To the knowledge of counsel, after reasonable investigation,
all contracts, agreements, instruments, leases, and licenses that are
required to be described in the Registration Statement or the
Prospectus have been properly described therein. To the knowledge of
counsel, after reasonable investigation, all contracts, agreements,
instruments, leases, or licenses required to be filed as an exhibit to
the Registration Statement have been filed with the Commission as an
exhibit to or have been incorporated as an exhibit by reference into
the Registration Statement;
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x. Insofar as statements in the Prospectus purport to summarize
the status of litigation or the provisions of laws, rules,
regulations, orders, judgments, decrees, contracts, agreements,
instruments, leases, or licenses, such statements have been prepared
or reviewed by such counsel and accurately reflect the status of such
litigation and provisions purported to be summarized and are correct
in all material respects;
xi. Except as provided in the Registration Statement, no person
or entity has the right to require registration of shares of Common
Stock or other securities of the Company because of the filing or
effectiveness of the Registration Statement;
xii. The Registration Statement has become effective under the
Act. No Stop Order has been issued and no proceedings for that purpose
have been instituted or threatened;
xiii. The Registration Statement and the Prospectus, and any
amendment or supplement thereto, comply as to form in all material
respects with the requirements of the Act and the Regulations;
xiv. After reasonable investigation, such counsel has no
knowledge that either the Registration Statement or the Prospectus, or
any amendment or supplement thereto, contains any 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 (except that no opinion need be expressed as to the
consolidated financial statements and other financial data and
schedules which are or should be contained therein);
xv. After reasonable investigation, counsel has no knowledge of
any event which has occurred since the Effective Date which should
have been set forth in an amendment or supplement to the Registration
Statement or the Prospectus that has not been set forth in such an
amendment or supplement;
xvi. The Company is not currently offering any securities for
sale except as described in the Registration Statement;
xvii. After reasonable investigation, such counsel has no
knowledge of any promoters, affiliates, parents or subsidiaries of the
Company except as are described in the Registration Statement;
xviii. The Company owns or possesses, free and clear of all liens
or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, copyrights,
service marks, service names, trade names and licenses necessary to
conduct its business (including without limitation, any such licenses
or rights described in the Registration Statement as being owned or
possessed by the Company or any subsidiary) (all of which are
collectively referred to herein as the "Intellectual Property"); there
is no actual or, to the knowledge of counsel, pending, or threatened
claim, proceeding or action by any person pertaining to or which
challenges the exclusive rights of the Company with respect to any of
the Company's Intellectual Property; based on a review of all the
Company's products, proposed products and Intellectual Property, to
the knowledge of counsel, such products, proposed products or
Intellectual Property do not and will not infringe on any trademarks,
copyrights, service marks, service names, trade names or valid patents
or patents pending held by third parties known to the Company and such
counsel;
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<PAGE>
xix. The Company is not a party to any agreement giving rise to
any obligation by the Company or any subsidiary to pay any third-party
royalties or fees of any kind whatsoever with respect to any
technology developed, employed, used or licensed by the Company or any
subsidiary, other than is disclosed in the Prospectus;
xx. The Common Stock and Warrants are eligible for quotation on
The Nasdaq SmallCap Market; and
xxi. All issued and outstanding shares of Common Stock and all
other securities issued and sold or exchanged by the Company or its
subsidiaries have been issued and sold or exchanged in compliance with
all applicable state and federal securities laws and regulations. For
the purposes of this subsection xxi, counsel shall be able to further
rely upon the opinion of such other of the Company's counsel as
counsel shall deem appropriate.
Such opinion shall be governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991) and shall be subject to the qualifications,
exceptions, definitions, limitations on coverage and other limitations set
forth therein and in such opinion. Qualifications in such opinion as to
knowledge or the absence of knowledge shall be based upon and limited to
the "Actual Knowledge" (as defined in the Accord) of the "Primary Lawyer
Group" (as identified in such opinion). In rendering such opinion, such
legal counsel shall be entitled to rely upon Public Authority Documents and
upon information provided by client officials in written Certificates
provided that copies of such Public Authority Documents and Certificates
are attached as exhibits to the written opinion of legal counsel. The term
"Public Authority Documents" shall have the meaning ascribed to it in the
Legal Opinion Accord of the ABA Section of Business Law (1991).
c. On or prior to the Closing Date and any Additional Closing Date, as
the case may be, you shall have been furnished such information, documents,
certificates, and opinions as you may reasonably require for the purpose of
enabling you to review the matters referred to in Sections 7(b) and (c),
and in order to evidence the accuracy, completeness, or satisfaction of any
of the representations, warranties, covenants, agreements, or conditions
herein contained, or as you may reasonably request.
d. At the Closing Date and any Additional Closing Date, as the case
may be, you shall have received a certificate of the chief executive
officer and of the chief financial officer of the Company, dated the
Closing Date or such Additional Closing Date, as the case may be, to the
effect that the conditions set forth in Section 7(a) have been satisfied,
that as of the date of this Agreement and as of the Closing Date or such
Additional Closing Date, as the case may be, the representations and
warranties of the Company contained herein were and are accurate, and that
as of the Closing Date or such Additional Closing Date, as the case may be,
the obligations to be performed by the Company hereunder on or prior
thereto have been fully performed.
e. At the time this Agreement is executed and at the Closing Date and
any Additional Closing Date, as the case may be, you shall have received
letters from HEIN + ASSOCIATES, LLP and James E. Scheifley & Associates,
Inc., Certified Public Accountants, addressed to you and dated the date of
delivery but covering a period within three business days of such date, in
form and substance satisfactory to you.
22
<PAGE>
f. All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Units and the Additional Securities shall be
satisfactory in form and substance to you and to counsel for the
Representative, and you shall have received a favorable opinion from
counsel to the Company, dated as of the Closing Date or the Additional
Closing Date, as the case may be, with respect to such of the matters set
forth under Sections 7(b) and 7(c), respectively, and with respect to such
other related matters, as you may reasonably request.
g. The NASD, upon review of the terms of the public offering of the
Units and the Additional Securities, shall not have objected to your
participation in such offering.
h. The Company shall have received notice that the Common Stock and
Warrants will be quoted on The Nasdaq SmallCap Market_ as of the Effective
Date.
Any certificate or other document signed by any officer of the Company and
delivered to you or to counsel for the Representative shall be deemed a
representation and warranty by such officer individually and by the Company
hereunder to the Representative as to the statements made therein. If any
condition to your obligations hereunder to be fulfilled prior to or at the
Closing Date or any Additional Closing Date, as the case may be, is not so
fulfilled, you may terminate this Agreement or, if you so elect, in writing
waive any such conditions which have not been fulfilled or extend the time for
their fulfillment.
8. Indemnification and Contribution.
a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Underwriters, the Representative, and each
of their officers, directors, partners, employees, agents, and counsel, and
each person, if any, who controls the Representative or any one of the
Underwriters within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act, against any and all loss, liability, claim, damage,
and expense whatsoever (which shall include, for all purposes of this
Section 8, but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and
all amounts paid in settlement of any claim or litigation) as and when
incurred arising out of, based upon, or in connection with (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, the Registration Statement, or the Prospectus
(as from time to time amended and supplemented), or any amendment or
supplement thereto, or (B) in any application or other document or
communication (in this Section 8 collectively called an "application") in
any jurisdiction in order to qualify the Units and Additional Securities
under the "blue sky" or securities laws thereof or filed with the
Commission or any securities exchange; or any omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company contained
in this Agreement. The foregoing agreement to indemnify shall be in
addition to any liability the Company may otherwise have, including
liabilities arising under this Agreement; however, the Company shall have
no liability under this Section 8 if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company as stated in Section 8(b) with respect to the Underwriters by or on
behalf of the Underwriters expressly for inclusion in any Preliminary
Prospectus, the Registration Statement, or the Prospectus, or any amendment
or supplement thereto, or in any application, as the case may be . If any
23
<PAGE>
action is brought against the Underwriters, the Representative or any of
their officers, directors, partners, employees, agents, or counsel, or any
controlling persons of an Underwriter or the Representative (an
"indemnified party") in respect of which indemnity may be sought against
the Company pursuant to the foregoing paragraph, such indemnified party or
parties shall promptly notify the Company in writing of the institution of
such action (but the failure so to notify shall not relieve the Company
from any liability it may have other than pursuant to this Section 8(a))
and the Company shall promptly assume the defense of such action, including
the employment of counsel (satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall
have been authorized in writing by the Company in connection with the
defense of such action or the Company shall not have promptly employed
counsel satisfactory to such indemnified party or parties to have charge of
the defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available
to it or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events such
fees and expenses shall be borne by the Company. Anything in this paragraph
to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written
consent. The Company agrees promptly to notify the Underwriters and the
Representative of the commencement of any litigation or proceedings against
the Company or against any of its officers or directors in connection with
the sale of the Units or the Additional Securities, any Preliminary
Prospectus, the Registration Statement, or the Prospectus, or any amendment
or supplement thereto, or any application.
b. The Underwriters agree to indemnify and hold harmless the Company,
the Company's counsel, each director of the Company, each officer of the
Company who shall have signed the Registration Statement, each other
person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Underwriters in Section 8(a),
but only with respect to statements or omissions, if any, made in any
Preliminary Prospectus, the Registration Statement, or the Prospectus (as
from time to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in con formity with
written information furnished to the Company as stated in this Section 8(b)
with respect to the Underwriters by or on behalf of the Underwriters
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or in
any application, as the case may be; provided, however, that the obligation
of the Underwriters to provide indemnity under the provisions of this
Section 8(b) shall be limited to the amount which represents the product of
the number of Units and Additional Securities sold hereunder and the
initial public offering price per Unit set forth on the cover page of the
Prospectus. For all purposes of this Agreement, the amounts of the selling
concession and reallowance set forth in the Prospectus, the information
under "Underwriting" and the identification of counsel to the
Representative under "Legal Matters" constitute the only information
furnished in writing by or on behalf of the Underwriters expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended or supplemented), or any amendment
or supplement thereto, or in any application, as the case may be. If any
action shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or
any application, and in respect of which indemnity may be sought against
the Underwriters pursuant to this Section 8(b), the Underwriters shall have
the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the
indemnified parties, by the provisions of Section 8(a).
24
<PAGE>
c. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section
8 is for any reason held to be unavailable to the Underwriters or the
Company, then the Company shall contribute to the damages paid by the
several Underwriters, and the several Underwriters shall contribute to the
damages paid by the Company; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by each party from the sale of
the Units and Additional Securities (taking into account the portion of the
proceeds of the offering realized by each), the parties' relative knowledge
and access to information concerning the matter with respect to which the
claim was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or
per capita allocation (even if the Underwriters were treated as one entity
for such purpose). No Underwriter or person controlling such Underwriter
shall be obligated to make contribution hereunder which in the aggregate
exceeds the total public offering price of the Units and Additional
Securities purchased by such Underwriter under this Agreement, less the
aggregate amount of any damages which such Underwriter and its controlling
persons have otherwise been required to pay in respect of the same or any
substantially similar claim. The Underwriters' obligations to contribute
hereunder are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act, shall have the same rights to
contribution as the Company. Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to
the settlement of any claim or action effected without its written consent.
This Section 8(c) is intended to supersede any right to contribution under
the Act, the Exchange Act, or otherwise.
9. Representations and Agreements to Survive Delivery. All representations,
warranties, covenants, and agreements contained in this Agreement shall be
deemed to be representations, warranties, covenants, and agreements at the
Closing Date and any Additional Closing Date, and such representations,
warranties, covenants, and agreements of the Underwriters and the Company,
including the indemnity and contribution agreements contained in Section 8,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Representative, the Underwriters or
any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 8(b), and shall survive
termination of this Agreement or the delivery of the Units and the Additional
Securities to the Underwriters for a period equal to the statute of limitations
for claims related hereto, but not to exceed an aggregate of five years from the
date hereof. In addition, the provisions of Sections 5(a), 6, 8, 9, 10, and 12
shall survive termination of this Agreement, whether such termination occurs
before or after the Closing Date or any Additional Closing Date.
10. Effective Date of This Agreement and Termination Thereof.
a. This Agreement shall be executed within 24 hours of the Effective
Date of the Registration Statement and shall become effective on the
Effective Date or at the time of the initial public offering of the Units,
whichever is earlier. The time of the initial public offering shall mean
the time, after the Registration Statement becomes effective, of the
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Units or the
25
<PAGE>
time, after the Registration Statement becomes effective, when the Units
are first released by the Representative for offering by dealers by letter
or telegram, whichever shall first occur. The Representative or the Company
may prevent this Agreement from becoming effective without liability of any
party to any other party, except as noted below in this Section 10, by
giving the notice indicated in Section 10(c) before the time this Agreement
becomes effective.
b. The Representative shall have the right to terminate this Agreement
at any time prior to the Closing Date or any Additional Closing Date, as
the case may be, by giving notice to the Company if there shall have been a
general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the American Stock Exchange or
in the over-the-counter market; or if there shall have been an outbreak of
major hostilities or other national or international calamity; or if a
banking moratorium has been declared by a state or federal authority; or if
a moratorium in foreign exchange trading by major international banks or
persons has been declared; or if there shall have been a material
interruption in the mail service or other means of communication within the
United States; or if the Company shall have sustained a material or
substantial loss by fire, flood, accident, hurricane, earthquake, theft,
sabotage, or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in the Representative's opinion, make
it inadvisable to proceed with the offering, sale, or delivery of the Units
or the Additional Securities, as the case may be; or if there shall have
been such material and adverse change in the market for securities in
general so as to make it inadvisable to proceed with the offering, sale,
and delivery of the Units or the Additional Securities, as the case may be,
on the terms contemplated by the Prospectus due to the impaired investment
quality of the Units or the Additional Securities; or if the Dow Jones
Industrial Average shall have fallen by 15% or more from its closing price
on the day immediately preceding the date that the Registration Statement
is declared effective by the Commission.
c. If the Representative elects to prevent this Agreement from
becoming effective as provided in this Section 10, or to terminate this
Agreement, it shall notify the Company promptly by telephone, telex, or
telegram, confirmed by letter. If, as so provided, the Company elects to
prevent this Agreement from becoming effective, the Company shall notify
the Representative promptly by telephone, telex, or telegram, confirmed by
letter.
d. Anything in this Agreement to the contrary notwithstanding other
than Section 10(e), if this Agreement shall not become effective by reason
of an election pursuant to this Section 10 or if this Agreement shall
terminate or shall otherwise not be carried out prior to May 31, 1999
because (i) of any reason solely within the control of the Company or its
stockholders and not due to the breach of any representation, warranty or
covenant or bad faith of the Representative, (ii) the Company unilaterally
withdraws the proposed Public Offering from the Representative in favor of
another underwriter, (iii) the Company does not permit the Registration
Statement to become effective, (iv) of any material discrepancy in any
representation by the Company and/or its officers, directors, stockholders,
agents, advisers or representatives, made in writing, including but not
limited to the Registration Statement, to the Representative, (v) the
Company is, directly and/or indirectly, negotiating with other persons or
entities of whatsoever nature relating to a possible Public Offering of its
securities, or (vi) of any failure on the part of the Company to perform
any covenant or agreement or satisfy any condition of this Agreement by it
to be performed or satisfied, then, in any of such events, the Company
shall be obligated to reimburse the Representative for its out-of-pocket
26
<PAGE>
expenses on an accountable basis. Should the Representative be required to
account for "out-of-pocket" expenses, any expense incurred by the
Representative shall be deemed to be reasonable and unobjectionable upon a
reasonable showing by the Representative that such expenses were incurred,
directly or indirectly, in connection with the proposed transaction and/or
relationship of the parties hereto, as described herein. In no event will
the Representative be entitled to reimbursement of accountable expenses
exceeding $45,000, inclusive of the $45,000 advanced against the
non-accountable expense allowance. The Representative will return to the
Company any portion of the $45,000 payment previously received that is not
used in the payment of accountable expenses if the Public Offering is not
completed.
e. Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 5(a), 6, 8, 9, and 10 shall not be in any way
affected by such election or termination or failure to carry out the terms
of this Agreement or any part hereof.
11. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Representative, shall be mailed, delivered, or sent by facsimile transmission
and confirmed by original letter, to Schneider Securities, Inc., 1120 Lincoln
Street, Suite 900, Denver, Colorado 80203, Attention: Keith Koch, with a copy to
Robert W. Walter, Esq., Berliner Zisser Walter & Gallegos, P.C., 1700 Lincoln
Street, Suite 4700, Denver, Colorado 80203; or if sent to the Company shall be
mailed, delivered, or telexed or telegraphed and confirmed by letter, to
Multi-Link Telecommunications, Inc., 811 Lincoln Street, 5th Floor, Denver,
Colorado 80203, Attention: Nigel V. Alexander and Shawn B. Stickle, with a copy
to Thomas S. Smith, Esq. , Smith McCullough, P.C., 4643 South Ulster Street,
Suite 900, Denver, Colorado 80237. All notices hereunder shall be effective upon
receipt by the party to which it is addressed.
12. Parties. This Agreement shall inure solely to the benefit of, and shall
be binding upon, the Underwriters, the Company, and the persons and entities
referred to in Section 8 who are entitled to indemnification or contribution,
and their respective successors, legal representatives, and assigns (which shall
not include any buyer, as such, of the Units, Common Stock and Warrants or the
Additional Securities) and no other person shall have or be construed to have
any legal or equitable right, remedy, or claim under or in respect of or by
virtue of this Agreement or any provision herein contained.
13. Construction. This Agreement shall be construed in accordance with the
laws of the State of Colorado, without giving effect to conflict of laws. Time
is of the essence in this Agreement. The parties acknowledge that this Agreement
was initially prepared by the Representative, and that all parties have read and
negotiated the language used in this Agreement. The parties agree that, because
all parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any party by reason of that party's role in drafting this
Agreement.
If the foregoing correctly sets forth the understanding between us, please
so indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between us.
Very truly yours,
MULTI-LINK TELECOMMUNICATIONS, INC.
By: /s/ Nigel V. Alexander
-------------------------------------------------------
Nigel V. Alexander, Chief Executive Officer
By: /s/ Shawn B. Stickle
-------------------------------------------------------
Shawn B. Stickle, President and Chief Operating Officer
<PAGE>
Accepted as of the date first above written.
Denver, Colorado
SCHNEIDER SECURITIES, INC.
for itself and any other Underwriters:
By: /s/ Thomas Schneider
------------------------------------------
Thomas Schneider, Chief Executive Officer
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC.
(a Colorado corporation)
SCHEDULE 1
This Schedule sets forth the name of each Underwriter referred to in the
Underwriting Agreement and the number of Units to be sold by the Company.
Number of
Name Units
---- ----------
Schneider Securities, Inc.
---------
Total 1,150,000
SELECTED DEALERS AGREEMENT
Public Offering of
1,150,000 Units
Offering Price: $6.00 per Unit
MULTI-LINK TELECOMMUNICATIONS, INC.
________, 1999
Schneider Securities, Inc., on behalf of itself and other underwriters (the
"Underwriters") for which it is the representative (the "Representative"), has
severally agreed with Multi-Link Telecommunications, Inc., a Colorado
corporation (the "Company"), to purchase 1,150,000 Units (the "Firm Units"),
each Unit consisting of one share of common stock (the "Common Stock") and one
redeemable warrant (the "Warrant") of the Company, and the Representative has
been granted the right to purchase up to an additional 172,500 Units and/or
warrants (the "Additional Securities") at its option for the sole purpose of
covering over-allotments in the sale of the Firm Units (the Firm Units and
Additional Securities being collectively referred to as the "Securities" or a
"Security"). The Underwriters are offering the Securities to the public at an
offering price of $6.00 per Unit. Certain other capitalized terms used herein
are defined in the Underwriting Agreement and are used herein as therein
defined.
The Representative is offering the Securities to certain selected dealers
(the "Selected Dealers"), when, as and if accepted by the Representative and
subject to withdrawal, cancellation or modification of the offer without notice
and further subject to the terms of (i) the Company's current Prospectus, (ii)
the Underwriting Agreement, (iii) this Agreement, and (iv) the Representative's
instructions which may be forwarded to the Selected Dealer from time to time. A
copy of the Underwriting Agreement will be delivered to you forthwith for
inspection or copying or both, upon your request therefor. This invitation is
made by the Representative only if the Securities may be offered lawfully to
dealers in your state.
The further terms and conditions of this invitation are as follows:
1. Acceptance of Orders. Orders received by the Representative from the
Selected Dealer will be accepted only at the price, in the amounts and on the
terms which are set forth in the Company's current Prospectus, subject to
allotment in the Representative's uncontrolled discretion. The Representative
reserves the right to reject any orders, in whole or in part.
2. Selling Concession. As a Selected Dealer, you will be allowed on all
Securities purchased by you, which the Underwriters have not repurchased or
contracted to repurchase prior to termination of this Agreement at or below the
public offering price, a concession of ___% of the full 10% Underwriting
discount, i.e., $___ per Security as shown in the Company's current Prospectus.
No selling concession will be allowed to any domestic broker-dealer who is not a
member of the National Association of Securities Dealers, Inc. (the
"Association"), or to any foreign broker-dealer eligible for membership in the
Association who is not a member of the Association. Payment of such selling
concession to you will be made only as provided in Section 4 hereof. After the
Securities are released for sale to the public, the Representative is authorized
to, and may, change the public offering price and the selling concession.
3. Reoffer of Securities. Securities purchased by you are to be bona fide
reoffered by you in conformity with this Agreement and the terms of offering set
forth in the Prospectus. You agree that you will not bid for, purchase, attempt
to induce others to purchase, or sell, directly or indirectly, any Securities
except as contemplated by this Agreement and except as a broker pursuant to
-1-
<PAGE>
unsolicited orders. You confirm that you have complied and agree that you will
at all times comply with the provisions of Regulation M of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") applicable to this
offering. In respect of Securities sold by you and thereafter purchased by the
Representative at or below the public offering price prior to the termination of
this Agreement as described hereinafter (or such longer period as may be
necessary to cover any short position with respect to the offering), you agree
at the Representative's option either to repurchase the Securities at a price
equal to the cost thereof to the Representative, including commissions and
transfer taxes on redelivery, or to repay the Representative such part of your
Selected Dealers' concessions on such Securities as the Representative
designates.
4. Payment for Securities. Payment for the Securities purchased by you is
to be made at the net Selected Dealers' price of $_____ per Security, at the
offices of Schneider Securities, Inc., Suite 900, 1120 Lincoln Street, Denver,
Colorado 80203, Attention: Syndicate Department, at such time and on such date
as the Representative may designate, by certified or official bank check,
payable in clearing house funds to the order of the Representative, against
delivery of certificates for the Securities so purchased. If such payment is not
made at such time and on such date, you agree to pay the Representative interest
on such funds at the current interest rate. The Representative may in its
discretion deliver the Securities purchased by you through the facilities of the
Depository Trust Company or, if you are not a member, through your ordinary
correspondent who is a member unless you promptly give the Representative
written instructions otherwise.
5. Offering Representations. The Representative has been informed that a
Registration Statement in respect of the Securities is expected to become
effective under the Securities Act of 1933, as amended (the "Act"). You are not
authorized to give any information or to make any representations other than
those contained in the Prospectus or to act as agent for the Company or for the
undersigned when offering the Securities to the public or otherwise.
6. Blue Sky. Neither the Representative nor the Underwriters assume any
responsibility or obligations as to your right to sell the Securities in any
jurisdiction, notwithstanding any information furnished in that connection. The
Selected Dealer shall report in writing to the Representative the number of
Securities which have been sold by it in each state and the number of
transactions made in each such state. This state report shall be submitted to
the Representative as soon as possible after completion of billing, but in any
event not more than three days after the closing.
7. Dealer Undertakings. By accepting this Agreement, the Selected Dealer in
offering and selling the Securities in the Public Offering (i) acknowledges its
understanding of (a) the Conduct Rules (the "Rules") of the Association and the
interpretations of such Rules promulgated by the Board of Governors of the
Association (the "Interpretations") including, but not limited to the Rule and
Interpretation with respect to "Free-Riding and Withholding" defined therein,
(b) Rule 174 of the rules and regulations promulgated under the Act, (c)
Regulation M promulgated under the Exchange Act, (d) Release No. 3907 under the
Act, (e) Release No. 4150 under the Act, and (f) Sections 2730, 2740, 2420 and
2750 of the Rules and Interpretations thereunder, and (ii) represents, warrants,
covenants and agrees that it shall comply with all applicable requirements of
the Act and the Exchange Act in addition to the specific provisions cited in
subparagraph (i) above and that it shall not violate, directly or indirectly,
any provision of applicable law in connection with its participation in the
Public Offering of the Securities.
8. Conditions of Public Offering. All sales shall be subject to delivery by
the Company of certificates evidencing the Securities against payment therefor.
9. Failure of Order. If an order is rejected or if a payment is received
which proves insufficient or worthless, any compensation paid to the Selected
Dealer shall be returned by (i) restoration by the Representative to the
Selected Dealer of the latter's remittance or (ii) a charge against the account
of the Selected Dealer with the Representative, as the latter may elect without
notice being given of such election.
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<PAGE>
10. Additional Representations, Covenants and Warranties of Selected
Dealer. By accepting this Agreement, the Selected Dealer represents that it is
registered as a broker-dealer under the Exchange Act; is qualified to act as a
dealer in the states or the jurisdictions in which it shall offer the
Securities; is a member in good standing of the Association; and shall maintain
such registrations, qualifications and membership in full force and effect and
in good standing throughout the term of this Agreement. If the Selected Dealer
is not a member of the Association, it represents that it is a foreign dealer
not registered under the Exchange Act and agrees to make no sales within the
United States, its territories or its possessions or to persons who are citizens
thereof or residents therein, and in making any sales to comply with the
Association's Rules and Interpretations with respect to Free-Riding and
Withholding. Further, the Selected Dealer agrees to comply with all applicable
federal laws including, but not limited to, the Act and Exchange Act and the
rules and regulations of the Commission thereunder; the laws of the states or
other jurisdictions in which Securities may be offered or sold by it; and the
Constitution, Bylaws, and rules of the Association. Further, the Selected Dealer
agrees that it will not offer or sell the Securities in any state or
jurisdiction except those in which the Securities have been qualified or
qualification is not required. The Selected Dealer acknowledges its
understanding that it shall not be entitled to any compensation hereunder for
any period during which it has been suspended or expelled from membership in the
Association.
11. Employees and other Agents of the Selected Dealer. By accepting this
Agreement, the Selected Dealer assumes full responsibility for thorough and
proper training of its employees and other agents and representatives concerning
the selling methods to be used in connection with the Public Offering of the
Securities, giving special emphasis to the principles of full and fair
disclosure to prospective investors and the prohibitions against "Free-Riding
and Withholding" as set forth in Section 2110 of the Rules and the
Interpretations thereunder.
12. Indemnification by the Company. The Company has agreed in Section 8 of
the Underwriting Agreement to indemnify and hold harmless the Underwriters, the
Representative and each person if any, who controls the Representative or any of
the Underwriters within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act against any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of Section 8 of the
Underwriting Agreement, but not be limited to, attorneys' fees and any and all
expense whatsoever incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, or (B) in any
application or other document or communication (in the Underwriting Agreement
collectively called an "application") in any jurisdiction in order to qualify
the Securities under the "blue sky" or securities laws thereof or filed with the
Commission or any securities exchange; or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in the Underwriting
Agreement. The Representative has agreed to give the Company an opportunity and
the right to participate in the defense or preparation of the defense of any
action brought against the Representative, any Underwriter or any controlling
person thereof to enforce any such loss, claim, demand, liability or expense.
The agreement of the Company under this indemnity is conditioned upon notice of
any such action having been promptly given by the indemnified party to the
Company. Failure to notify the Company as provided in the Underwriting Agreement
shall not relieve the Company of its liability which it may have to the
Representative, the Underwriters, or any controlling person thereof other than
pursuant to Section 8(a) of the Underwriting Agreement. This agreement is
subject in all respects, especially insofar as the foregoing description of the
indemnification provisions set forth in the Underwriting Agreement is concerned,
-3-
<PAGE>
to the terms and provisions of the Underwriting Agreement, a copy of which will
be made available for inspection or copying or both to the Selected Dealer upon
written request to the Representative therefor. The Selected Dealer acknowledges
and confirms that, by signing a counterpart of this Agreement, it shall be
deemed an agent of the Underwriters or a "Representative" for all purposes of
Section 8 of the Underwriting Agreement, as expressly set forth therein.
13. Indemnification by the Selected Dealer. The Selected Dealer shall
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall have signed the Registration Statement, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, to the same extent as the
indemnity from the Company to the Underwriters in Section 8(a) of the
Underwriting Agreement, but only with respect to statements or omissions, if
any, made in any Preliminary Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with information furnished to the Representative or the Company with respect to
the Selected Dealer by or on behalf of the Selected Dealer expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or are based upon alleged misrepresentations or omissions to
state material facts in connection with statements made by the Selected Dealer
or the Selected Dealer's employees or other agents to the Company or the
Representative orally or by any other means; provided, however, that the
obligation of the Selected Dealer to provide indemnity hereunder shall be
limited to the amount which represents the product of the number of Firm Units
and Additional Securities sold and the initial public offering price per
Security set forth on the cover page of the Prospectus. If any action shall be
brought against the Company or any other person so indemnified in respect of
which indemnity may be sought against the Selected Dealer pursuant to this
provision, the Selected Dealer shall have the rights and duties given to the
Company in the Underwriting Agreement, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified parties,
by the provisions of Section 8(a) of the Underwriting Agreement; and the
Selected Dealer shall reimburse the Company and the Representative for any legal
or other expenses reasonably incurred by them in connection with the
investigation of or the defense of any such action or claim. The Representative
shall, after receiving the first summons or other legal process disclosing the
nature of the action being brought against it or the Company in any proceeding
with respect to which indemnity may be sought by the Company or the
Representative hereunder, notify promptly the Selected Dealer in writing of the
commencement thereof; and the Selected Dealer shall be entitled to participate
in (and, to the extent the Selected Dealer shall wish, to direct) the defense
thereof at the expense of the Selected Dealer, but such defense shall be
conducted by counsel satisfactory to the Company and the Representative. If the
Selected Dealer shall fail to provide such defense, the Company or the
Representative may defend such action at the cost and expense of the Selected
Dealer. The Selected Dealer's obligation under this Section 13 shall survive any
termination of this Agreement, the Underwriting Agreement and the delivery of
and payment for the Securities under the Underwriting Agreement, and shall
remain in full force and effect regardless of the investigation made by or on
behalf of any Representative within the meaning of Section 15 of the Act.
14. No Authority to Act as Partner or Agent. Nothing herein shall
constitute the Selected Dealers as an association or other separate entity or
partners with or agents of the Representative or with each other, but each
Selected Dealer shall be responsible for its pro rata share of any liability or
expense based upon any claims to the contrary. The Representative shall not be
under any liability for or in respect of the value, validity or form of the
Securities, or the delivery of certificates for the Securities or the
performance by any person of any agreement on its part, or the qualification of
the Securities for sale under the laws of any jurisdiction, or for or in respect
of any matter in connection with this Agreement, except for lack of good faith
and for obligations expressly assumed by the Representative in this Agreement.
-4-
<PAGE>
15. Expenses. No expenses incurred in connection with offers and sales of
the Securities under the Public Offering will be chargeable to the Selected
Dealers. A single transfer tax, if any, on the sale of Securities by the
Selected Dealer to its customers will be paid when such Securities are delivered
to the Selected Dealer for delivery to its customers. Notwithstanding the
foregoing, the Selected Dealer shall pay its proportionate share of any transfer
tax or any other tax (other than the single transfer tax described above) if any
such tax shall at any time be assessed against the Representative and other
Selected Dealers.
16. Notices. All notices, demands or requests required or authorized
hereunder shall be deemed given sufficiently if in writing and sent by
registered or certified mail, return receipt requested and postage prepaid, or
by tested telex, telegram, cable or facsimile to, in the case of the
Representative, the address set forth above directed to the attention of the
President of the Representative, and in the case of the Selected Dealer, to the
address provided below by the Selected Dealer, directed to the attention of the
President.
17. Termination. This Agreement may be terminated by the Representative
with or without cause upon written notice to Selected Dealer to such effect; and
such notice having been given, this Agreement shall terminate at the time
specified therein. Additionally, this Agreement shall terminate upon the earlier
of the termination of the Underwriting Agreement, or at the close of business
thirty days after the Securities are released by the Representative for sale to
the public.
18. General Provisions. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Colorado. This
Agreement embodies the entire agreement and understanding between the
Representative and the Selected Dealer and supersedes all prior agreements and
understandings related to the subject matter hereof, and this Agreement may not
be modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment, modification,
waiver or discharge is sought to be enforced. All the terms of this Agreement,
whether so expressed or not, shall be binding upon, and shall inure to the
benefit of, the respective successors, legal representatives and assigns of the
parties hereto; provided, however, that none of the parties hereto can assign
this Agreement or any of its rights hereunder without the prior written consent
of the other party hereto, and any such attempted assignment or transfer without
the other party's prior written consent shall be void and without force or
effect. The headings of this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
If the foregoing correctly sets forth the terms and conditions of your
agreement to purchase the Securities allotted to you, please indicate your
acceptance thereof by signing and returning to Schneider Securities, Inc. the
duplicate copy of this Agreement, whereupon this letter and your acceptance
shall become and evidence a binding contract between you and the Representative.
SCHNEIDER SECURITIES, INC.
By:
-------------------------------
Title:
----------------------------
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<PAGE>
Gentlemen:
The undersigned confirms its agreement to purchase __________ Units of
Multi-Link Telecommunications, Inc., upon the terms and subject to the
conditions of the foregoing Selected Dealers Agreement, and further agrees that
any agreement by it to purchase Additional Securities during the life of such
Agreement will be upon the same terms and subject to the same conditions. The
undersigned acknowledges receipt of the Prospectus relating to the public
offering of the Securities and confirms that in agreeing to purchase such
Securities it has relied on such Prospectus and not on any other statement
whatsoever written or oral.
Firm Name:
------------------------------------------
(Print or Type name of Firm)
By:
------------------------------------------------
(Authorized Agent)
- ----------------------------------------------------
(Print or Type Name and Title of
Authorized Agent)
Address:
-------------------------------------------
- ----------------------------------------------------
Telephone No.
--------------------------------------
IRS Employer Identification No.:
-------------------
Dated: , 1999
------------------------
-6-
RESTATED ARTICLES OF INCORPORATION
OF
MULTI-LINK HOLDINGS, INC.
which is changing its name to
MULTI-LINK TELECOMMUNICATIONS, INC.
Pursuant to Section 7-110-107 of the Colorado Business Corporation Act
("Act"), Multi-Link Holdings, Inc., a Colorado corporation (the "Corporation"),
hereby amends and restates the Articles of Incorporation of the Corporation as
follows:
These Articles of Restatement to the Articles of Incorporation of the
Corporation (these "Restated Articles") (i) correctly set forth the provisions
of the Articles of Incorporation of the Corporation; (ii) change the name of the
Corporation; (iii) authorize preferred stock and increase authorized shares;
(iv) were proposed and recommended for shareholder approval by the Board of
Directors of the Corporation pursuant to the unanimous written consent of the
Board of Directors of the Corporation in lieu of meeting dated as of May 1,
1998; (v) were approved by the shareholders of the Corporation pursuant to the
unanimous written consent of the shareholders of the Corporation in lieu of
meeting dated as of May 1, 1998; the Corporation has only one shareholder voting
group and the number of votes cast for the approval of these Restated Articles
was sufficient for approval of such Restated Articles; and (vi) supersede all
Articles of Incorporation of the Corporation, any amendments thereto and
restatements thereof, as filed with the Secretary of State of Colorado.
Article I
NAME
The name of the Corporation is Multi-Link Telecommunications, Inc.
Article II
SHARES AND VOTING
A. General. The aggregate number of shares of all classes of stock which
the Corporation shall have authority to issue is 25,000,000 shares, of which
20,000,000 shares shall be classified as common stock, no par value per share
("Common Stock"), and 5,000,000 shares shall be classified as preferred stock,
$0.01 per share ("Preferred Stock"). The Common Stock and Preferred Stock shall
each constitute a separate class of shares. Cumulative voting shall not be
permitted in the election of directors or otherwise by any class of shares of
the Corporation.
B. Common Stock. Each holder of Common Stock entitled to vote shall have
one vote for each share of Common Stock standing in his name on the books of the
Corporation. The holders of Common Stock shall have unlimited voting rights and
shall constitute the sole voting group of the Corporation, except to the extent
any additional voting group or groups may hereafter be established in accordance
with the Act. Subject to the prior rights of holders of Preferred Stock of the
Corporation then issued and outstanding, if any, the holders of Common Stock
shall be entitled to receive the net assets of the Corporation upon dissolution.
<PAGE>
C. Preferred Stock. Shares of Preferred Stock may be issued from time to
time in one or more series as the Board of Directors may determine, without
shareholder approval, as hereinafter provided. The Board of Directors is hereby
authorized, by resolution or resolutions, to provide from time to time, out of
the unissued shares of Preferred Stock not then allocated to any series of
Preferred Stock, for a series of Preferred Stock. Before any shares of any such
series of Preferred Stock are issued, the Board of Directors shall (i) fix and
determine, and is hereby expressly empowered to fix and determine, by
resolution, or resolutions, the designations, powers, preferences, relative
participating, optional, and other special rights, qualifications, limitations,
and restrictions, of the shares of such series and (ii) make such filings and
recordings with respect thereto as required by the Act. Each series of Preferred
Stock shall be given a distinguishing designation.
The Board of Directors is expressly authorized to vary the provisions
relating to the foregoing matters between the various series of Preferred Stock.
All shares of Preferred Stock of any one series shall be identical in all
respects with all shares of such series, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereon shall be payable and, if cumulative, shall cumulate.
Unless otherwise provided in the resolution, or resolutions, of the Board
of Directors providing for the issuance thereof, the number of authorized shares
of any series of Preferred Stock may be increased or decreased (but not below
the number of shares thereof then outstanding) by resolution, or resolutions, by
the Board of Directors and appropriate filing and recording to the extent
required by the Act. In case the number of shares of any such series of
Preferred Stock shall be decreased, the shares representing such decrease shall,
unless otherwise provided in the resolution, or resolutions, of the Board of
Directors providing for the issuance thereof, resume the status of authorized
but unissued shares of Preferred Stock, undesignated as to series, and may be
reissued as part of such series or as part of any other series of Preferred
Stock.
Unless otherwise provided in the resolution, or resolutions, of the Board
of Directors providing for the issuance thereof, shares of any series of
Preferred Stock that shall be issued and thereafter acquired by the Corporation
through purchase, redemption (whether through the operation of a sinking fund or
otherwise), conversion, exchange, or otherwise shall have the status of
authorized and unissued shares of Preferred Stock, undesignated as to series,
and may be reissued as part of such series or as part of any other series of
Preferred Stock.
Article III
REGISTERED AGENT AND OFFICE
The street address of the registered office of the Corporation is 811
Lincoln Street, Fifth Floor, Denver, Colorado 80203. The name of the registered
agent of the Corporation at such address is Nigel V. Alexander.
Article IV
PRINCIPAL OFFICE
The address of the principal office of the Corporation is 811 Lincoln
Street, Fifth Floor, Denver, Colorado 80203.
Article V
MANAGEMENT
The following provisions relate to the management of the business and the
conduct of the affairs of the Corporation, and the same are in furtherance of
and not in limitation or exclusion of the powers conferred by law.
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<PAGE>
A. Indemnification. The Corporation shall indemnify, to the maximum extent
permitted by law, any person who is or was a director or officer of the
Corporation, and may indemnify any other person, against any claim, liability or
expense arising against or incurred by such person made party to a proceeding
because he is or was a director, officer, agent, fiduciary or employee of the
Corporation or because he is or was serving another entity as a director,
officer, partner, trustee, employee, fiduciary or agent at the Corporation's
request. The Corporation shall further have the authority, to the maximum extent
permitted by law, to purchase and maintain insurance providing such
indemnification, advance expenses to persons indemnified by the Corporation, and
provide indemnification to any person by general or specific action of the board
of directors, the bylaws of the Corporation, contract or otherwise.
B. Limitation on Director's Liability. No director of the Corporation shall
have any personal liability to the Corporation or its shareholders for monetary
damages for breach of his fiduciary duty as a director, except that this
provision shall not eliminate or limit the personal liability of a director to
the Corporation or to its shareholders for monetary damages for: (i) any breach
of the director's duty of loyalty to the Corporation or to its shareholders;
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) voting for or assenting to a distribution
which, after giving effect to the distribution, would result in (a) the
Corporation not being able to pay its debts as they become due, or (b) the
Corporation's total assets being less than the sum of its total liabilities plus
amounts needed to satisfy preferential rights upon dissolution of the
Corporation, but only if it is established that the director did not perform his
duties in good faith, with the care of an ordinary prudent person in a like
position under similar circumstances, and in a manner he believed to be in the
best interests of the Corporation, provided that the personal liability of a
director in this circumstance shall be limited to the amount of the distribution
which exceeds what could have been distributed without violation of this
paragraph; or (iv) any transaction from which the director directly or
indirectly derives an improper personal benefit. If the Act is hereafter amended
or superseded and such amendment or superseding statute eliminates or limits
further, or allows the Corporation to eliminate or limit further, the liability
of a director, then in addition to the elimination and limitation of liability
provided by the preceding sentence, the liability of each director shall be
eliminated or limited to the fullest extent permitted by the Act, as so amended,
or such superseding statute. Nothing contained herein will be construed to
deprive any director of his right to all defenses ordinarily available to a
director nor will anything herein be construed to deprive any director of any
right he may have for contribution from any other director or other person.
IN WITNESS WHEREOF, the Corporation has caused these Restated Articles to
be signed by its Managing Director on May 18, 1998.
/s/ Nigel V. Alexander
--------------------------------------------
Nigel V. Alexander,
Managing Director
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MULTI-LINK TELECOMMUNICATIONS, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation ("Corporation") adopts the following Articles of
Amendment to its Restated Articles of Incorporation:
FIRST: The name of the Corporation is Multi-Link Telecommunications, Inc.
SECOND: Article V of the Restated Articles of Incorporation is amended by
adding thereto paragraph C that reads as follows:
C. Negation of Equitable Interests in Shares or Rights. Unless a
person is recognized as a shareholder through procedures established
by the Corporation pursuant to Section 7-107-204 of the Act or any
similar law, the Corporation shall be entitled to treat the registered
holder of any shares of the Corporation as the owner thereof for all
purposes permitted by the Act, including without limitation all rights
deriving from such shares, and the Corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares
or rights deriving from such shares on the part of any other person
including without limitation, a purchaser, assignee or transferee of
such shares, unless and until such other person becomes the registered
holder of such shares or is recognized as such, whether or not the
Corporation shall have either actual or constructive notice of the
claimed interest of such other person. By way of example and not of
limitation, until such other person has become the registered holder
of such shares or is recognized pursuant to Section 7-107-204 of the
Act or any similar applicable law, such person shall not be entitled:
(i) to receive notice of the meetings of the shareholders; (ii) to
vote at such meetings; (iii) to examine a list of the shareholders;
(iv) to be paid dividends or other distributions payable to
shareholders; or (v) to own, enjoy and exercise any other rights
deriving from such shares against the Corporation. Nothing contained
herein will be construed to deprive any beneficial shareholder, as
defined in Section 7-113-101(1) of the Act, as amended from time to
time, of any right such beneficial shareholder may have pursuant to
Article 113 of the Act or any similar law subsequently enacted.
<PAGE>
The Restated Articles of Incorporation are amended by adding thereto
Article VII that reads as follows:
ARTICLE VII
BOARD OF DIRECTORS
The corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed
under the direction of, a Board of Directors. The Board of Directors
shall consist of not less than one director, with the number of
directors of the Corporation specified in or fixed in accordance with
the bylaws of the Corporation and in accordance with this Article VII.
The Board of Directors shall be divided into three classes, each
class to be as nearly equal in number as possible. The terms of office
of directors of the first class are to expire at the first annual
meeting of shareholders after their election, the terms of the second
class are to expire at the second annual meeting after their election,
and the terms of the third class are to expire at the third annual
meeting after their election. Thereafter, each director shall serve
for a term ending on the date of the third annual meeting of
shareholders following the annual meeting at which such director was
elected. Notwithstanding anything contained herein to the contrary, in
the event that there are exactly two directors, then the Board of
Directors shall be divided into two classes, the term of office of the
director of the first class is to expire at the first annual meeting
of shareholders after his or her election and the term of the second
class is to expire at the second annual meeting after his or her
election. Thereafter, each director shall serve for a term ending on
the date of the second annual meeting of shareholders following the
annual meeting at which such director was elected. This divided Board
of Directors provision shall not be altered or repealed without the
affirmative vote of the holders of at least two-thirds of the shares
entitled to vote in the election of directors.
The unanimous vote of the Board of Directors or the affirmative
vote of the holders of not less than two-thirds of the votes entitled
to be cast by the holders of the shares entitled to vote in the
election of directors is required to change the size of the Board of
Directors. Directors may only be removed for cause by the affirmative
vote of holders of not less than two-thirds of the shares entitled to
vote in the election of directors. The provision regarding the votes
required to change the size of the Board of Directors and the
provision regarding the votes required to remove a director for cause
shall not be altered or repealed without the affirmative vote of the
holders of at least two-thirds of the shares entitled to vote in the
election of directors.
THIRD: Effective upon filing of these Articles of Amendment with the
Colorado Secretary of State, every five shares of the Corporation's no par value
Common Stock outstanding on such date ("Old Common Stock") shall automatically,
without any action on the part of the holder thereof or the Corporation, be
combined into and shall become three fully paid and non-assessable shares of no
par value Common Stock of the Corporation. Each holder of a certificate or
certificates representing Old Common Stock shall be entitled, upon surrender of
such certificate or certificates to the Corporation for cancellation, to receive
new certificates representing the number of fully paid and non-assessable shares
of the authorized Common Stock into which shares of Old Common Stock are hereby
split and combined as provided herein. No fractional shares of Common Stock or
scrip certificate therefor will be issued to the holders of shares of Common
Stock by reason of the foregoing three-for-five reverse stock split. Any
fractions resulting from the reverse stock split computation will be rounded up
to the next whole share. The total number of shares of Common Stock that the
Corporation shall have authority to issue shall remain 20,000,000 shares after
the reverse stock split.
FOURTH: These Articles of Amendment to the Restated Articles of
Incorporation were proposed and recommended for shareholder approval by the
Board of Directors of the Corporation pursuant to the unanimous written consent
of the Board of Directors of the Corporation in lieu of meeting dated January
22, 1999. The Corporation has only one shareholder voting group and at a Special
Meeting of Shareholders held on February 2, 1999, the number of votes cast for
the amendments set forth herein by such voting group was sufficient for approval
of the amendments.
Dated: February 2, 1999.
MULTI-LINK TELECOMMUNICATIONS, INC.,
a Colorado corporation
By: /s/ Nigel V. Alexander
--------------------------------------
Nigel V. Alexander, Managing Director
-2-
BYLAWS
OF
MULTI-LINK TELECOMMUNICATIONS, INC.,
a Colorado corporation
<PAGE>
BYLAWS
OF
MULTI-LINK TELECOMMUNICATIONS, INC.,
a Colorado corporation
ARTICLE I - OFFICES
Section 1. Principal Office. The principal office of Multi-Link
Telecommunications, Inc., a Colorado corporation (the "Corporation"), shall be
designated from time to time by the Corporation and may be within or outside of
Colorado.
Section 2. Other Offices. The Corporation may have such other offices,
either within or outside Colorado, as the Board of Directors of the Corporation
(the "Board") may designate or as the business of the Corporation may require
from time to time.
Section 3. Registered Office. The registered office of the Corporation
required by the Colorado Business Corporation Act (the "Act") to be maintained
in Colorado may be, but need not be, identical with the principal office, and
the address of the registered office may be changed from time to time by the
Board.
ARTICLE II - SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held each year on a date and at a time fixed by the Board (or by the president
in the absence of action by the Board), for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
If the election of directors is not held on the day fixed as provided herein for
any annual meeting of the shareholders, or any adjournment thereof, the Board
shall cause the election to be held at a special meeting of the shareholders as
soon thereafter as may be convenient.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation, or the special meeting
was not held in accordance with the notice.
Section 2. Special Meetings. Special meetings of the shareholders may be
called for any purpose by the president or by the Board. The president shall
call a special meeting of the shareholders if the Corporation receives one or
more written demands for the meeting, stating the purpose or purposes for which
it is to be held, signed and dated by holders of shares representing at least
10% of all the votes entitled to be cast on any issue proposed to be considered
at the meeting.
1
<PAGE>
Section 3. Place of Meeting. The Board may designate any place, either
within or outside Colorado, as the place for any annual meeting or any special
meeting called by the Board. A waiver of notice signed by all shareholders
entitled to vote at a meeting may designate any place, either within or outside
Colorado, as the place for such meeting. If no designation is made, or if a
special meeting is called other than by the Board, the place of meeting shall be
the principal office of the Corporation.
Section 4. Notice of Meeting. Written notice stating the place, date, and
hour of the meeting shall be given not less than 10 nor more than 60 days before
the date of the meeting, except (i) if the number of authorized shares is to be
increased, at least 30 days' notice shall be given, or (ii) if any other longer
notice period is required by the Act, notice shall be given in compliance with
the Act. Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting, except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the Corporation, (ii) a merger or share exchange in which the
Corporation is a party, and with respect to a share exchange, in which the
Corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the Corporation or of another entity which
this Corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the Corporation, or (v) any other purpose for which a statement
of purpose is required by the Act. Notice shall be given personally or by mail,
private carrier, telegraph, teletype, electronically transmitted facsimile or
other form of wire or wireless communication by or at the direction of the
president, the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed and ina
comprehensible form, such notice shall be deemed to be given and effective when
deposited in the United States mail, addressed to the shareholder at his address
as it appears in the Corporation's current record of shareholders, with postage
prepaid. If notice is given other than by mail, the notice is given and
effective on the date received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
secretary shall give notice thereof at the expense of the Corporation. No notice
need be sent to any shareholder if three successive notices mailed to the last
known address of such shareholder have been returned as undeliverable until such
time as another address for such shareholder is made known to the Corporation by
such shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the Corporation in writing of any change in such
shareholder's mailing address as shown on the Corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need not
be given of the new date, time or place if the new date, time or place of such
meeting is announced before adjournment of the meeting at which the adjournment
is taken. At the adjourned meeting the Corporation may transact any business
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which may have been transacted at the original meeting. If the adjournment is
for more than 120 days, or if a new record date is fixed for the adjourned
meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before, at or after the time
and date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the Corporation for filing with the corporate records.
Further, by attending a meeting either in person or by proxy, a shareholder
waives objection to lack of notice or defective notice of the meeting unless the
shareholder objects at the beginning of the meeting to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice. By attending the meeting, the shareholder also waives any objection to
consideration at the meeting of a particular matter not within the purpose or
purposes described in the meeting notice unless the shareholder objects to
considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (iii)
demand a special meeting, or to make a determination of shareholders for any
other purpose, the Board may fix a future date as the record date for any such
determination of shareholders, such date in any case to be not more than 70
days, and, in case of a meeting of shareholders, not less than 10 days, prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If no record date is fixed by the Board, the record
date shall be the date on which notice of the meeting is mailed to shareholders,
or the date on which the resolution of the Board providing for a distribution or
share dividend is adopted, as the case may be. When a determination of
shareholders entitled to vote at any meeting of shareholders is made as provided
in this Section, such determination shall apply to any adjournment thereof
unless the Board fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
Notwithstanding the above, the record date for determining the shareholders
entitled to take action without a meeting or entitled to be given notice of
action so taken shall be the date a writing upon which the action is taken is
first received by the Corporation. The record date for determining shareholders
entitled to demand a special meeting shall be the date of the earliest of any of
the demands pursuant to which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the earlier of 10
days before each meeting of shareholders or 2 business days after notice of the
meeting has been given, a complete list of the shareholders entitled to be given
notice of such meeting or any adjournment thereof. The list shall be arranged by
voting groups and within each voting group by class or series of shares, shall
be in alphabetical order within each class or series, and shall show the address
of and the number of shares of each class or series held by each shareholder.
For the period beginning the earlier of 10 days prior to the meeting or two
business days after notice of the meeting is given and continuing through the
meeting and any adjournment thereof, this list shall be kept on file at the
principal office of the Corporation, or at a place (which shall be identified in
the notice) in the city where the meeting will be held. Such list shall be
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available for inspection on written demand by any shareholder (including for the
purpose of this Section 6 any holder of voting trust certificates) or his agent
or attorney during regular business hours and during the period available for
inspection. The original stock transfer books shall be prima facie evidence as
to the shareholders entitled to examine such list or to vote at any meeting of
shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder described with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The Board may adopt
by resolution a procedure whereby a shareholder of the Corporation may certify
in writing to the Corporation that all or a portion of the shares registered in
the name of such shareholder are held for the account of a specified person or
persons. The resolution may set forth (i) the types of nominees to which it
applies, (ii) the rights or privileges that the Corporation will recognize in a
beneficial owner, which may include rights and privileges other than voting,
(iii) the form of certification and the information to be contained therein,
(iv) if the certification is with respect to a record date, the time within
which the certification must be received by the Corporation, (v) the period for
which the nominee's use of the procedure is effective, and (vi) such other
provisions with respect to the procedure as the Board deems necessary or
desirable. Upon receipt by the Corporation of a certificate complying with the
procedure established by the Board, the persons specified in the certification
shall be deemed, for the purpose or purposes set forth in the certification, to
be the registered holders of the number of shares specified in place of the
shareholder making the certification.
Section 8. Quorum and Manner of Acting. A majority of the votes entitled to
be cast on a matter by a voting group shall constitute a quorum of that voting
group for action on the matter. If less than a majority of such votes are
represented at a meeting, a majority of the votes sorepresented may adjourn the
meeting from time to time without further notice, for a period not to exceed 120
days for any one adjournment. If a quorum is present at such adjourned meeting,
any business may be transacted which might have been transacted at the meeting
as originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, unless the meeting is
adjourned and a new record date is set for the adjourned meeting.
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If a quorum exists, action on a matter other than the election of directors
by a voting group is approved if the votes cast within the voting group favoring
the action exceed the votes cast within the voting group opposing the action,
unless the vote of a greater number or voting by classes is required by the Act
or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy by signing an appointment form or similar writing, either personally or
by his duly authorized attorney-in-fact. A shareholder may also appoint a proxy
by transmitting or authorizing the transmission of a telegram, teletype, or
other electronic transmission providing a written statement of the appointment
to the proxy or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the Corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar writing
shall be filed with the secretary of the Corporation before or at the time of
the meeting. The appointment of a proxy is effective when received by the
Corporation and is valid for 11 months unless a different period is expressly
provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of an
appointment of a proxy may be substituted for or used in lieu of the original
appointment for any purpose for which the original appointment could be used.
Revocation of a proxy does not affect the right of the Corporation to
accept the proxy's authority unless (i) the Corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the Corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the Corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The Corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 of this Article II and any express limitation on the
proxy's authority appearing on the appointment form, the Corporation is entitled
to accept the proxy's vote or other action as that of the shareholder making the
appointment.
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Section 10. Voting of Shares. Each outstanding share, regardless of class,
shall be entitled to one vote, except in the election of directors, and each
fractional share shall be entitled to a corresponding fractional vote on each
matter submitted to a vote at a meeting of shareholders, except to the extent
that the voting rights of the shares of any class or classes are limited or
denied by the articles of incorporation as permitted by the Act. Cumulative
voting shall not be permitted in the election of directors or for any other
purpose. In the election of directors, each record holder of stock shall be
entitled to vote with respect to each position to be filled pursuant to such
election.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the Board.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the Corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
Corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if
the Corporation requests, evidence of fiduciary status acceptable to
the Corporation has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation
requests, evidence of this status acceptable to the Corporation has
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been presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the Corporation
requests, evidence acceptable to the Corporation of the signatory
authority to sign for the shareholder has been presented with respect
to the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(v) two (2) or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least
one of the co-tenants or fiduciaries, and the person signing appears
to be acting on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under
rules established by the Corporation that are not inconsistent with
this Section 11.
The Corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
Neither the Corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section 11
shall be liable for the consequences of such acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the Corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the Corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
Corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describingthe action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the Corporation before the effectiveness of the action.
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Section 13. Meetings by Telecommunication. Any or all of the shareholders
may participate in an annual or special shareholders' meeting by, or the meeting
may be conducted through the use of, any means of communication by which all
persons participating in the meeting may hear each other during the meeting. A
shareholder participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE III - BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall be
managed under the direction of the Board, except as otherwise provided in the
Act or the articles of incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors of
the Corporation shall be fixed from time to time by the Board. A director shall
be a natural person who is 18 years of age or older. A director need not be a
resident of Colorado or a shareholder of the Corporation.
Section 3. Vacancies. Any director may resign at any time by giving written
notice to the Corporation. Such resignation shall take effect at the time the
notice is received by the Corporation unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
Corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the Board may be filled by the affirmative vote of a
majority of the shareholders or the Board. If the directors remaining in office
constitute fewer than a quorum of the Board, the directors may fill the vacancy
by the affirmative vote of a majority of all the directors remaining in office.
If elected by the directors, the director shall hold office until the next
annual shareholders' meeting at which directors are elected. If elected by the
shareholders, the director shall hold office for the unexpired term of his
predecessor in office; except that, if the director's predecessor was elected by
the directors to fill a vacancy, the director elected by the shareholders shall
hold office for the unexpired term of the last predecessor elected by the
shareholders.
Section 4. Regular Meetings. A regular meeting of the Board shall be held
without notice immediately after and at the same place as the annual meeting of
shareholders. The Board may provide by resolution the time and place, either
within or outside the State of Colorado, for the holding of additional regular
meetings without other notice.
Section 5. Special Meetings. Special meetings of the Board may be called by
or at the request of the president or any director. The person or persons
authorized to call special meetings of the Board may fix any place, either
within or outside the State of Colorado, as the place for holding any special
meeting of the Board called by them, provided that no meeting shall be called
outside the State of Colorado unless a majority of the Board has so authorized.
Section 6. Notice. Notice of any special meeting of the Board shall be
given at least two days prior to the meeting by written notice either personally
delivered or mailed to each director at his business address, or by notice
transmitted by telegraph, telex, electronically transmitted facsimile or other
form of wire or wireless communication. If mailed, such notice shall be deemed
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to be given and to be effective on the earlier of (i) three days after such
notice is deposited in the United States mail, properly addressed, with postage
prepaid, or (ii) the date shown on the return receipt, if mailed by registered
or certified mail return receipt requested. If notice is given by telex,
electronically transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be effective when
sent, and with respect to a telegram, notice shall be deemed to be given and to
be effective when the telegram is delivered to the telegraph company. If a
director has designated in writing one or more reasonable addresses or facsimile
numbers for delivery of notice to him, notice sent by mail, telegram, telex,
electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before, at or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the Corporation for filing with the corporate records. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or promptly
upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action any taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board need be specified in the notice or
waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the Board
pursuant to Section 2 of this Article III, or, if no number is fixed, a majority
of the number in office immediately before the meeting begins, shall constitute
a quorum for the transaction of business at any meeting of the Board. If less
than such majority is present at a meeting, a majority of the directors present
may adjourn the meeting from time to time without further notice, for a period
not to exceed 60 days at any one adjournment.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board.
Section 9. Compensation. By resolution of the Board, any director may be
paid any one or more of the following: his expenses, if any, of attendance at
meetings, a fixed sum for attendance at each meeting, a stated salary as
director, or such other compensation as the Corporation and the director may
reasonably agree upon. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board or committee of the Board at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless (i) the director objects at the beginning of the meeting, or
promptly upon his arrival, to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to any action taken at the
meeting, (ii) the director contemporaneously requests that his dissent or
abstention as to any specific action to be taken be entered in the minutes of
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the meeting; or (iii) the director causes written notice of his dissent or
abstention as to any specific action to be received by the presiding officer of
the meeting before its adjournment or by the Corporation promptly after the
adjournment of the meeting. A director may dissent to a specific action at a
meeting, while assenting to others. The right to dissent to a specific action
taken at a meeting of the Board or a committee of the Board shall not be
available to a director who voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of all the
directors in office when the action is taken, the Board may designate from among
its members an executive committee and one or more other committees, and appoint
one or more members of the Board to serve on them. To the extent provided in the
resolution, each committee shall have all the authority of the Board, except
that no committee shall have the authority to (i) authorize distributions, (ii)
approve or propose to shareholders actions or proposals required by the Act to
be approved by shareholders; (iii) fill vacancies on the Board or any committee
thereof; (iv) amend the articles of incorporation; (v) adopt, amend or repeal
these bylaws; (vi) approve a plan of merger not requiring shareholder approval;
(vii) authorize or approve the reacquisition of shares unless pursuant to a
formula or method prescribed by the Board, or (viii) authorize or approve the
issuance or sale of shares, or contract for the sale of shares or determine the
designations and relative rights, preferences and limitations of a class or
series of shares, except that the Board may authorize a committee or officer to
do so within limits specifically prescribed by the Board. The committee shall
then have full power within the limits set by the Board to adopt any final
resolution setting forth all preferences, limitations, and relative rights of
such class or series and to authorize an amendment of the articles of
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the Board, shall apply to committees and their members appointed
under this Section 11.
Neither the designation of any such committee, the delegation of authority
to such committee, nor any action by such committee pursuant to its authority
shall alone constitute compliance by any member of the Board or a member of the
committee in question with his responsibility to conform to the standard of care
set forth in Article III, Section 14 of these bylaws.
Section 12. Informal Action by Directors. Any action required or permitted
to be taken at a meeting of the Board or any committee designated by the Board
may be taken without a meeting if a written consent (or counterparts thereof)
that sets forth the action so taken is signed by all of the directors entitled
to vote with respect to the action taken. Such consent shall have the same force
and effect as a unanimous vote of the directors or committee members and may be
stated as such in any document. Unless the consent specifies a different
effective date, action taken under this Section 12 is effective at the time the
last director signs a writing describing the action taken, unless, before such
time, any director has revoked his consent by a writing signed by the director
and received by the president or the secretary of the Corporation.
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Section 13. Meetings by Telecommunication. The Board may permit any
director (or any member of a committee designated by the Board) to participate
in a regular or special meeting of the Board or a committee thereof through the
use of any means of communication by which all directors participating in the
meeting can hear each other during the meeting. A director participating in a
meeting in this manner is deemed to be present in person at the meeting.
Section 14. Standard of Care. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the Board, in good faith, in a manner he reasonably believes to be in the
best interests of the Corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the Corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i) one
or more officers or employees of the Corporation whom the director reasonably
believes to be reliable and competent in the matters presented, (ii) legal
counsel, public accountant, or other person as to matters which the director
reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the Board on which the director does not
serve if the director reasonably believes the committee merits confidence.
Section 15. Conflicting Interest Transactions. As used in this Section,
"conflicting interest transaction" means any of the following: (i) a loan or
other assistance by the Corporation to a director of the Corporation or to an
entity in which a director of the Corporation is a director or officer or has a
financial interest; (ii) a guaranty by the Corporation of an obligation of a
director of the Corporation or of an obligation of an entity in which a director
of the Corporation is a director or officer or has a financial interest; or
(iii) a contract or transaction between the Corporation and a director of the
Corporation or between the Corporation and an entity in which a director of the
Corporation is a director or officer or has a financial interest. No conflicting
interest transaction shall be void or voidable, enjoined, or set aside, or give
rise to an award of damages or other sanctions in a proceeding by a shareholder
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or by or in the right of the Corporation, solely because the conflicting
interest transaction involves a director of the Corporation or an entity in
which a director of the Corporation is a director or officer or has a financial
interest, or solely because the director is present at or participates in the
meeting of the Corporation's Board or of the committee of the Board which
authorizes, approves or ratifies a conflicting interest transaction, or solely
because the director's vote is counted for such purpose if: (i) the material
facts as to the director's relationship or interest and as to the conflicting
interest transaction are disclosed or are known to the Board or the committee,
and the Board or committee in good faith authorizes, approves or ratifies the
conflicting interest transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors are less than a
quorum; or (ii) the material facts as to the director's relationship or interest
and as to the conflicting interest transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the conflicting interest transaction
is specifically authorized, approved or ratified in good faith by a vote of the
shareholders; or (iii) a conflicting interest transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the Board,
the committee, or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board or of
a committee which authorizes, approves or ratifies the conflicting interest
transaction.
Section 16. Loans and Guaranties for the Benefit of Directors. Neither the
Board nor any committee thereof shall authorize a loan by the Corporation to a
director of the Corporation or to an entity in which a director of the
Corporation is a director or officer or has a financial interest, or a guaranty
by the Corporation of an obligation of a director of the Corporation or of an
obligation of an entity in which a director of the Corporation is a director or
officer or has a financial interest, until at least ten days after written
notice of the proposed authorization of the loan or guaranty has been given to
the shareholders who would be entitled to vote thereon if the issue of the loan
or guaranty were submitted to a vote of the shareholders. The requirements of
this Section 16 are in addition to, and not in substitution for, the provisions
of Section 15 of this Article III.
ARTICLE IV - OFFICERS AND AGENTS
Section 1. General. The officers of the Corporation shall be a president, a
chief executive officer, a chief operating officer, a secretary, a treasurer and
one or more vice- presidents who shall also be natural persons 18 years of age
or older. The Board or an officer or officers authorized by the Board may
appoint such other officers, assistant officers, committees and agents,
including a chairman of the Board, assistant secretaries and assistant
treasurers, as they may consider necessary. The Board or the officer or officers
authorized by the Board shall from time to time determine the procedure for the
appointment of officers, their term of office, their authority and duties and
their compensation. One person may hold more than one office. In all cases where
the duties of any officer, agent or employee are not prescribed by these bylaws
or by the Board, such officer, agent or employee shall follow the orders and
instructions of the president of the Corporation.
Section 2. Appointment and Term of Office. The officers of the Corporation
shall be appointed by the Board at each annual meeting of the Board held after
each annual meeting of the shareholders. If the appointment of officers is not
made at such meeting or if an officer or officers are to be appointed by another
officer or officers of the Corporation, such appointments shall be made as soon
thereafter as may be convenient. Each officer shall hold office until the first
of the following occurs: his successor shall have been duly appointed and
qualified, his death, his resignation, or his removal in the manner provided in
Section 3 of this Article IV.
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Section 3. Resignation and Removal. An officer may resign at any time by
giving written notice of resignation to the Corporation. The resignation is
effective when the notice is received by the Corporation unless the notice
specifies a later effective date.
Any officer or agent may be removed as an officer or agent at any time,
with or without cause, by the Board or an officer or officers authorized by the
Board. Such removal does not affect the contract rights, if any, of the
Corporation or of the person so removed. The appointment of an officer or agent
shall not in itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may be
filled by the Board, or by the officer or officers authorized by the Board, for
the unexpired portion of the officer's term. If an officer resigns and his
resignation is made effective at a later date, the Board, or officer or officers
authorized by the Board, may permit the officer to remain in office until the
effective date and may fill the pending vacancy before the effective date if the
Board or officer or officers authorized by the Board provide that the successor
shall not take office until the effective date. In the alternative, the Board,
or officer or officers authorized by the Board, may remove the officer at any
time before the effective date and may fill the resulting vacancy.
Section 5. President and Chief Operating Officer. Subject to the direction
and supervision of the Board, the president and chief operating officer, in
conjunction with the chief executive officer, shall have general and active
control of the affairs of the Corporation and the business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the Board, the president and chief operating officer shall attend in person or
by substitute appointed by him, or shall execute on behalf of the Corporation
written instruments appointing a proxy or proxies to represent the Corporation,
at all meetings of the shareholders of any other Corporation in which the
Corporation holds any stock. On behalf of the Corporation, the president and
chief operating officer may in person or by substitute or by proxy execute
written waivers of notice and consents with respect to any such meetings. At all
such meetings and otherwise, the president and chief operating officer, in
person or by substitute or proxy, may vote the stock held by the Corporation,
execute written consents and other instruments with respect to such stock, and
exercise any and all rights and powers incident to the ownership of said stock,
subject to the instructions, if any of the Board. The president and chief
operating officer shall have custody of the treasurer's bond, if any.
Section 6. Chief Executive Officer. Subject to the direction and
supervision of the Board, the chief executive officer, in conjunction with the
president and chief operating officer, shall have general and active control of
the affairs of the Corporation and the business and general supervision of its
officers, agents and employees.
Section 7. Vice Presidents. The vice presidents shall assist the president
and shall perform such duties as may be assigned to them by the president or by
the Board. In the absence of the president, the vice president, if any (or, if
more than one, the vice presidents in the order designated by the Board, or if
the Board makes no such designation, then the vice president designated by the
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president, or if neither the Board nor the president makes any such designation,
the senior vice president as determined by first election to that office), shall
have the powers and perform the duties of the president.
Section 8. Secretary. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
Board, a record of all actions taken by the shareholders or the Board without a
meeting, a record of all actions taken by a committee of the Board, and a record
of all waivers of notice of meetings of shareholders and of theBoard or any
committee thereof, (ii) cause all notices to be duly given in accordance with
the provisions of these bylaws and as required by law, (iii) serve as custodian
of the corporate records and of the seal of the Corporation and affix the seal
to all documents when authorized by the Board, (iv) keep at the Corporation's
registered office or principal place of business a record containing the names
and addresses of all shareholders in a form that permits preparation of a list
of shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held by,
each shareholder, unless such a record shall be kept at the office of the
Corporation's transfer agent or registrar, (v) maintain at the Corporation's
principal office the originals or copies of the Corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three (3) years, all
written communications within the past three (3) years to shareholders as a
group or to the holders of any class or series of shares as a group, a list of
the names and business addresses of the current directors and officers, a copy
of the Corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the Corporation's
assets and liabilities and results of operations for the last three (3) years,
(vi) have general charge of the stock transfer books of the Corporation, unless
the Corporation has a transfer agent, (vii) authenticate records of the
Corporation, and (viii) in general, perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him by
the president or by the Board. Assistant secretaries, if any, shall have the
same duties and powers, subject to supervision by the secretary. The directors
and/or shareholders may, however, respectively designate a person other than the
secretary or assistant secretary to keep the minutes of their respective
meetings.
Any books, records, or minutes of the Corporation may be in written form or
in any form capable of being converted into written form within a reasonable
time.
Section 9. Treasurer. The treasurer shall be the principal financial
officer of the Corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
Corporation and shall deposit the same in accordance with the instructions of
the Board. He shall receive and give receipts and acquittances for money paid in
on account of the Corporation, and shall pay out of the Corporation's funds on
hand all bills, payrolls and other just debts of the Corporation of whatever
nature upon maturity. He shall perform all other duties incident to the office
of the treasurer and, upon request of the Board, shall make such reports to it
as may be required at any time. He shall, if required by the Board, give the
Corporation a bond in such sums and with such sureties as shall be satisfactory
to the Board, conditioned upon the faithful performance of his duties and for
the restoration to the Corporation of all books, papers, vouchers, money and
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other property of whatever kind in his possession or under his control belonging
to the Corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the Board or the president. The
assistant treasurers, if any, shall have the same powers and duties, subject to
the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
Corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Act, prepare and file all local, state and federal tax returns,
prescribe and maintain an adequate system of internal audit and prepare and
furnish to the president and the Board statements of account showing the
financial position of the Corporation and the results of its operations.
ARTICLE V - STOCK
Section 1. Certificates. The Board shall be authorized to issue any of its
classes of shares with or without certificates. The fact that the shares are not
represented by certificates shall have no effect on the rights and obligations
of shareholders. If the shares are represented by certificates, such shares
shall be represented by consecutively numbered certificates signed, either
manually or by facsimile, in the name of the Corporation by one or more persons
designated by the Board. In case any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, such certificate may nonetheless be
issued by the Corporation with the same effect as if he were such officer at the
date of its issue. Certificates of stock shall be in such form and shall contain
such information consistent with law as shall be prescribed by the Board. If
shares are not represented by certificates, within a reasonable time following
the issue or transfer of such shares, the Corporation shall send the shareholder
a complete written statement of all of the information required to be provided
to holders of uncertificated shares by the Act.
Section 2. Consideration for Shares. Certificated or uncertificated shares
shall not be issued until the shares represented thereby are fully paid. The
Board may authorize the issuance of shares for consideration consisting of any
tangible or intangible property or benefit to the Corporation, including cash,
promissory notes, services performed or other securities of the Corporation.
Future services shall not constitute payment or partial payment for shares of
the Corporation. The promissory note of a subscriber or an affiliate of a
subscriber shall not constitute payment or partial payment for shares of the
Corporation unless the promissory note is negotiable and is secured by
collateral, other than the shares being purchased, having a fair market value at
least equal to the principal amount of the promissory note. For purposes of this
Section 2, "promissory note" means a negotiable instrument on which there is an
obligation to pay independent of collateral and does not include a non-recourse
note.
Section 3. Lost Certificates. In case of the alleged loss, destruction or
mutilation of a stock certificate, the Board may direct the issuance of a new
certificate in lieu thereof upon such terms and conditions in conformity with
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law as the Board may prescribe. The Board may in its discretion require an
affidavit of lost certificate and/or a bond in such form and amount and with
such surety as it may determine before issuing a new certificate.
Section 4. Transfer of Shares. Upon surrender to the Corporation or to a
transfer agent of the Corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the Corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the Corporation, which shall be kept at
its principal office or by the person and the place designated by the Board.
Except as otherwise expressly provided in Article II, Sections 7 and 11,
and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Act, the Corporation shall be entitled to treat the
registered holder of any shares of the Corporation as the owner thereof for all
purposes, and the Corporation shall not be bound to recognize any equitable or
other claim to, or interest in, such shares or rights deriving from such shares
on the part of any person other than the registered holder, including without
limitation any purchaser, assignee or transferee of such shares or rights
deriving from such shares, unless and until such other person becomes the
registered holder of such shares, whether or not the Corporation shall have
either actual or constructive notice of the claimed interest of such other
person.
Section 5. Transfer Agent, Registrars and Paying Agents. The Board may at
its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
Corporation. They shall have such rights and duties and shall be entitled to
such compensation as may be agreed.
ARTICLE VI - INDEMNIFCATION OF CERTAIN PERSONS
Section 1. Indemnification. For purposes of Article VI, a "Proper Person"
means any person who was or is a party or is threatened to be made a party to
any threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of any
foreign or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The Corporation
shall indemnify any Proper Person who is an officer or director of the
Corporation and may indemnify any other Proper Person against reasonably
incurred expenses (including attorneys' fees), judgments, penalties, fines
(including any excise tax assessed with respect to an employee benefit plan) and
amounts paid in settlement reasonably incurred by him in connection with such
action, suit or proceeding if it is determined by the groups set forth in
Section 4 of this Article VI that he conducted himself in good faith and that he
reasonably believed (i) in the case of conduct in his official capacity with the
corporation, that his conduct was in the Corporation's best interests, or (ii)
in all other cases (except criminal cases), that his conduct was at least not
opposed to the Corporation's best interests, or (iii) in the case of any
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criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful. A Proper Person will be deemed to be acting in his official capacity
while acting as a director, officer, employee or agent on behalf of this
corporation and not while acting on the Corporation's behalf for some other
entity.
No indemnification shall be made under this Article VI to a Proper Person
with respect to any claim, issue or matter in connection with a proceeding by or
in the right of a Corporation in which the Proper Person was adjudged liable to
the Corporation or in connection with any proceeding charging that the Proper
Person derived an improper personal benefit, whether or not involving action in
an official capacity, in which he was adjudged liable on the basis that he
derived an improper personal benefit. Further, indemnification under this
Section in connection with a proceeding brought by or in the right of the
corporation shall be limited to reasonable expenses, including attorneys' fees,
incurred in connection with the proceeding.
Section 2. Right to Indemnification. The Corporation shall indemnify any
Proper Person who was wholly successful, on the merits or otherwise, in defense
of any action, suit, or proceeding as to which he was entitled to
indemnification under Section l of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the Corporation other than the
determination in good faith that the defense has been wholly successful.
Section 3. Effect of Termination of Action. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent shall not of itself create a presumption
that the person seeking indemnification did not meet the standards of conduct
described in Section l of this Article VI. Entry of a judgment by consent as
part of a settlement shall not be deemed an adjudication of liability, as
described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification Determination. Except
where there is a right to indemnification as set forth in Sections 1 or 2 of
this Article VI or where indemnification is ordered by a court in Section 5 of
this Article VI, any indemnification shall be made by the Corporation only as
authorized in the specific case upon a determination by a proper group that
indemnification of the Proper Person is permissible under the circumstances
because he has met the applicable standards of conduct set forth in Section l of
this Article VI. This determination shall be made by the Board by a majority
vote of those present at a meeting at which a quorum is present, which quorum
shall consist of directors not parties to the proceeding ("Quorum"). If a Quorum
cannot be obtained, the determination shall be made by a majority vote of a
committee of the Board designated by the Board, which committee shall consist of
two or more directors not parties to the proceeding, except that directors who
are parties to the proceeding may participate in the designation of directors
for the committee. If a Quorum of the Board cannot be obtained and the committee
cannot be established, or even if a Quorum is obtained or the committee is
designated and a majority of the directors constituting such Quorum or committee
so directs, the determination shall be made by (i) independent legal counsel
selected by a vote of the Board or the committee in the manner specified in this
Section 4 or, if a Quorum of the full Board cannot be obtained and a committee
cannot be established, by independent legal counsel selected by a majority vote
of the full Board (including directors who are parties to the action) or (ii) a
vote of the shareholders.
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Section 5. Court-Ordered Indemnification. Any Proper Person may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction for mandatory indemnification under Section 2 of this
Article VI, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If the court determines that such Proper Person
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he met the standards of conduct set forth in
Section l of this Article VI or was adjudged liable in the proceeding, the court
may order such indemnification as the court deems proper except that if the
Proper Person has been adjudged liable, indemnification shall be limited to
reasonable expenses incurred in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including attorneys'
fees) incurred in defending an action, suit or proceeding as described in
Section 1 of this Article VI may be paid by the Corporation to any Proper Person
in advance of the final disposition of such action, suit or proceeding upon
receipt of (i) a written affirmation of such Proper Person's good faith belief
that he has met the standards of conduct prescribed by Section l of this Article
VI, (ii) a written undertaking, executed personally or on the Proper Person's
behalf, to repay such advances if it is ultimately determined that he did not
meet the prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may be
accepted without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
Section 7. Witness Expenses. The sections of this Article VI do not limit
the Corporation's authority to pay or reimburse expenses incurred by a director
in connection with an appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
Section 8. Report to Shareholders. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the Corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
Board, such notice shall be given to the shareholders at or before the time the
first shareholder signs a writing consenting to such action.
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ARTICLE VII - PROVISION OF INSURANCE
By action of the Board, notwithstanding any interest of the directors in
the action, the Corporation may purchase and maintain insurance, in such scope
and amounts as the board of directors deems appropriate, on behalf of any person
who is or was a director, officer, employee, fiduciary or agent of the
Corporation, or who, while a director, officer, employee, fiduciary or agent of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any other
foreign or domestic corporation or of any partnership, joint venture, trust,
profit or nonprofit unincorporated association, limited liability company or
other enterprise or employee benefit plan, against any liability asserted
against, or incurred by, him in that capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of Article VI or applicable law. Any
such insurance may be procured from any insurance company designated by the
Board of the corporation, whether such insurance company is formed under the
laws of Colorado or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the Corporation has an equity interest
or any other interest, through stock ownership or otherwise.
ARTICLE VIII - MISCELLANEOUS
Section 1. Seal. The corporate seal of the Corporation shall be circular in
form and shall contain the name of the Corporation and the words, "Seal,
Colorado."
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
established by the Board.
Section 3. Amendments. The Board shall have power, to the maximum extent
permitted by the Act, to make, amend and repeal these bylaws at any regular or
special meeting of the Board unless the shareholders, in making, amending or
repealing a particular bylaw, expressly provide that the directors may not amend
or repeal such bylaw. The shareholders also shall have the power to make, amend
or repeal these bylaws at any annual meeting or at any special meeting called
for that purpose.
Section 4. Gender. The masculine gender is used in these bylaws as a matter
of convenience only and shall be interpreted to include the feminine and neuter
genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable conflict between
these bylaws and either the Corporation's articles of incorporation or
applicable law, the latter shall control.
Section 6. Definitions. Except as otherwise specifically provided in these
bylaws, all terms used in these bylaws shall have the same definition as in the
Act.
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* * * * *
BORROWING AGREEMENT
This borrowing agreement (the "Borrowing Agreement") is made as of
September 25, 1998, among: Westburg Media Capital L.P., a Washington limited
partnership ("Lender"); Multi-Link Telecommunications, Inc., a Colorado
corporation; Multi-Link Communications, Inc., a Colorado corporation and
majority owned subsidiary of Multi-Link Telecommunications, Inc.; and the
Pledgors and Guarantors hereinafter defined. Multi-Link Telecommunications, Inc.
and Multi-Link Communications, Inc. are oftentimes hereinafter jointly and
severally referred to as "Borrower."
RECITALS
A. Borrower has asked Lender to make a loan to Borrower, to be secured by:
a lien and security interest in all of the assets of Borrower; by the joint and
several personal guaranties of Nigel V. Alexander and Shawn B. Stickle; by the
pledges of an aggregate of 1,600,000 of the issued and outstanding voting
capital stock of Multi-Link Telecommunications, Inc. owned beneficially or of
record by Mr. Alexander, Mr. Stickle or Blackhawk Trust, of which St Helier
Trust Company Ltd. is the sole trustee; and by the pledge of 1,950 of the issued
and outstanding shares of capital stock of Multi-Link Communications, Inc. owned
beneficially or of record by Multi-Link Telecommunications, Inc. As additional
consideration for the Loan, Borrower has also agreed to grant Lender warrants to
purchase shares of the capital stock of Multi-Link Telecommunications, Inc. The
proceeds of the loan will be used by Borrower to refinance existing
indebtedness; to pay transaction costs incurred in connection with the Loan; and
as working capital.
B. Lender is willing to make the loan to Borrower on the terms and
conditions set forth in this Borrowing Agreement and the other Loan Documents.
AGREEMENT
In consideration of the mutual covenants contained in this Borrowing
Agreement, Borrower and Lender agree as follows:
1. Definitions. Most of the capitalized terms used in this Borrowing
Agreement and the other Loan Documents are defined below. Other capitalized
terms are defined elsewhere in this Borrowing Agreement or in other of the Loan
Documents.
1.1 Borrower shall mean, jointly and severally, Multi-Link
Telecommunications, Inc., a Colorado corporation, and Multi-Link
Communications, Inc., a Colorado corporation and majority owned
subsidiary of Multi-Link Telecommunications, Inc. Borrower shall also
mean any successor or assign of Multi-Link Telecommunications, Inc. or
Multi-Link Communications, Inc., including any successor created by
merger, consolidation or other reorganization. Borrower is sometimes
also referred to as Maker or Debtor in other of the Loan Documents.
1.2 Borrowing Agreement shall mean this borrowing agreement as
the same may be supplemented or amended.
1.3 CS Capital shall mean CS Capital Corp., a Colorado
corporation, and a secured creditor of Borrower.
1.4 Cure Period shall mean the period of time Borrower shall have
to cure an Event of Default. If the Event of Default is a monetary
default, the Cure Period shall be ten (10) days from the date Borrower
first receives Notice of such Event of Default. If the Event of
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Default is other than a monetary default, the Cure Period shall be
fifteen (15) days from the date Borrower first receives such Notice.
As used herein, a "monetary default" means a failure by Borrower to
make any payment required of it by the Note or any other Loan
Document.
1.5 Event of Default shall mean any of the following events:
(i) if any payment due under the Note or any other Loan
Document is not paid within five (5) days of the date upon which
such payment was due.
(ii) if any representation made in this Borrowing Agreement,
any other Loan Document or any other document, certificate or
report delivered by Borrower in connection with the Loan shall be
false when made or shall be breached in any material respect.
(iii) if Borrower or any Guarantor shall breach any covenant
contained in this Borrowing Agreement or in any other Loan
Document, and such breach is not cured within fifteen (15) days
after notice from Lender specifying the nature of the breach.
(iv) if any of the following shall occur:
(A) Borrower or any Guarantor becomes insolvent, makes
a transfer in fraud to or an assignment for the benefit of
creditors, or admits in writing its inability to pay its
debts as they become due;
(B) A receiver, custodian, liquidator or trustee is
applied for by Borrower or any Guarantor, or is appointed
for all or substantially all of the assets of Borrower or
any Guarantor, or any such receiver, custodian, liquidator
or trustee is appointed in any proceeding brought against
Borrower or any Guarantor, and such appointment is not
contested or is not dismissed or discharged within 60 days
after such appointment, or Borrower or any Guarantor
acquiesces in such appointment; (C) Borrower or any
Guarantor files a petition for relief under the federal
Bankruptcy Code, as amended, or under any similar law or
statute of the United States or any state thereof, or
Borrower or any Guarantor seeks to take advantage of any
insolvency law;
(D) A petition against Borrower or any Guarantor is
filed commencing an involuntary case under any present or
future federal or state bankruptcy or similar law, and such
petition is not dismissed or discharged within 60 days of
filing;
(E) Borrower is dissolved or liquidated, or all or
substantially all of the assets of Borrower are sold or
otherwise transferred; or
(F) Any Guarantor ceases to be employed by or otherwise
affiliated with Borrower.
1.6 Financing Statements shall mean such uniform commercial code
financing statements as Lender may require to perfect any security
interests granted to Lender under any of the Loan Documents.
1.7 Guarantor shall mean each of Nigel V. Alexander and Shawn B.
Stickle. Guarantors shall mean the Guarantors collectively.
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1.8 Guaranties shall mean the guaranties in the forms annexed to this
Borrowing Agreement evidencing the Guarantors' personal guarantees of the
payment and performance of Borrower's obligations under the Loan Documents.
Guaranty shall mean the Guaranties singularly.
1.9 Lender shall mean Westburg Media Capital L.P., a Washington
limited partnership, acting by and through its general partner, Westburg
Media Capital, Inc., a Washington corporation. Lender shall also mean any
successor or assign of Westburg Media Capital L.P. Lender is sometimes also
referred to as Holder, Secured Party, Senior Lender or Westburg Media in
other of the Loan Documents.
1.10 Loan shall mean the loan made by Lender to Borrower and evidenced
by this Borrowing Agreement and the other Loan Documents.
1.11 Loan Documents shall mean this Borrowing Agreement, the Note, the
Security Agreement, the Financing Statements, the Pledge Agreements, the
Guaranty, the Warrant Certificate and the Subordination Agreement, and any
amendments or supplements to such documents.
1.12 Note shall mean the promissory note in the form annexed to this
Borrowing Agreement evidencing amounts borrowed by Borrower under the Loan
and establishing the terms by which such borrowing shall be repaid. The
term Note also includes any amendment to, or renewal or replacement of such
promissory note.
1.13 Notice shall mean any notice or other communication required or
permitted under this Borrowing Agreement or any of the other Loan
Documents. Notice shall be in writing and shall be deemed sufficiently
given and served for all purposes if hand delivered, if sent by overnight
express mail or if sent by certified United States mail return receipt
requested. If sent to Lender, Notice shall be addressed to Westburg Media
Capital L.P., P.O. Box 28951, Spokane, Washington 99228, Attention: John
Weller (or if sent by overnight express mail, to Westburg Media Capital
L.P., 11809 North Highwood Court, Spokane, Washington 99218, Attention:
John Weller); if sent to Borrower, Notice shall be addressed to Multi-Link
Telecommunications, Inc., 811 Lincoln Street, Fifth Floor, Denver, Colorado
80203, Attention: Nigel V. Alexander; and if sent to a Guarantor or a
Pledgor, Notice shall be addressed to such Guarantor or Pledgor, in care of
Borrower at the aforementioned address.
1.14 Pledge Agreements shall mean the pledge agreement in the form
annexed to this Borrowing Agreement creating a lien and security interest
in the issued and outstanding shares of voting capital stock of Multi-Link
Telecommunications, Inc. owned beneficially or of record by Nigel
Alexander, Shawn B. Stickle and Blackhawk Trust, and the pledge agreement
in the form annexed to this Borrowing Agreement creating a lien and
security interest in the issued and outstanding shares of capital stock of
Multi-Link Communications, Inc. owned beneficially or of record by
Multi-Link Telecommunications, Inc.
1.15 Pledgor shall mean, with respect to the Pledge Agreement covering
the issued and outstanding voting capital stock of Multi-Link
Telecommunications, Inc., each of Nigel Alexander, Shawn B. Stickle and
Blackhawk Trust; and, with respect to the Pledge Agreement covering the
issued and outstanding capital stock of Multi-Link Communications, Inc.,
Multi-Link Telecommunications, Inc. Pledgors shall mean all of the Pledgors
collectively.
1.16 Security Agreement shall mean the security agreement in the form
annexed to this Borrowing Agreement creating a first priority security
interest in Borrower's accounts receivable, inventory, equipment, leasehold
interests and the rents therefrom, and the pledged interests, whenever
acquired, under the Uniform Commercial Code of Colorado and such other
states in which such collateral is or may be located.
1.17 Subordination Agreement shall mean the subordination agreement in
the form annexed to this Borrowing Agreement evidencing the subordination
of prior indebtedness held by CS Capital to the Loan.
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1.18 Warrant Certificate shall mean the stock purchase warrant in the
form annexed to this Borrowing Agreement evidencing the grant to Lender of
warrants to purchase up to 250,000 shares of common stock, no par value per
share, of Multi-Link Telecommunications, Inc. at the price of $2.50 per
share over a period of five years.
2. The Loan. Lender shall loan Borrower the principal amount of up to
$2,100,000, and Borrower shall borrow from and repay such amount to Lender, with
interest, as is more fully set forth in the Note.
3. Loan Documents. The Loan will be evidenced, guaranteed and secured by
the Loan Documents, and any other documents which Lender may require, all of
which must be acceptable to Lender in form and content.
4. Loan Fee. In consideration of Lender's execution of this Borrowing
Agreement, evidencing Lender's commitment to make the Loan on the terms and
conditions of this Borrowing Agreement, Borrower shall pay to Lender a loan fee
in the amount of $42,000 (the "Loan Fee"). The Loan Fee shall be fully earned by
Lender upon the execution of this Borrowing Agreement by both parties, and shall
be advanced to Borrower, and simultaneously paid to Lender, as part of the
initial advance under the Note.
5. Transaction Fee. Borrower shall pay to Lender a transaction fee in the
amount of $21,000 (the "Transaction Fee") to reimburse Lender for its legal,
travel, filing, recording and other out-of-pocket costs incurred in connection
with the Loan. The Transaction Fee shall be fully earned by Lender upon the
execution of this Borrowing Agreement by both parties; the sum of $7,500,
representing a portion of the Transaction Fee, is hereby acknowledged as having
been paid; the sum of $13,500, representing the balance of the Transaction Fee,
shall be payable at closing; provided, however, that if Lender elects not to
make the Loan because Borrower has not complied with any of the pre-closing
requirements set forth in Section 7 of this Borrowing Agreement, then Lender
shall not require payment of that portion of the Transaction Fee that has not
theretofore been paid to Borrower.
6. Representations and Warranties. Multi-Link Telecommunications, Inc.,
Multi-Link Communications, Inc. and each Guarantor jointly and severally
represent and warrant to and for the benefit of Lender as follows:
6.1 Organization and Standing. Multi-Link Telecommunications, Inc. and
Multi-Link Communications, Inc. are corporations duly organized, validly
existing and in good standing in the State of Colorado, and are duly
qualified to transact business as foreign corporations in such other
jurisdictions, if any, where such qualification is necessary.
6.2 Certificates and Articles of Incorporation and Bylaws. Multi-Link
Telecommunications, Inc. and Multi-Link Communications, Inc. have made
available to Lender or its counsel true, correct and complete copies of
their respective certificates and articles of incorporation, their bylaws
and any other constating documents or agreements affecting the rights of
their respective shareholders, each as amended or restated to date.
6.3 Power and Authorization. Multi-Link Telecommunications, Inc. and
Multi-Link Communications, Inc. have all requisite power to execute and
deliver this Borrowing Agreement and the other Loan Documents to which it
is a party, and to carry out and perform its obligations under this
Borrowing Agreement and the Loan Documents. All action on the part of
Multi-Link Telecommunications, Inc. and Multi-Link Communications, Inc.,
their respective directors, and, if necessary, their respective
shareholders, for the authorization, execution, delivery and performance of
this Borrowing Agreement and the Loan Documents has been taken or will be
taken prior to closing, and will not be in conflict with, result in a
breach of or constitute a default under any agreement to which either
corporation or any Guarantor is subject. This Borrowing Agreement and the
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other Loan Documents, when executed and delivered by Borrower, Guarantors
and Pledgors, will constitute valid and legally binding obligations of the
parties thereto in accordance with their terms, except to the extent their
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general principles of equity. Nigel V. Alexander and Shawn
B. Stickle are executive officers of Multi-Link Telecommunications, Inc.
and Multi-Link Communications, Inc., and have the full right and authority
to execute this Borrowing Agreement and the other Loan Documents on behalf
of such entities. Each Guarantor and Pledgor named in this Borrowing
Agreement and the other Loan Documents has the full right and authority to
execute this Borrowing Agreement and the other Loan Documents to which each
is a party, and to perform his or her obligations as a guarantor and
pledgor thereunder.
6.4 Capitalization. The authorized capital of Multi-Link
Telecommunications, Inc. consists of 20,000,000 shares of common stock, no
par value, and 5,000,000 shares of preferred stock, $.01 par value, of
which 2,496,918 shares of common stock are issued and outstanding; of
these, 1,937,500 shares of common stock, constituting 77.6% of Multi-Link
Telecommunications, Inc.'s issued and outstanding shares of common stock,
are owned beneficially or of record by Nigel Alexander, Shawn B. Stickle
and Blackhawk Trust. Other than the Warrants to be issued to Lender at
closing, the Warrant to be issued to CS Capital, and options granted
pursuant to the Multi-Link Telecommunications, Inc. Stock Option Plan,
which authorizes the issuance of up to 400,000 shares of common stock of
the Borrower, there are no options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of capital stock of Multi-Link
Telecommunications, Inc. The authorized capital of Multi-Link
Communications, Inc. consists of 1,000,000 shares of capital stock, of
which 2,000 shares are issued and outstanding; of these, 1,950 shares,
constituting 97.5% of Multi-Link Communications, Inc.'s issued and
outstanding shares, are owned beneficially or of record by Multi-Link
Telecommunications, Inc. There are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of capital stock of Multi-Link
Communications, Inc.
6.5 All Approvals and Consents Obtained. The execution, delivery and
performance of the Loan Documents by Borrower and each Guarantor and
Pledgor has been approved or consented to by all persons or entities whose
approval or consent is required. Lender's exercise of any remedies
available to it under the Loan Documents does not require the approval or
consent of any person.
6.6 No Untrue Statements of Material Fact. All information in the Loan
Documents or in connection with such documents given to Lender by Borrower
and each Guarantor and Pledgor, specifically including financial
information concerning Borrower, was true, complete and correct when given
and will be true, complete and correct at closing. No such information
contains any untrue statement of a material fact or omits a material fact
necessary to make such information not misleading.
6.7 Business Operated in Conformance with Laws. Borrower's business
has been operated in material conformance with all applicable laws and
regulations. Borrower has obtained all permits, licenses and authorizations
needed to operate its business. Borrower has not received any opinion or
memorandum or legal advice from any legal counsel to the effect that there
is any liability or disadvantage relating to its business that may be
material to Borrower.
6.8 Environmental Compliance. To the best knowledge of Borrower, no
part of the real property owned or leased by Borrower (all of which is
hereinafter referred to as the "Property") is (i) targeted for clean-up or
remediation of Hazardous Substances (which are hereinafter defined) or (ii)
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otherwise not in compliance with applicable Environmental Laws (which are
also hereinafter defined). To the best knowledge of Borrower, there are no
Hazardous Substances on, in or under the Property or any part thereof which
are in violation of applicable Environmental Laws, and there are no
underground storage tanks on or under the Property. To the best knowledge
of Borrower, each prior owner or lessor of the Property has owned and
operated the Property in compliance with all applicable Environmental Laws.
The term "Hazardous Substance" means any substance or material defined or
designated as hazardous or toxic (or by any similar term) under any
Environmental Law, including petroleum products and friable asbestos. The
term "Environmental Law" means federal, state or local law, ordinance, rule
or regulation relating to pollution or protection of the environment or
actual or threatened releases, discharges or emissions into the
environment.
6.9 Title to Assets. Borrower has good and clear record and marketable
title to its properties and title or valid and subsisting interests in its
other assets. Except as otherwise disclosed to Lender in writing on
Schedule 6.9 attached hereto, such assets are free and clear of liens,
encumbrances and adverse claims. The personal property of Borrower comprise
all of the property that has been used by Borrower for the operation of its
business, and is in good operating condition and repair, subject only to
ordinary normal wear and tear.
6.10 Use of Loan Proceeds. The proceeds of the Loan will be used by
Borrower to refinance existing indebtedness; to pay transaction costs
incurred in connection with the Loan; and as working capital.
7. Pre-Closing Requirements and Initial Advance; Additional Advances.
7.1 Pre-Closing Requirements and Initial Advances. Prior to and as a
condition precedent to the closing of the Loan and the initial advance of
funds under the Note, the conditions set forth below must be met to
Lender's satisfaction. In addition, Borrower must meet to Lender's
satisfaction all other conditions to the closing and initial disbursement
of the Loan as may have been specified in writing by Lender to Borrower
pursuant to a loan commitment, term sheet, exhibit letter or other written
instrument. The term "closing" used in this Borrowing Agreement shall mean
the date the conditions to the initial disbursement of proceeds of the Loan
are satisfied.
7.1.1 Loan Documents. All of the Loan Documents shall have been
executed and delivered to Lender by Borrower, each Guarantor, each
Pledgor and such other persons or entities as Lender may require, as
their interests appear; the Financing Statements and fixture filings
shall have been filed in all places necessary to perfect the liens and
security interests created by the Loan Documents; and any other Loan
Documents to be recorded or filed shall have been duly recorded and
filed in the appropriate offices.
7.1.2 Loan Fee. Borrower shall have paid the Loan Fee.
7.1.3 Transaction Fee. Borrower shall have paid the Transaction
Fee.
7.1.4 UCC Searches. Lender shall have conducted uniform
commercial code searches of Borrower, each Guarantor and such other
persons and entities as Lender may require, and such searches shall
show no filings related to or which could relate to the collateral for
the Loan, other than filings made pursuant to the Loan Documents or
otherwise approved by Lender.
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7.1.5 Financial Condition. Lender shall be satisfied that the
financial condition and credit of Borrower, and all information
relating to its business, is as represented to Lender, without any
material change.
7.1.6 Permits and Licenses. Borrower shall have obtained all
permits and licenses needed to own and operate its business, or shall
have valid and subsisting agreements pursuant to which such permits
and licenses shall be acquired.
7.1.7 Litigation. There shall be no litigation pending against
Borrower or any Guarantor which, in Lender's opinion, could or does
affect Borrower's ability to operate its business, or Borrower's or
such Guarantor's ability to otherwise perform all of the terms and
provisions of this Borrowing Agreement and the other Loan Documents to
which Borrower or such Guarantor is a party.
7.1.8 Restructuring of CS Capital Loan. CS Capital shall have
restructured its loan with Borrower. Such restructuring shall provide
that $300,000 in principal amount of indebtedness owed it by Borrower
shall be converted into equity of Borrower; that the remaining
indebtedness shall not exceed $515,000 in principal amount; that
Borrower shall be required to pay interest only on such indebtedness,
at a rate not to exceed 15% per annum, for a period of not less than
one year; and that principal payments shall be made (i) only from
funds derived from subsequent debt or equity financings of Borrower,
or (ii) on and after October 30, 1999; and that the loan shall be
expressly subordinate to the Loan (as provided in the Subordination
Agreement). In addition, Borrower shall furnish Lender with written
evidence of such restructuring.
7.1.9 Other Conditions. All other provisions of this Borrowing
Agreement or any other Loan Document to be complied with prior to the
closing and initial disbursement of the Loan shall have been complied
with, and all of the representations and warranties of Borrower and
any Guarantor in this Borrowing Agreement and the other Loan Documents
shall be true and correct in all material respects. If Lender
disburses Loan funds without requiring Borrower or any Guarantor to
satisfy each of the foregoing conditions, Borrower's obligation to
meet the unsatisfied conditions shall not be deemed waived (unless
specifically waived in writing by Lender) and Lender may require
compliance with each of such conditions before further Loan
disbursements are made.
7.2 Additional Advances. Prior to and as a condition precedent to each
additional advance of funds under the Note following closing, the
conditions set forth in Sections 7.1.5, 7.1.6, 7.1.7 and 7.1.8 shall have
been satisfied.
8. Covenants of Borrower and each Guarantor. Borrower and each Guarantor
jointly and severally covenant with and for the benefit of Lender as follows.
Such covenants shall continue in effect for so long as any amount remains
outstanding under the Note, or any other obligation under any of the Loan
Documents remains to be performed.
8.1 Financial Reports and Related Information. Borrower shall promptly
furnish to Lender such information with respect to Borrower's business as
Lender may from time-to-time reasonably request, and shall promptly notify
Lender of any material occurrence affecting Borrower's business or its
assets. Without limiting the generality of the foregoing, Borrower shall
provide financial statements to Lender on a quarterly basis and within 30
days of the end of each quarter. Borrower shall also provide Lender, no
less often than monthly, with copies of its bank statements, and no less
often than quarterly shall furnish Lender with a certificate in form and
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substance acceptable to Lender certifying, if true, that it is in
compliance with all of the terms and conditions of the Loan Documents.
Borrower shall also provide Lender with a copy of its annual budgets, when
the same become available, and Borrower and each Guarantor shall each
provide Lender with copies of their respective annual financial statements
(which, in the case of Borrower, shall be audited) within 90 days of the
end of each year. If Borrower or any Guarantor is delinquent in furnishing
Lender with the information specified in this Section 8.1, Borrower agrees
to pay Lender a late fee of $100.
8.2 Compliance with Laws. Borrower shall comply with all applicable
laws and regulations in connection with the operation of its business.
8.3 Maintenance of Liability and Property Insurance. Borrower shall
maintain a policy or policies of general liability insurance naming Lender
as an additional insured and insuring Borrower and Lender against any
liability arising from the conduct of Borrower's business, which insurance
shall be in an amount reasonably acceptable to Lender. In addition,
Borrower shall maintain a policy or policies of insurance naming Lender as
an additional insured and insuring Borrower's physical assets against risk
of damage, loss and destruction in accordance with customary industry
standards, in such amounts and with such insurance company or companies as
Lender reasonably may specify. Each such policy shall provide that it
cannot be canceled or materially altered unless Lender is given at least 30
days' advance written notice.
8.4 Maintenance of Ratios. Borrower shall maintain the following
ratios, on a consolidated basis:
8.4.1 Ratio of Debt to Annualized Cash Flow. Borrower's ratio of
debt to annualized cash flow shall not exceed 3.00 to 1, determined
quarterly in arrears. As used herein, "debt" shall mean unpaid
interest and principal of the Loan and any other indebtedness owed by
Borrower, and "annualized cash flow" shall mean Borrower's annualized
earnings, based on the trailing three months, before deduction for
interest, depreciation, the amortization of goodwill and intangible
assets, and federal and state income taxes.
8.4.2 Ratio of Cash Flow to Interest, Principal and Taxes.
Borrower's ratio of annualized cash flow to interest, principal and
taxes shall not be less than 1.25 to 1, determined quarterly in
arrears, based on the trailing three months' cash flow and interest
expense, principal payments and accrued federal and state income tax
expense during such period.
8.5 Limitations on Indebtedness. Without the written consent of
Lender, Borrower shall incur no indebtedness in any calendar year or
portion thereof other than the Loan; trade payables incurred in the normal
course of business; the indebtedness specified in the Subordination
Agreement; indebtedness to The Associates Capital Corporation incurred in
connection with the purchase of switching equipment (which indebtedness
does not exceed $650,000 in principal amount); and such additional
indebtedness, which, if incurred by Borrower and added to the indebtedness
specified in this Section 8.5, would not cause Borrower's aggregate
indebtedness to exceed three times its annualized cash flow (as defined in
Section 8.4.1).
8.6 Limitations on Capital Expenditures. Without the written consent
of Lender, Borrower shall not incur capital expenditures in excess of the
greater of: $500,000 or 75% of its excess cash flow during any fiscal year.
As used herein, "excess cash" flow shall be defined as cash flow (as
defined in Section 8.4.1) less all scheduled interest and principal
payments with respect to the Loan and any other indebtedness of Borrower
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that are paid or accrued during such year, and state and federal income
taxes, and property taxes, paid or accrued during such year.
8.7 Limitations on Distributions. Without the written consent of
Lender, Multi-Link Telecommunications, Inc. shall neither pay nor declare
any dividends, nor make any other distributions to its shareholders, in any
calendar year, in excess of an amount determined by subtracting from excess
cash flow for such year (as defined in Section 8.6) the amount of capital
expenditures made or accrued during such year; provided, however, that if
Borrower shall pay a dividend or other distribution pursuant to this
Section 8.7, it shall also be required to make a prepayment of the Note,
from excess cash flow, in an amount equal to 50% of such dividend or
distribution.
8.8 Further Assurances. Borrower and each Guarantor shall from
time-to-time perform such further acts, execute such additional documents
or deliver such further assurances as Lender may reasonably request and as
may be necessary to implement the intent of the parties to this Borrowing
Agreement or to create, perfect, maintain or preserve the security
interests created or intended to be created by the Loan Documents.
8.9 Access to Books and Records. Borrower shall permit Lender and its
representatives to review and copy the books and records of Borrower upon
reasonable notice. Lender understands that such books and records may
contain proprietary or confidential information, and agrees to use all
reasonable efforts to maintain the proprietary or confidential nature of
such information.
8.10 No Other Liens or Security Interests. Borrower shall permit no
lien or other encumbrance of its assets, nor grant any security interest
with respect thereto, other than the liens and encumbrances favoring Lender
created by the Security Agreement and the liens and encumbrances set forth
on Schedule 8.10 to this Borrowing Agreement.
9. Closing. The closing of the Loan shall occur as of, and be evidenced by,
the completion of the following events:
9.1 Execution of Loan Documents. Borrower, each Guarantor and each
Pledgor shall sign (and, where appropriate, acknowledge) and deliver to
Lender this Borrowing Agreement and the other Loan Documents each is
required to sign.
9.2 Insurance. If not previously delivered, Borrower shall deliver to
Lender a certificate or certificates evidencing the insurance coverage
specified in Section 8.3 of this Borrowing Agreement.
9.3 Stock Certificates. Nigel Alexander, Shawn B. Stickle and
Blackhawk Trust shall deliver to Lender a stock certificate or certificates
evidencing his or its ownership of the shares of voting capital stock of
Multi-Link Telecommunications, Inc. pledged pursuant to the Pledge
Agreement, duly endorsed in blank or accompanied by stock powers duly
executed in blank. In addition, Multi-Link Telecommunications, Inc. shall
deliver to Lender stock certificates evidencing its ownership of the shares
of capital stock of Multi-Link Communications, Inc., duly endorsed in blank
or accompanied by stock powers duly executed in blank.
9.4 Opinion of Borrower's Counsel. Borrower shall deliver to Lender an
opinion of its counsel substantially in the form annexed to this Borrowing
Agreement.
9.5 Funding of Loan. Lender shall advance the sum of $1,800,000 to or
on behalf of Borrower at closing (from which it will pay itself the Loan
Fee and the unpaid portion of the Transaction Fee) against receipt of a
compliance certificate signed by Borrower's president and chief executive
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officer and each Guarantor, signifying that Borrower and each Guarantor is
in full compliance with all of the terms, conditions and covenants this
Borrowing Agreement and the other Loan Documents, and that all of the
representations and warranties of Borrower and each Guarantor were true and
correct when made and are true and correct as of the closing. Such advance
shall be disbursed by Lender, to or for the benefit of Borrower as set
forth on Schedule 9.5-A of this Borrowing Agreement. Borrower shall, in
turn, disburse funds advanced to it in the amounts and to the persons or
entities set forth in Schedule 9.5-B, against receipt of any collateral
held by such recipients (together with any uniform commercial code
termination statements necessary to terminate any financing statements of
record). Borrower shall advance additional sums to Borrower, not to exceed
$300,000 in aggregate principal amount, upon Borrower's written request and
against receipt of an additional or supplementary compliance certificate.
10. Remedies on Default; Right to Cure.
10.1 Remedies on Default. Upon the occurrence of an Event of Default
and the expiration of the applicable Cure Period, Lender, at its option,
may: accelerate all amounts owing on the Note and the other Loan Documents,
in which event such accelerated amounts shall become immediately due and
payable; pursue any one or more of the remedies set forth in this Borrowing
Agreement or in any of the other Loan Documents, either concurrently or
successively; or pursue any and all other remedies available to Lender at
law or in equity. No remedy conferred upon or reserved to Lender in this
Borrowing Agreement, in any other Loan Document or at law or in equity
shall be exclusive of any other remedy available to Lender. To the extent
permitted by applicable law, all such remedies shall be cumulative and in
addition to every other remedy available to Lender.
10.2 Right to Cure. Notwithstanding any other provision of this
Borrowing Agreement or any other Loan Document, Borrower shall have a right
to cure an Event of Default within the applicable Cure Period.
11. Indemnity. Borrower and each Guarantor shall jointly and severally
indemnify and defend Lender against, and hold Lender harmless from, any and all
losses, liability, claims, damages, costs and expenses (including reasonable
attorneys' fees and court costs, including fees and costs associated with any
appeal or any bankruptcy) that Lender may suffer or incur, or to which Lender
may be subjected, by reason of, or directly or indirectly arising out of or in
connection with any actual or alleged default or breach by Borrower or any
Guarantor under any of the Loan Documents. Upon demand by Lender, Borrower shall
promptly defend any action or proceeding brought against Lender in connection
with the foregoing.
12. Special Provisions Regarding the Warrant Certificate.
12.1 Lock-Up Agreement. In the event Multi-Link Telecommunications,
Inc. completes an Initial Public Offering of its capital stock (as such
term is defined in the Warrant Certificate), and in the further event the
stockholders of Multi-Link Telecommunications, Inc. are required by the
underwriter of such offering to enter into a lock-up or similar agreement
restricting their ability to resell their shares of stock following the
Initial Public Offering, then, upon the request of the underwriter, Lender
shall enter into the same or similar lock-up agreement, restricting
Lender's ability to resell the shares of capital stock of Multi-Link
Telecommunications, Inc. obtained upon the exercise of the Warrant
Certificate. The foregoing notwithstanding, Lender shall not be obligated
to enter into any lock-up or similar agreement that would restrict its
ability to resell such stock for a period of more than twelve months from
the effective date of the registration statement filed with the Securities
and Exchange Commission in connection with the Initial Public Offering.
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12.2 Redemption. In the event Multi-Link Telecommunications, Inc. has
not completed an Initial Public Offering prior to the Expiry Date (as such
term is defined in the Warrant Certificate), then Borrower, upon written
request of Lender, shall be required to repurchase the shares of capital
stock of Multi-Link Telecommunications, Inc. obtained upon the exercise of
the Warrant Certificate at Fair Market Value. As used herein, "Fair Market
Value" shall be: (i) in the event an Initial Public Offering was not
commenced, the value determined by Borrower and Lender; or (ii) in the
event an Initial Public Offering was not commenced and Borrower and Lender
cannot arrive at a determination of value, the value determined by a
qualified appraiser jointly selected by Borrower and Lender (provided
however, that if Borrower and Lender cannot agree on a joint appraiser,
then they shall each select an appraiser, and the average of the two
appraisals shall be controlling; and provided, further, that if the two
appraisals differ by a factor of more than 20%, the two appraisers so
chosen shall select a third appraiser who shall conduct a third appraisal,
in which event Fair Market Value shall be the average of the two appraisals
closest in value (of the three appraisals then prepared).
13. Miscellaneous Provisions.
13.1 Integration; Amendment and Modification. This Borrowing Agreement
and the other Loan Documents constitute the full agreement of the parties
with respect to the Loan and supersede all prior written or oral
negotiations or agreements. This Borrowing Agreement and the other Loan
Documents can be extended, modified or amended only in writing and only if
signed by Lender and each other party thereto.
13.2 Costs and Expenses in Event of Default. Borrower and each
Guarantor jointly and severally agree to pay on demand all costs and
expenses of Lender incurred in connection with an Event of Default,
including all reasonable attorneys' fees and costs incurred by Lender in
enforcing any of the provisions of such Loan Documents or in collecting
payments due under the Note or any other Loan Document through litigation
or other dispute resolution. Such fees, costs and other expenses shall
include all statutory costs and disbursements, all fees and costs
associated with discovery depositions and expert witness fees, and all
out-of-pocket costs incurred by Holder in the prosecution or defense of the
action. For purposes of this section, the phrase "litigation or other
dispute resolution" shall be deemed to include any proceeding commenced in
any court of general or limited jurisdiction, any arbitration or mediation,
any proceeding commenced in the bankruptcy courts of the United States, and
any appeal from any of the foregoing. The amount of all such costs and
expenses shall bear interest at the default rate specified in the Note from
the date of demand and shall be secured by the Loan Documents.
13.3 Assignments. This Borrowing Agreement and the other Loan
Documents may be assigned by Lender, in whole or in part and in its sole
discretion, upon Notice but without the consent or approval of any other
party hereto. Neither this Borrowing Agreement nor the other Loan Documents
may be assigned by Borrower, in whole or in part, without the prior written
consent of Lender, which consent shall not be withheld unreasonably.
13.4 Venue and Applicable Law. This Borrowing Agreement and the other
Loan Documents are made in accordance with, and shall be interpreted and
enforced pursuant to, the laws of the State of Washington, including the
Washington Uniform Commercial Code, and the federal laws of the United
States of America. If any action or other proceeding shall be brought in
connection with this Borrowing Agreement or any other Loan Document, the
venue of such action may, in the discretion of Lender, be in Spokane
County, Washington. Borrower and each Guarantor and Pledgor hereby consents
to the exclusive personal jurisdiction of the Superior Court of Spokane
County and the United States District Court for the Eastern District of
Washington. 13.5 Counterpart Execution. This Borrowing Agreement may be
signed in counterparts and by telefacsimile (to be followed by original
signatures), and the counterparts combined shall constitute a binding
agreement among all parties.
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13.6 Time of Essence. Time is of the essence of this Borrowing
Agreement and the other Loan Documents.
13.7 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of Borrower and each Guarantor
contained in this Borrowing Agreement and the other Loan Documents shall
survive closing.
13.8 Invalid Provision. If any provision of this Borrowing Agreement
is held to be illegal, invalid or unenforceable under present or future
laws effective during the term of this Borrowing Agreement, such provision
shall be fully severable. This Borrowing Agreement shall be construed and
enforced as if such illegal or otherwise unenforceable provision had never
comprised a part hereof. The remaining provisions of this Borrowing
Agreement shall remain in full force and effect and shall not be affected.
Furthermore, in lieu of such illegal, invalid or unenforceable provision
there shall be added automatically as part of this Borrowing Agreement a
legal, valid and enforceable provision as similar in terms and intent to
such illegal, invalid or unenforceable provision as may be legally
possible.
13.9 Successors. Subject to the provisions of this Borrowing Agreement
restricting assignments, all rights and obligations of the parties
hereunder shall be binding upon and inure to the benefit of their heirs,
personal representatives, successors and assigns.
13.10 Waiver. No right or obligation under this Borrowing Agreement
will be deemed to have been waived unless evidenced by a writing signed by
the party against whom the waiver is asserted, or by its duly authorized
representative. Any waiver will be effective only with respect to the
specific instance involved, and will not impair or limit the right of the
waiving party to insist upon strict performance of the right or obligation
on any other instance, in any other respect, or at any other time. No
failure on the part of Lender to exercise, and no delay in exercising, any
right or obligation under this Borrowing Agreement shall operate as a
waiver thereof.
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ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY,
EXTEND CREDIT OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties have executed this Borrowing Agreement the
day and year first above written.
LENDER:
Westburg Media Capital L.P.,
a Washington limited partnership,
acting by and through its general partner,
Westburg Media Capital, Inc.
/s/
- -----------------------------------------
Its duly authorized officer
BORROWER:
Multi-Link Telecommunications, Inc.,
a Colorado corporation
/s/
- -----------------------------------------
its duly authorized officer
Multi-Link Communications, Inc.,
a Colorado corporation
/s/
- -----------------------------------------
its duly authorized officer
GUARANTORS:
/s/ Nigel V. Alexander
- -----------------------------------------
Nigel V. Alexander
/s/ Shawn B. Stickle
- -----------------------------------------
Shawn B. Stickle
<PAGE>
Schedule 6.9
Liens and Encumbrances:
1. The lien and security interest of The Associates Capital Corporation.
2. The lien and security interest of Sprint Telemagine
3. The lien and security interest of CS Capital Corp.
<PAGE>
Schedule 8.10
Other Permitted Liens:
<PAGE>
Schedule 9.5-A
Disbursement of Initial Advance:
1. $844,500 shall be wire transferred to Borrower.
2. $900,000 shall be wire transferred to CS Capital Corp.
3. $55,500 of the initial advance shall be retained by Lender in payment of
the Loan Fee and that portion of the Transaction Fee not theretofore paid.
<PAGE>
Schedule 9.5-B
Payments to be Made by Borrower from that Portion of the Initial Advance to
Borrower:
1. $30,000 shall be disbursed to Robert and Lynne Williams in full payment of
amounts owed them by Borrower, against receipt of those shares of
Multi-Link Communications, Inc. held by them as collateral.
2. $25,000 shall be disbursed to Blackhawk Trust in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
3. $6,000 shall be paid to Joanne and Hughes Webb in full payment of amounts
owed them by Borrower, against receipt of any collateral held by them.
4. $97,000 shall be disbursed to Harbor Settlement in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
5. $13,000 shall be disbursed to Shawn Stickle in full payment of amounts owed
him by Borrower, against receipt of any collateral held by him. In
addition, $91,000 shall be advanced to Mr. Stickle in payment of accrued
salary.
6. $11,000 shall be disbursed to Arcadia Financial in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
7. $11,000 shall be disbursed to Arcadia Financial in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
8. $178,000 shall be disbursed to Octagon Strategies in full payment of
amounts owed it by Borrower, against receipt of any collateral held by it,
and in payment of accrued consulting fees.
9. $6,000 shall be disbursed to Sprint Telemagine in full payment of amounts
owed it under certain equipment leases, against receipt of any collateral
held by it.
10. $43,000 shall be disbursed to Ron Stickle in full payment of amounts owed
him by Borrower, against receipt of any collateral held by him.
COMMERCIAL INSTALLMENT CONTRACT
ACCOUNT NUMBER
Buyer (Print or Type) Co-Buyer
Name
- --------------------------------------------------------------------------------
Street Address Street Address
- --------------------------------------------------------------------------------
City & State
- --------------------------------------------------------------------------------
Seller (Dealer) Contract Date
================================================================================
Name & Address Quantity Make Model Number Serial Number AMOUNT
SEE ATTACHED INVOICE# 206493 DATED 03/20/96
(Attach schedule if additional space is required.)
- ------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Rate of Charge: The Annual Percentage Rate stated ITEMIZATION OF AMOUNT FINANCED
in this Security Agreement. CASH PRICE __________ $______________________
The Buyer agrees to purchase the above CASH DOWN PAYMENT______ $ ____________________
described goods and services, hereafter called TRADE-IN _____________ $ _____________________
"property" for the Total Sale Price. (Describe)
Buyer promises to pay Seller the total of TOTAL DOWN PAYMENT_______ $__________________
payments in consecutive monthly payments according UNPAID BALANCE OF CASH PRICE (A $________________
to the payment schedule shown opposite. MINUS B)
A security interest in the property shall OTHER CHARGES:
remain in the Seller or his assignee under the TO PUBLIC OFFICIALS _________________________
Uniform Commercial Code until this Security TOTAL OTHER CHARGES _______ $__________________
Agreement is fully performed. Buyer hereby AMOUNT FINANCED (C+D) ______ $__________________
acknowledges delivery and possession of the
property. The property shall remain personal DISCLOSURE STATEMENT
property and shall not become real property no AMOUNT FINANCED (The amount of credit]
matter how affixed thereto provided to you or on your behalf) $_________
Buyer also promises to pay to the Seller or FINANCE CHARGE (The dollar amount the
other holder of this Security Agreement a credit will cost you) $__________________
delinquency and collection charge on each payment TOTAL OF PAYMENTS (The amount you
of this Security Agreement in default more than 10 will have paid after you have made all
days in an amount equal to 8% of each such payment payments as scheduled) $__________________
or $6.00, whichever is greater, if allowed by law, TOTAL SALE PRICE (The total cost of your
otherwise at the highest amount allowed by law. purchase on credit, including your
If the indebtedness is accelerated or prepaid down payment of $__________________)
in full, the Buyer will be allowed a rebate of the $__________________
unearned portion of the finance charge for the ANNUAL PERCENTAGE RATE (The
months prepaid computed by the "Rule of 78's." No cost of your credit as a yearly rate) _______%
refund of less than $1.00 will be made.
Subsequent purchases may, at the Seller's Your payment schedule will be:
option, be included in and consolidated with one
or more previous contracts. The Seller shall apply Number of Amount of When Payments Are Due
the entire amount made before the subsequent Payments Payments
purchases to the previous purchases, and shall --------- --------- ---------------------
allocate each payment on the consolidated contract Monthly
to all of the various purchases in the same ratio Starting
as the original cash sale prices of all the -------------------------------------------------
various purchases bear to the total of all.
The Buyer and Seller agree to the "Statement -------------------------------------------------
of Additional Covenants" set forth on the reverse Security: You are giving a security interest in
side hereof, which the undersigned each agree the goods or property being purchased.
shall constitute a part of this Security
Agreement. Late Charge: If a payment is more than 10 days
The property is not being acquired by Buyer late, you will be charged 5% of each payment in
for personal, family or household use, and will be default or $6.00, whichever is greater.
used primarily for
Prepayment: If you pay off early, you will be
( ) Agricultural ( ) Business or commercial purposes. entitled to a refund of part of the finance
- --------------------------------------------------- charge.
Delivery Receipt.
The goods were delivered to the Buyer, See opposite and on reverse side for additional
properly installed if required, and information about non-payment, default, any
unconditionally accepted by the Buyer on the date required payment in full before the scheduled
of this Contract. date, and prepayment refunds.
- --------------------------------------------------
NOTICE TO THE BUYER: SELLER
1. Do not sign this Agreement before you read it ------------------------------------------
or if it contains any blank spaces. This Agreement
consists of two pages.
2. You are entitled to an exact copy of the
Agreement you sign.
3. Under the law, you have the right, among
others, to pay in advance the full amount due and
to obtain under certain conditions a partial
refund of the finance charge.
<PAGE>
The Buyer acknowledges receipt of an exact copy of
this Contract
COMMERCIAL INSTALLMENT CONTRACT
BUYER ____________________________________________
BUYER ____________________________________________
I hereby guarantee the payment of the above
described amount upon failure of Buyer to pay said
amount to Seller named herein.
- --------------------------------------------------
GUARANTOR ________________________________________
By________________________________________________
</TABLE>
<PAGE>
CONTINUING GUARANTY
For Valuable Consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned, for themselves, their heirs, executors, personal
representatives, successors and assigns (individually called "Guarantor" and
collectively called "Guarantors") jointly and severally and in solido, hereby
unconditionally guarantee to Associates Capital Services Corporation,
- ---------------------- its successors, endorsees and assigns, (collectively
called "Associates") that Multi-Link Communications, Inc. (the "Company), whose
address is 811 Lincoln Street, Denver, Colorado 80203,
(Part to be Guaranteed) Debtor
shall promptly and fully perform, pay and discharge all of its present and
future liabilities, obligations and indebtedness to Associates, whether direct
or indirect, joint or several, absolute or contingent, secured or unsecured,
matured or unmatured, and whether originally contracted with or otherwise
acquired by Associates (all of which liabilities, obligations and indebtedness
are herein individually and collectively called the "Indebtedness"). This
Guaranty is an absolute and unconditional guarantee of payment and not of
collectibility. The liability of each Guarantor hereunder is not conditional or
contingent upon the genuineness, validity, sufficiency or enforceability of the
indebtedness or any instruments, agreements or chattel paper related thereto
(collectively called "Agreements") or any security or collateral therefor
(collectively called "Security") or the pursuit by Associates of any rights or
remedies which it now has or may hereafter have. If the Company fails to pay the
indebtedness promptly as the same becomes due, or otherwise fails to perform any
obligation under any of the Agreements, each Guarantor agrees to pay on demand
the entire indebtedness and all losses, costs, attorney's fees and expenses
which may be suffered by Associates by reason of the Company's default or the
default of any Guarantor hereunder, and agrees to be bound by and to pay on
demand any deficiency established by the sale of any of the Agreements or
Security, all without relief from valuation and appraisement laws and without
requiring Associates to (i) proceed against the Company by suit or otherwise,
(ii) foreclose, proceed against, liquidate or exhaust any of the Agreements or
Security, or (iii) exercise, pursue or enforce any right or remedy Associates
may have against the Company, any co-Guarantor (whether hereunder or under a
separate instrument) or any other party. Each Guarantor agrees that: this
Guaranty shall not be discharged or affected by any circumstances which
constitute a legal or equitable discharge of a Guarantor or surety, or by the
death of any Guarantor; the records of Associates shall be received as
conclusive evidence of the amount of the indebtedness at any time owing; one or
more successive or concurrent suits may be brought and maintained against any or
all of the Guarantors, at the option of Associates, with or without joinder of
the Company or any of the other Guarantors as parties thereto; such Guarantor
will not avail itself of any defense whatsoever which the Company may have
against Associates, other than full payment of the indebtedness; and such
Guarantor will not seek a change of venue from any jurisdiction or court in
which any action, proceeding or litigation is commenced.
EACH GUARANTOR HEREBY WAIVES NOTICE OF ANY ADVERSE CHANGE IN THE COMPANY'S
CONDITION OR OF ANY OTHER FACT WHICH MIGHT MATERIALLY INCREASE SUCH GUARANTOR'S
RISK, WHETHER OR NOT ASSOCIATES HAS KNOWLEDGE OF THE SAME. EACH GUARANTOR ALSO
HEREBY WAIVES ANY CLAIM, RIGHT OR REMEDY WHICH SUCH GUARANTOR MAY NOW HAVE OR
HEREAFTER ACQUIRE AGAINST THE COMPANY THAT ARISES HEREUNDER AND/OR FROM THE
PERFORMANCE BY ANY GUARANTOR HEREUNDER INCLUDING, WITHOUT LIMITAITON, ANY CLAIM,
REMEDY OR RIGHT OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION,
INDEMNIFICATION, OR PARTICIPATION IN ANY CLAIM, RIGHT OR REMEDY OF ASSOCIATES
AGAINST THE COMPANY OR ANY SECURITY WHICH ASSOCIATES NOW HAS OR HEREAFTER
ACQUIRES; WHETHER OR NOT SUCH CLAIM, RIGHT OR REMEDY ARISES IN EQUITY, UNDER
CONTRACT, BY STATUTE, UNDER COMMON LAW OR OTHERWISE.
<PAGE>
No termination hereof shall be effective until the Guarantors deliver to
Associates a written notice signed by them electing not to guarantee any new
extension of credit that may be granted by Associates to the Company after its
receipt of such notice, but such notice shall not affect the obligation of the
guarantors hereunder as to any and all indebtedness existing at the time such
notice is received. Each Guarantor hereby waives (i) notice of acceptance hereof
and notice of extensions of credit given by Associates to the Company from time
to time; (ii) presentment, demand, protest, and notice of non-payment or protest
as to any note or other evidence of indebtedness signed, accepted, endorsed or
assigned to Associates by the Company; (iii) all exemptions and homestead laws:
(iv) any other demands and notices required by law; and (v) any right to trial
by jury. Associates may at any time and from time to time, without notice to or
the consent of any Guarantor, and without affecting or impairing the obligation
of any Guarantor hereunder; (a) renew, extend or refinance any part or all of
the indebtedness of the Company or any indebtedness of its customers, or of any
co-Guarantor (whether hereunder or under a separate instrument) or any other
party; (b) accept partial payments of the indebtedness and apply such payments
to any part of the indebtedness; (c) settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate, in any manner, any of
the indebtedness, any Security, or any indebtedness of any co-Guarantor (whether
hereunder or under a separate instrument) or any other party; (d) consent to the
transfer of any Security; (e) bid and purchase at any sale of any of the
Agreements or Security; and (f) exercise any and all rights and remedies
available to Associates by law or agreement even if the exercise thereof may
affect, modify or eliminate any rights or remedies which a Guarantor may have
against the Company. Each Guarantor shall continue to be liable under this
Guaranty, the provisions hereof shall remain in full force and effect, and
Associates shall not be stopped from exercising any rights hereunder,
notwithstanding (i) Associates waiver of or failure to enforce any of the terms,
covenants or conditions contained in any of the Agreements; (ii) any release of
or failure on the part of Associates to perfect any security interest in or
foreclose, proceed against, or exhaust, any Security; or (iii) Associates
failure to take new, additional or substitute security or collateral for the
indebtedness.
Each Guarantor agrees that Associates may bring any legal proceedings it
deems necessary to enforce any or all of such Guarantor's obligations hereunder
in any court in the State in which Associates' office administering the
indebtedness is located; and service of process may be made upon such Guarantor
by mailing a copy of the summons to such Guarantor at its address last known to
Associates. All rights and remedies of Associates are cumulative and not
alternative. Each provision of this Guaranty is intended to be severable. Any
term or provision hereof declared to be contrary to, prohibited by or invalid
under applicable laws or regulations shall be inapplicable and deemed omitted
herefrom, but shall not invalidate the remaining terms and provisions hereof.
IN WITNESS WHEREOF, the Guarantors have executed this Guaranty on
Witness Guarantor
- ---------------------------- ---------------------------------------------
(name of individual, corporation or
partnership)
Witness By
- ---------------------------- -------------------------------------------
(If corporate guarantor, authorized
officer must sign and show corporate
title. If partnership guarantor, a
general partner must sign and show
"Partner" after name. If individual
guarantor, show "Individual" after
name.)
Address
-------------------------------------------
Witness Guarantor
- ---------------------------- -------------------------------------------
(L.S.)
Witness By
- ---------------------------- -------------------------------------------
(If corporate guarantor, authorized
officer must sign and show corporate
title. If partnership guarantor, a
general partner must sign and show
"Partner" after name. If individual
guarantor, show "Individual" after
name.)
Address
-------------------------------------------
Note: Insert exact company names where appropriate, individual guarantors must
sign guaranty without titles. Sign simply "John Smith, Individually," not
"John Smith, President.
SECURITY AGREEMENT
The undersigned debtor, meaning all debtors jointly and severally
("Debtor"), to secure the obligations set forth herein grants to the secured
party named below herein, with its successors and assigns, (called "Secured
Party") under the terms and provisions of this agreement (this "Agreement") a
security interest in the following described property (herein, with all present
and future attachments, accessories, replacement parts, repairs and additions or
substitutions, referred to collectively as "Equipment"):
(Describe the Equipment, including all major attachments, fully, including make,
kind of unit, model, serial numbers and other pertinent information.)
- --------------------------------------------------------------------------------
The Equipment will be used primarily for: ( ) business or commercial use other
than farming operations; ( ) farming operations. When not in use, the Equipment
will be kept at:
----------------------------------------------------------------
(Street Address)
and, when in use, will be used only in the following State(s):
<TABLE>
<CAPTION>
PAYMENT SCHEDULE USE OF PROCEEDS
<S> <C>
Debtor promises to pay Secured Party the Total Secured Party is hereby irrevocably authorized
Amount of $____________ (the "Total Amount") in and directed to disburse the proceeds of this
______________ installments as follows: Agreement as follows:
Amount Payee (Name and Address)
(a) $_____________ on _________________, and a $
like sum on the like date of each month
thereafter until fully paid:
or
(b) $
$
Debtor hereby acknowledges and agrees that the
proceeds of this Agreement will be used for
commercial, business or agricultural purposes and
will not be used for personal, family or
household purposes. Secured Party may disburse
the proceeds using checks, drafts, orders,
provided, however, that the final installment transfer funds, or any other method or media
will be in the amount of the then remaining Secured Party deems desirable. Disbursement may
unpaid balance. All amounts payable under this be made in Secured Party's name on Debtor's
Agreement are payable at Secured Party's address behalf or in Debtor's name. Disbursement in
shown below or at such other address as Secured accordance with the above instructions or any
Party may specify from time to time in writing. written supplement to those instructions will
Any note taken in conjunction with this Agreement constitute payment and delivery to and receipt by
evidences indebtedness and not payment. Debtor of all such proceeds.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
INSURANCE: Physical damage insurance covering the equipment is required. Debtor
can furnish this insurance through an agent or broker of Debtor's choice. Debtor
hereby authorizes Secured Party and any assignee to release to any insurance
company affiliated with Secured Party or any assignee any information relating
to a contract or policy of insurance which is providing or may provide insurance
coverage against physical damage to the Equipment.
- --------------------------------------------------------------------------------
TOTAL AMOUNT: The Total Amount consists of $_______________ of principal and
precomputed interest in the amount of $__________ computed on the basis of
______% per annum on the assumption that all payments will be made on their
respective due dates.
DELINQUENCY: For each installment not paid when due, Debtor agrees to pay
Secured Party a delinquency charge calculated on the amount of such installment
at the rate of 1 1/2% per month for the period of the delinquency, or, at
Secured Party's option, 5% of such installment, provided that such a delinquency
charge is not prohibited by law, otherwise at the highest rate that Debtor can
legally obligate itself to pay and/or Secured Party can legally collect. Debtor
agrees to reimburse Secured Party immediately upon demand for any amount charged
to Secured Party by any depositary institution because a check, draft or other
order made or drawn by or for the benefit of Debtor is returned unpaid for any
reason. From and after acceleration, Debtor agrees to pay interest on all
amounts then owing at the rate of 1 1/2% per month, if not prohibited by law,
otherwise at the highest rate that Debtor can legally obligate itself to pay
and/or Secured Party can legally collect. If the implementation of any provision
of this Agreement would at any time raise the interest rate (whether before or
after accelerated delinquency charge above the lawful maximum, if any, in effect
from time to time under applicable state or federal laws for loans to borrowers,
for the purposes, and otherwise of the kind contemplated by this Agreement, then
such interest rate and/or delinquency charge will be the lawful maximum and any
excess amount inadvertently collected will be deemed to be a partial prepayment
of principal and applied or reapplied in that manner.
SECURITY INTEREST: To secure payment of the Total Amount and all of Debtor's
obligations under this Agreement or with respect to the Equipment Debtor hereby
grants to Secured Party a first priority security interest in the Equipment and
in all cash and non-cash proceeds thereof (the Equipment and any such proceeds
are herein called the "Collateral") regardless of any retaking and/or redelivery
of the Collateral to Debtor.
CROSS SECURITY: Debtor further grants to Secured Party a security interest in
the Collateral to secure the payment of all absolute and all contingent
obligations and liabilities of Debtor to Secured Party now existing or hereafter
arising, whether under this Agreement or under any other agreement and whether
due immediately or by assignment; provided, however, upon any assignment of this
Agreement by Secured Party, the assignee shall be deemed for the purpose of this
paragraph as the only party with a security interest in the Collateral.
<PAGE>
DELIVERY AND ACCEPTANCE OF EQUIPMENT
(Check Appropriate Box)
Debtor's obligations and liabilities to Secured party are absolute and
unconditional under all circumstances and regardless of any failure of operation
or Debtor's loss of possession of any item of Equipment or the cessation or
interruption of Debtor's business for any reason whatsoever.
[ ] On _____________, the Equipment being purchased with the proceeds of this
Agreement was delivered to Debtor with all installation and other work
necessary for the proper use of the Equipment completed at a location
agreed upon by Debtor; the Equipment was inspected by Debtor and found to
be in satisfactory condition in all respects and delivery was
unconditionally accepted by Debtor.
[ ] The Equipment being purchased with the proceeds of this Agreement has not
yet been delivered to or accepted by Debtor and, upon delivery, Debtor
agrees to execute such delivery and acceptance certificate as Secured Party
requires.
[ ] All of the Equipment was acquired by Debtor prior to the date hereof and
was previously delivered to and unconditionally accepted by Debtor.
ADDITIONAL TERMS AND ORAL AGREEMENTS: Debtor and Secured Party agree that the
"Statement of Additional Terms" contained on the reverse side of this Agreement
constitutes a part of this Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Debtor's Social Security or Federal Taxpayer Identification Number is: _________
and Co-Debor's is: ____________
DATED: Debtor hereby acknowledges receipt of an
exact copy of this Agreement.
SECURED PARTY DEBTOR
By Title By Title
----------------------- ------- ----------------------- -------
(If corporation, authorized party (If corporation, authorized party must
must sign and show corporate title. sign and show corporate title. If
If partnership, a general partner partnership, a general partner must
must sign. If owner or partner, show sign. If owner(s) or partner, show
which.) which.)
- ---------------------------------------- By Title
(Street Address) --------------------- --------
(If co-buyer or co-officer, sign
here and show which.)
- ---------------------------------------- --------------------------------------
(City, State and Zip Code) (Street Address)
--------------------------------------
(City, COUNTY, State and Zip Code)
826374 Rev. 9-94
Comm'l Direct Loan - Various States
(Precomputed-R.D.)
(O642D)
WARRANT AGREEMENT
-------------------------
MULTI-LINK TELECOMMUNICATIONS, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
WARRANT AGENT
_________________, 1999
<PAGE>
WARRANT AGREEMENT
THIS AGREEMENT dated as of _______________, 1999, between MULTI-LINK
TELECOMMUNICATIONS, INC., a Colorado corporation (the "Company"), and AMERICAN
SECURITIES TRANSFER & TRUST, INC., a transfer agency located in Denver, Colorado
(the "Warrant Agent").
WHEREAS: The Company is conducting a public offering (the "Public
Offering") of 1,150,000 shares (the "Firm Shares") of Common Stock of the
Company ("Common Stock") and 1,150,000 warrants ("Firm Warrants"), two Warrants
entitling the Registered Owner thereof to purchase one share of Common Stock, or
an aggregate of 575,000 shares of Common Stock of the Company on exercise of all
Firm Warrants; and
The Company also is granting the several underwriters (the "Underwriters")
of the Company's Public Offering pursuant to an underwriting agreement (the
"Underwriting Agreement"), the option to purchase up to an additional 172,500
shares (the "Over-Allotment Shares") and 172,500 warrants (the "Over-Allotment
Warrants") exercisable to purchase up to an aggregate of 86,250 shares of Common
Stock; and
The Company desires to provide for the issuance, registration, transfer,
exchange and exercise of certificates (the "Warrant Certificates") representing
the Firm Warrants and the Over-Allotment Warrants (collectively, herein, the
"Warrants") and for the exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrant Certificates and the Warrants, and the respective rights and
obligations thereunder of the Company, the registered holders of the Warrant
Certificates and the Warrant Agent, the parties hereto agree as follows:
1. Definitions. As used herein:
(a) "Common Stock" shall mean Common Stock, of the Company, whether
now or hereafter authorized, holders of which have the right to participate
in the distribution of earnings and assets of the Company without limit as
to amount or percentage.
(b) "Corporate Office" shall mean the place of business of the Warrant
Agent (or its successor) located in Denver, Colorado, which office is
presently located at 1825 Lawrence Street, Denver, Colorado 80202.
(c) "Effective Date" shall mean ___________________, 1999, the date on
which the Company's Registration Statement is declared effective by the
Securities and Exchange Commission.
(d) "Exercise Date" shall mean the date of surrender for exercise of
any Warrant Certificate, provided the exercise form on the back of the
Warrant Certificate or a form substantially similar thereto has been
completed in full by the Registered Owner or a duly appointed attorney and
the Warrant Certificate is accompanied by payment in full of the Exercise
Price.
(e) "Exercise Period" shall mean the period commencing on the
Effective Date and extending to and through the Expiration Date.
(f) "Exercise Price" shall mean a purchase price of $9.00 per share of
Common Stock (150% of the offering price for one Firm Share); provided,
however, that in the event the Company reduces the Exercise Price in
accordance with Section 9(i) hereof, the Exercise Price shall be as
established by the Company in accordance with such Section.
<PAGE>
(g) "Expiration Date" shall mean 5:00 P.M. Mountain Time on the last
day of the 3 year period commencing on the Effective Date, subject to the
terms provided in Section 5 herein for redemption; provided however, if
such date shall be a holiday or a day on which banks are authorized to
close, then Expiration Date shall mean 5:00 p.m., Mountain Time on the next
following day which in the State of Colorado is not a holiday or a day on
which banks are authorized to close. If the Company redeems the Warrants as
provided in Section 5 of this Agreement, the Expiration Date shall be the
date fixed for redemption.
(h) "Firm Warrants" shall mean 1,150,000 Warrants to purchase 575,000
shares of Common Stock, all of which will be purchased by the several
Underwriters from the Company and sold in the Public Offering in accordance
with the Underwriting Agreement.
(i) "Over-Allotment Warrants" shall mean 172,500 Warrants to purchase
86,250 shares of Common Stock, any or all of which may be purchased by the
Representative for the several Underwriters from the Company in accordance
with the Underwriting Agreement. The Over-Allotment Warrants shall have
identical terms and conditions to those established for the Firm Warrants,
subject to their issuance in accordance with Section 2 hereof.
(j) "Representative" shall mean Schneider Securities, Inc., the
representative of the several Underwriters.
(k) "Registered Owner" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to Section 6 of this Agreement.
(l) "Registration Statement" shall mean the Company's Registration
Statement on Form SB-2 (S.E.C. File No. 333-____), as amended.
(m) "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
(n) "Warrant" or the "Warrants" shall mean and include up to 1,322,500
Warrants to purchase 661,250 authorized and unissued Shares of Common Stock
of the Company and, unless otherwise noted, shall include 1,150,000 Firm
Warrants and 172,500 Over-Allotment Warrants.
(o) "Warrant Agent" shall mean American Securities Transfer & Trust,
Inc., or its successor, as the transfer agent and registrar of the
Warrants.
(p) "Warrant Shares" shall mean and include up to 661,250 authorized
and unissued shares of Common Stock reserved for issuance on exercise of
the Warrants, and unless otherwise noted, shall include 575,000 shares of
Common Stock issuable upon exercise of the Firm Warrants and 86,250 shares
of Common Stock issuable upon exercise of the Over-Allotment Warrants and
any additional shares of Common Stock or other property which may hereafter
be issuable or deliverable on exercise of the Warrants pursuant to Section
9 of this Agreement.
2. Warrants and Issuance of Warrant Certificates. Each two Warrants shall
initially entitle the Registered Owner of the Warrant Certificates representing
such Warrants to purchase one share of Common Stock on exercise thereof, subject
to modification and adjustment as hereinafter provided in Section 9. Warrant
Certificates representing 1,150,000 Firm Warrants and evidencing the right to
purchase an aggregate of 575,000 shares of Common Stock of the Company shall be
executed by the proper officers of the Company and delivered to the Warrant
<PAGE>
Agent for countersignature. Certificates representing the Firm Warrants to be
delivered to the Warrant Agent shall be in direct relation to the Firm Shares
sold in the Company's Public Offering and shall be attached to certificates
representing an equal number of Firm Shares. The Warrant Certificates
representing the Firm Warrants will be issued and delivered on written order of
the Company signed by the proper officers of the Company. The Warrant Agent
shall deliver Warrant Certificates in required whole number denominations to the
persons entitled thereto in connection with any transfer or exchange permitted
under this Agreement.
The Over-Allotment Warrants shall carry identical terms and conditions to
those established for the Firm Warrants and outlined herein. Up to 172,500
Over-Allotment Warrants may be issued and such Over-Allotment Warrants shall
evidence the right of the Registered Owners thereof to purchase an aggregate of
up to 86,250 shares of Common Stock of the Company. Any Warrant Certificates for
Over-Allotment Warrants to be issued will be issued and delivered on written
order of the Company signed by the proper officers of the Company on exercise of
the option to purchase Over-Allotment Warrants by the several Underwriters in
accordance with the Underwriting Agreement. Certificates representing
Over-Allotment Warrants will be initially attached to certificates representing
an equal number of Over-Allotment Shares.
Except as provided in Section 8 hereof, share certificates representing the
Warrant Shares shall be issued only on or after the Exercise Date on exercise of
the Warrants or on transfer or exchange of the Warrant Shares. The Warrant
Agent, if other than the Company's Transfer Agent, shall arrange with the
Transfer Agent for the issuance and registration of all Warrant Shares.
3. Form and Execution of Warrant Certificates. The Warrant Certificates
shall be substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement.
The Warrant Certificates shall be dated as of the date of issuance, whether on
initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or
destroyed Warrant Certificates.
Each Warrant Certificate for Firm Warrants shall be initially issued only
when attached to a certificate representing an equal number of Firm Shares of
Common Stock as Firm Warrants and shall be separately transferable from the
certificate representing Firm Shares immediately upon issuance. Warrant
Certificates issued for Over-Allotment Warrants shall be issued together with
certificates representing an equal number of shares of Common Stock as
Over-Allotment Warrants.
The Warrant Certificates shall be executed on behalf of the Company by its
duly authorized officers, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the Company's
seal. The Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. In the
event any officer of the Company who executed the Warrant Certificates shall
cease to be an officer of the Company before the date of issuance of the Warrant
Certificates or before countersignature and delivery by the Warrant Agent, such
Warrant Certificates may be countersigned, issued and delivered by the Warrant
Agent with the same force and effect as though the person who signed such
Warrant Certificates had not ceased to be an officer of the Company.
4. Exercise. The exercise of Warrants in accordance with this Agreement
shall only be permitted during the Exercise Period.
Warrants shall be deemed to have been exercised immediately prior to the
close of business on the Exercise Date. The exercise form shall be executed by
the Registered Owner thereof or the Registered Owner's attorney duly authorized
in writing and shall be delivered together with payment to the Warrant Agent, in
cash or by official bank or certified check, of an amount in lawful money of the
United States of America. Such payment shall be in an amount equal to the
Exercise Price as hereinabove defined.
<PAGE>
The person entitled to receive the number of Warrant Shares deliverable on
such exercise shall be treated for all purposes as the Registered Owner of such
Warrant Shares as of the close of business on the Exercise Date. The Company
shall not be obligated to issue any fractional share interests in Warrant
Shares. If Warrants represented by more than one Warrant Certificate shall be
exercised at one time by the same Registered Owner, the number of full Warrant
Shares which shall be issuable on exercise thereof shall be computed on the
basis of the aggregate number of full Warrant Shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued and
delivered by the Transfer Agent to the person or persons entitled to receive the
same, a certificate or certificates for the number of Warrant Shares deliverable
on such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent shall
promptly notify the Company in writing of any exercise and of the number of
Warrant Shares caused to be delivered and shall cause payment of an amount in
cash equal to the Exercise Price to be made promptly to the order of the
Company. The parties contemplate such payments will be made by the Warrant Agent
to the Company on a weekly basis and will consist of collected funds only. The
Warrant Agent shall hold any proceeds collected and not yet paid to the Company
in a Federally-insured escrow account at a commercial bank selected by agreement
of the Company and the Warrant Agent, at all times relevant hereto. Following a
determination by the Warrant Agent that collected funds have been received, the
Warrant Agent shall cause the Transfer Agent to issue share certificates
representing the number of Warrant Shares purchased by the Registered Owner.
Expenses incurred by the Warrant Agent, including administrative costs, and
the standard fees imposed by the Warrant Agent for the Warrant Agent's services,
shall be paid by the Company and shall be deducted from the Escrow Account prior
to distribution of funds to the Company.
A detailed accounting statement setting forth the number of Warrants
exercised, the number of Warrant Shares issued, the net amount of exercised
funds and all expenses incurred by the Warrant Agent shall be transmitted to the
Company on payment of each exercise amount. Such accounting statement shall
serve as an interim accounting for the Company during the Exercise Period. The
Warrant Agent shall render to the Company, at the completion of the Exercise
Period, a complete accounting setting forth the number of Warrants exercised,
the identity of persons exercising such Warrants, the number of Warrant Shares
issued, the amounts distributed to the Company, and all expenses incurred by the
Warrant Agent.
The Company may be required to deliver a prospectus that satisfies the
requirements of Section 10 of the Securities Act of 1933, as amended (the "1933
Act") with delivery of the Warrant Shares and must have a registration statement
(or a post-effective amendment to an existing registration statement) effective
under the 1933 Act in order for the Company to comply with any such prospectus
delivery requirements. The Company will advise the Warrant Agent of the status
of any such registration statement under the 1933 Act and of the effectiveness
of the Company's registration statement or lapse of effectiveness.
No issuance of Warrant Shares shall be made unless there is an effective
registration statement under the 1933 Act, and registration or qualification of
the Warrant Shares, or an exemption therefrom, has been obtained from state or
other regulatory authorities in the jurisdiction in which such Warrant Shares
are sold. The Company will provide to the Warrant Agent written confirmation of
all such registration or qualification, or an exemption therefrom, when
requested by the Warrant Agent.
<PAGE>
5. Redemption. Commencing one year from the Effective Date, the Company
may, at its option, redeem the Warrants in whole, but not in part, for a
redemption price of $.05 per Warrant, on not less than 30 days' notice to the
Registered Owners. The right to redeem the Warrants may be exercised by the
Company following such one year period and during the Exercise Period only in
the event (i) the closing bid price for Company's shares of Common Stock has
equaled or exceeded $11.25 (125% of the Warrant Exercise Price) for 20
consecutive trading days, (ii) any notice of the call for redemption is given
not more than five (5) business days after the conclusion of the 20 consecutive
trading days referred to in the foregoing (i), (iii) the Company has a
registration statement (or a post-effective amendment to an existing
registration statement) pertaining to the Warrant Shares effective with the
Securities and Exchange Commission, which registration statement would enable a
Registered Owner to exercise the Warrants, and (iv) the expiration of the 30 day
notice period is within the Exercise Period. In the event the Company exercises
its right to redeem the Warrants, the Expiration Date will be deemed to be, and
the Warrants will be exercisable until the close of business on, the date fixed
for redemption in such notice. If any Warrant called for redemption is not
exercised by such time, it will cease to be exercisable and the Registered Owner
thereof will be entitled only to the redemption price
6. Reservation of Shares and Payment of Taxes. The Company covenants that
it will at all times reserve and have available from its authorized shares of
Common Stock such number of shares of Common Stock as shall then be issuable on
exercise of all outstanding Warrants. The Company covenants that all Warrant
Shares issuable shall be duly and validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
The Registered Owner shall pay all documentary, stamp or similar taxes and
other government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be delivered in
a name other than the name of the Registered Owner of the Warrant Certificates,
no such delivery shall be made unless the person requesting the same has paid to
the Warrant Agent or Transfer Agent the amount of any such taxes or charges
incident thereto.
The Company will supply the Warrant Agent with blank Warrant Certificates,
so as to maintain an inventory satisfactory to the Warrant Agent. The Company
will file with the Warrant Agent a statement setting forth the name and address
of its Transfer Agent for Warrant Shares and of each successor Transfer Agent,
if any.
7. Registration of Transfer. The Warrant Certificates may be transferred in
whole or in part and may be separately transferred from the Common Stock share
certificate to which such Warrant Certificate is attached upon initial issuance,
if any, at any time during the Exercise Period. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its corporate office. The
Company shall execute and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the holder
making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its corporate office on
which Warrant Certificates and the transfer thereof shall be registered. On due
presentment for registration of transfer of any Warrant Certificate at such
office, the Company shall execute and the Warrant Agent shall issue and deliver
to the transferee or transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
All Warrant Certificates presented for registration of transfer or exercise
shall be duly endorsed or be accompanied by a written instrument or instruments
of transfer in form satisfactory to the Company and the Warrant Agent.
<PAGE>
Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may treat the Registered Owner of any Warrant
Certificate as the absolute owner thereof (notwithstanding any notations of
ownership or writing thereon made by anyone other than the Company or the
Warrant Agent) and the parties hereto shall not be affected by any notice to the
contrary.
8. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate, the Company shall execute and the Warrant
Agent shall countersign and deliver in lieu thereof, a new Warrant Certificate
representing an equal aggregate number of Warrants. In the case of loss, theft
or destruction of any Warrant Certificate, the Registered Owner requesting
issuance of a new Warrant Certificate shall be required to secure an indemnity
bond from an approved surety bonding company in favor of the Company and Warrant
Agent in an amount satisfactory to each of them. In the event a Warrant
Certificate is mutilated, such Certificate shall be surrendered and cancelled by
the Warrant Agent prior to delivery of a new Warrant Certificate. Applicants for
a substitute Warrant Certificate shall also comply with such other regulations
and pay such other reasonable charges as the Company may prescribe.
9. Adjustment of Exercise Price and Shares.
(a) If at any time prior to the expiration of the Warrants by their
terms or by exercise, the Company increases or decreases the number of its
issued and outstanding shares of Common Stock, or changes in any way the
rights and privileges of such shares of Common Stock, by means of (i) the
payment of a share dividend or the making of any other distribution on such
shares of Common Stock payable in its shares of Common Stock, (ii) a split
or subdivision of shares of Common Stock, or (iii) a consolidation or
combination of shares of Common Stock, then the Exercise Price in effect at
the time of such action and the number of Warrants required to purchase
each Warrant Share at that time shall be proportionately adjusted so that
the numbers, rights and privileges relating to the Warrant Shares then
purchasable upon the exercise of the Warrants shall be increased, decreased
or changed in like manner, for the same aggregate purchase price set forth
in the Warrants, as if the Warrant Shares purchasable upon the exercise of
the Warrants immediately prior to the event had been issued, outstanding,
fully paid and nonassessable at the time of that event. Any dividend paid
or distributed on the shares of Common Stock in shares of any other class
of shares of the Company or securities convertible into shares of Common
Stock shall be treated as a dividend paid in shares of Common Stock to the
extent shares of Common Stock are issuable on the payment or conversion
thereof.
(b) In the event, prior to the expiration of the Warrants by exercise
or by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding shares of Common Stock to shares without par
value or in the event of any other material change in the capital structure
of the Company or of any successor corporation by reason of any
reclassification, recapitalization or conveyance, prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby any
Registered Owner of the Warrants shall thereafter have the right to
purchase, on the basis and the terms and conditions specified in this
Agreement, in lieu of the Warrant Shares theretofore purchasable on the
exercise of any Warrant, such securities or assets as may be issued or
payable with respect to or in exchange for the number of Warrant Shares
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and in
any such event, the rights of any Registered Owner of a Warrant to any
adjustment in the number of Warrant Shares purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the Registered Owner becomes entitled
to purchase.
<PAGE>
(c) In the event the Company, at any time while the Warrants shall
remain unexpired and unexercised, shall sell all or substantially all of
its property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the Registered Owner of a Warrant may thereafter receive, on exercise
thereof, in lieu of each Warrant Share which the Registered Owner would
have been entitled to receive, the same kind and amount of any stock,
securities or assets as may be issuable, distributable or payable on any
such sale, dissolution, liquidation or winding up with respect to each
share of Common Stock of the Company; provided, however, that in the event
of any such sale, dissolution, liquidation or winding up, the right to
exercise the Warrants shall terminate on a date fixed by the Company, such
date to be not earlier than 5:00 P.M., Mountain Time, on the 30th day next
succeeding the date on which notice of such termination of the right to
exercise the Warrants has been given by mail to the Registered Owners
thereof at such addresses as may appear on the books of the Company.
(d) In the event prior to the expiration of the Warrants by exercise
or by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase its shares of
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) at the date of taking such
record, then, (i) the number of Warrant Shares purchasable pursuant to the
Warrants shall be redetermined as follows: the number of Warrant Shares
purchasable pursuant to a Warrant immediately prior to such adjustment
(taking into account fractional interests to the nearest 1,000th of a
share) shall be multiplied by a fraction, the numerator of which shall be
the number of shares of Common Stock of the Company outstanding (excluding
shares of Common Stock then owned by the Company) immediately prior to the
taking of such record, plus the number of additional shares offered for
purchase, and the denominator of which shall be the number of shares of
Common Stock of the Company outstanding (excluding shares of Common Stock
owned by the Company) immediately prior to the taking of such record, plus
the number of shares which the aggregate offering price of the total number
of additional shares so offered would purchase at such current market
price; and (ii) the Exercise Price per Warrant Share purchasable pursuant
to a Warrant shall be redetermined as follows: the Exercise Price in effect
immediately prior to the taking of such record shall be multiplied by a
fraction, the numerator of which is the number of Warrant Shares
purchasable immediately prior to the taking of such record, and the
denominator of which is the number of Warrant Shares purchasable
immediately after the taking of such record as determined pursuant to
clause (i) above; provided, however, (i) that any adjustment in the number
of shares issuable as set forth above shall be effective only to the extent
sufficient shares of Common Stock have bee registered through a
registration statement effective under the 1933 Act, and (ii) that any
adjustment in the Exercise Price does not cause the Company to receive
proceeds in excess of the amount authorized by any such registration
statement. For the purpose hereof, the current market price per share at
any date shall be determined as follows:
(i) If the Common Stock is listed on the New York Stock Exchange,
the American Stock Exchange or such other securities exchange
designated by the Board of Directors of the Company, or admitted to
unlisted trading privileges on any such exchange, or if the Common
Stock is quoted on a National Association of Securities Dealers, Inc.
system that reports closing prices, the current market price shall be
the average of the closing prices of the Common Stock as reported by
such exchange or system for 10 consecutive business days commencing 30
business days prior to the record date;
<PAGE>
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or so quoted, the current market price shall be the
average of the last reported highest bid and the lowest asked prices
quoted on the National Association of Securities Dealers, Inc.
Automated Quotations System or, if not so quoted, then by the National
Quotation Bureau, Inc. for 10 consecutive business days commencing 30
business days prior to the record date; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges or so quoted, and bid and asked prices are
not reported, the current market price shall be determined in such
reasonable manner as may be prescribed by the Board of Directors.
(e) On exercise of the Warrants by the Registered Owners, the Company
shall not be required to deliver fractions of Warrant Shares; provided,
however, that the Company shall make prompt, proportionate, equitable,
lawful and adequate provisions in respect of any such fraction of one
Warrant Share either on the basis of adjustment in the then applicable
Exercise Price or a purchase of the fractional interest at the price of the
Company's shares of Common Stock or such other reasonable basis as the
Company may determine.
(f) In the event, prior to expiration of the Warrants by exercise or
by their terms, the Company shall determine to take a record of the holders
of its shares of Common Stock for the purpose of determining shareholders
entitled to receive any stock dividend, distribution or other right which
will cause any change or adjustment in the number, amount, price or nature
of the shares of Common Stock or other stock, securities or assets
deliverable on exercise of the Warrants pursuant to the foregoing
provisions, the Company shall give to the Registered Owners of the Warrants
at the addresses as may appear on the books of the Company at least 30
days' prior written notice to the effect that it intends to take such a
record. Such notice shall specify the date as of which such record is to be
taken; the purpose for which such record is to be taken; and the number,
amount, price and nature of the shares of Common Stock or other stock,
securities or assets which will be deliverable o exercise of the Warrants
after the action for which such record will be taken has been completed.
Without limiting the obligation of the Company to provide notice to the
Registered Owners of the Warrants of any corporate action hereunder, the
failure of the Company to give notice shall not invalidate such corporate
action of the Company.
(g) The Warrants shall not entitle the Registered Owner thereof to any
of the rights of shareholders or to any dividend declared on the shares of
Common Stock unless the Warrant is exercised and the Warrant Shares
purchased prior to the record date fixed by the Board of Directors of the
Company for the determination of holders of shares of Common Stock entitled
to such dividend or other right.
(h) On and after ____________, 2000, the Company shall be empowered,
in the sole and unconditional discretion of the Board of Directors, at any
time during the Exercise Period, to reduce the applicable Exercise Price of
the Warrants. Prior to _____________, 2000, the Company may reduce the
applicable Exercise Price of the Warrants only with the prior written
consent of the Representative. Any reduction in the applicable Exercise
Price shall be effective upon written notice to the Warrant Agent, which
notice shall be given pursuant to a duly and validly authorized resolution
of the Board of Directors of the Company. Any such reduction in the
Exercise Price shall not entitle the Registered Owners to issuance of any
additional Common Shares pursuant to the adjustment provisions set forth
elsewhere herein, regardless of whether the reduction in the Exercise Price
was effected either prior to or following exercise of Warrants by the
Registered Owners thereof. A nonexercising Registered Owner shall have no
remedy or rights to receive any additional Warrant Shares as a result of
any reduction in any applicable Exercise Price pursuant to this subsection.
<PAGE>
10. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not, by issuing and delivering Warrant Certificates or by
any other act hereunder, be deemed to make any representations as to the
validity, value or authorization of the Warrant Certificate or the Warrants
represented thereby or of the Warrant Shares or other property delivered on
exercise of any Warrant. The Warrant Agent shall not be under any duty or
responsibility to any holder of the Warrant Certificates to make or cause to be
made any adjustment of the Exercise Price or to determine whether any fact
exists which may require any such adjustment.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance on
any Warrant Certificate or other document or instrument believed by it in good
faith to be genuine and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement or
in the Warrant Certificates, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in accordance
with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Company shall be sufficiently evidenced by an instrument signed by an
officer of the Company. The Warrant Agent shall not be liable for any action
taken or omitted by it in accordance with such notice, statement, instruction,
request, direction, order or demand.
The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse the Warrant Agent for its reasonable
expenses. The Company further agrees to indemnify the Warrant Agent against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for any action taken or omitted by the Warrant Agent in the execution of
its duties and powers hereunder, excepting losses, expenses and liabilities
arising as a result of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further duties
and liabilities hereunder (except liabilities arising as a result of the Warrant
Agent's own negligence or willful misconduct) on 30 days' prior written notice
to the other party. Upon notice by the Company to the Warrant Agent, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Owner of each Warrant Certificate. The expenses the Warrant Agent
incurs in mailing such notice shall be paid by the Company. On such resignation
or termination, the Company shall appoint a new Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of the resignation by the Warrant Agent, then the Registered
Owner of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any new Warrant Agent,
whether appointed by the Company or by such court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report to
its shareholders, of not less than $1,000,000, and having its principal office
in the United States.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; provided, however, if it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed. The
Company shall file a notice of appointment of a new Warrant Agent with the
resigning Warrant Agent and shall forthwith cause a copy of such notice to be
mailed to the Registered Owner of each Warrant Certificate.
<PAGE>
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation to
which the Warrant Agent or any new Warrant Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent
shall be a successor Warrant Agent under this Agreement, provided that such
corporation is eligible for appointment as a successor to the Warrant Agent. Any
such successor Warrant Agent shall promptly cause notice of its succession as
Warrant Agent to be mailed to the Company and to the Registered Owner of each
Warrant Certificate. No further action shall be required for establishment and
authorization of such successor Warrant Agent.
The Warrant Agent, its officers or directors and it subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the Company and
otherwise deal with the Company in the same manner and to the same extent and
with like effect as though it were not the Warrant Agent. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company.
11. Modification of Agreement. The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this Agreement they
shall deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or mistake or error herein contained. Additionally, the
parties may make any changes or corrections deemed necessary which shall not
adversely affect the interests of the Registered Owners of Warrant Certificates;
provided, however, this Agreement shall not otherwise be modified, supplemented
or altered in any respect except with the consent in writing of the Registered
Owners of Warrant Certificates representing not less than a majority of the
Warrants outstanding. Additionally, no change in the number or nature of the
Warrant Shares purchasable on exercise of a Warrant or the Exercise Price
therefor shall be made without the consent in writing of the Registered Owner of
the Warrant Certificate representing such Warrant, other than such changes as
are specifically prescribed by this Agreement.
12. Notices. All notices, demands, elections, opinions or requests (however
characterized or described) required or authorized hereunder shall be deemed
given sufficiently in writing and sent by registered or certified mail, return
receipt requested and postage prepaid, or by tested telex, telegram or cable to:
in the case of the Company:
Multi-Link Telecommunications, Inc.
and in the case of the Warrant Agent:
American Securities Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, Colorado 80202
with a copy to:
Thomas S. Smith, Esq.
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
and, if requested by the Company to the Registered Owner of a Warrant
Certificate, at the address of such Registered Owner as set forth on the books
maintained by the Warrant Agent.
<PAGE>
13. Persons Benefiting. This Agreement shall be binding upon and inure to
the benefit of the Company, the Warrant Agent and their respective successors
and assigns, and the Registered Owners and beneficial owners from time to time
of the Warrant Certificates. Nothing in this Agreement is intended or shall be
construed to confer on any other person any right, remedy or claim or to impose
on any other person any duty, liability or obligation.
14. Further Instruments. The parties shall execute and deliver any and all
such other instruments and shall take any and all such other actions as may be
reasonable or necessary to carry out the intention of this Agreement.
15. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or inoperative for
any reason by any court of competent jurisdiction, government authority or
otherwise, such holding, declaration or pronouncement shall not affect adversely
any other provision of this Agreement, which shall otherwise remain in full
force and effect and be enforced in accordance with its terms, and the effect of
such holding, declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
16. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies as
provided by law. No delay or failure on the part of either party in the exercise
of any right or remedy arising from a breach of this Agreement shall operate as
a waiver of any subsequent right or remedy arising from a subsequent breach of
this Agreement. The consent of any party where required hereunder to any act or
occurrence shall not be deemed to be a consent to any other action or
occurrence.
17. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Colorado. Except as
otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be modified or
amended or any term or provision hereof waived or discharged except in writing
signed by the party against whom such amendment, modification, waiver or
discharge is sought to be enforced. The headings of this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning thereof. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above mentioned.
THE COMPANY:
MULTI-LINK TELECOMMUNICATIONS, INC.
(CORPORATE SEAL)
By: /s/ Nigel Alexander
-----------------------------------
Nigel Alexander, Managing Director
ATTEST:
/s/
- ---------------------------------------
, Secretary
THE WARRANT AGENT:
AMERICAN SECURITIES TRANSFER & TRUST,
INC.
By: /s/
------------------------------------
Title: /s/
----------------------------------
ATTEST:
/s/
- ----------------------------------------
, Secretary
CUSTODY AGREEMENT
CUSTODY AGREEMENT, effective as of the ___ day of ___________, 1999, by and
among certain of the shareholders (the "Shareholders or "Shareholder") of
MULTI-LINK TELECOMMUNICATIONS, INC., a Colorado corporation, (the "Company"),
SCHNEIDER SECURITIES, INC. (the "Representative") and AMERICAN SECURITIES
TRANSFER & TRUST, INC. (the "Custodian").
WHEREAS, the Shareholders are the record and beneficial owners of Common
Stock of the Company, as more fully reflected on Exhibit A hereto, all of which
are "restricted securities" as defined under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, the Company and the Representative of the several underwriters
(the "Underwriters") intend to enter into an Underwriting Agreement (the
"Underwriting Agreement"; certain terms used herein which are not defined herein
and which are defined in the Underwriting Agreement are used herein as therein
defined) pursuant to which the Company will sell in a public offering pursuant
to the registration provisions of the 1933 Act, shares of Common Stock (the
"Common Stock") and Warrants (the "Warrants");
WHEREAS, as a condition to closing the proposed initial public offering of
the Company (the "Offering"), the Representative has required the Shareholders
to deposit an aggregate of 200,000 shares of Common Stock owned by such
Shareholders in the Company in custody with the Custody Agreement (the
"Custodial Shares"); and
WHEREAS, the Shareholders wish to deposit the Custodial Shares in custody
in order to fulfill the requirements of the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, terms and conditions hereinafter set forth, the parties hereto hereby
agree as follows:
Section 1. Designation and Deposit of Custodial Shares.
a. The Custodial Shares of the Company to be deposited in custody
pursuant to this Agreement consist of 200,000 shares of Common Stock of the
Company and are owned of record as of __________, 1999 by the Shareholders
identified on Exhibit A attached hereto.
b. On or before the date on which the Securities and Commission
declares the Company's Registration Statement on SB-2 (Reg. No. 333-_____)
effective under the 1933 Act (the Effective Date"), the Shareholders shall
deliver to the Custodian any and all certificates representing the
Custodial Shares and a stock power endorsed in blank. Promptly after the
effective date of the Offering, the Custodian shall deliver a receipt
therefor and a new certificate representing each Shareholder's shares of
Common Stock not subject to this Custody Agreement.
1 Section 2. Title of Account. All certificates representing the Custodial
Shares delivered to the Custodian pursuant to this Agreement shall be deposited
on the Effective Date by the Custodian in an account designated substantially as
follows: "Multi-Link Telecommunications, Inc. Stock Certificate Account" (the
"Custody Account").
Section 3. Transfer of Custodial Shares During Custody Period.
a. During the Custody Period (hereinafter defined) none of the
Custodial Shares deposited in the Custody Account shall be sold, pledged,
hypothecated or otherwise transferred or delivered out of the Custody
Account except as follows:
<PAGE>
i. Transfers by operation of law occasioned by the death or
incapacity of the Shareholder shall be recorded upon presentation to
the Company by the personal representative or guardian of a deceased
or incapacitated Shareholder of appropriate documents regarding the
necessity for transfer and of which transfer the Company has notified
the Custodian and the Representative; or
ii. Transfers of ownership of certificates representing the
Custodial Shares, certificates for which have been deposited to the
Custody Account, shall remain subject to the restrictions imposed
hereby, including those persons, if any, who become holders, by any
means provided herein, of the Custody Shares during the Custody
Period.
Section 4. Duration of Custody Period.
a. The Custody Period shall commence on the Effective Date and shall
terminate on the earlier of the date on which all 200,000 shares have been
returned to the Shareholders pursuant to Sections 6(a), 6(b) or 6(c) below
or ________________, 2006.
b. This Agreement shall be of no force or effect in the event the
Underwriting Agreement is not executed on the Effective Date in accordance
with its terms.
Section 5. Receipt of Distributions and Dividends. During the term of the
Custody Period, if the Company issues any distributions, dividends, rights or
other property with respect to the Common Stock, then, in such event, the
Company shall be authorized to send evidence of such distributions, dividends,
rights or other property directly to the Custodian, which is hereby authorized
to hold and retain possession of all such evidences of distributions, dividends,
rights or other property until termination of the Custody Period in accordance
with Section 6 below. In the event the Custodial Shares are distributed to the
Shareholders pursuant to Sections 6(a), 6(b) or 6(c) below, then the Custodian
will distribute evidences of such distributions, dividends, rights, or other
property in the form the Custodian received such distributions, dividends,
rights or other property from the Company. In the event the Custody Period
terminates pursuant to Section 6(d) below, the Custodian is hereby authorized,
empowered and instructed to deliver all such evidences of distributions,
dividends, rights or other property to the Company, which is hereby authorized
to cancel the same on the books of the Company at the time of receipt thereof
from the Custodian. If the Company recapitalizes, splits or combines its shares,
such shares shall be substituted, on a pro rata basis for the Custodial Shares.
Section 6. Release and Delivery of Custodial Shares.
a. In the event the Custodian receives written advice from the
Representative and the Company confirming the Company had net income of
$0.75 per share of Common Stock and a bid price of at least $15.00 per
share for the year ended and as of September 31, 2000, respectively, the
Custodian shall return to each Shareholder a certificate for his or her pro
rata share of the Custodial Shares. The Custodian shall return each
certificate only to the person named as the holder of record in Exhibit A
hereto, as modified by any transfers made pursuant to Section 3 above.
b. In the event the Custodian receives written advice from the
Representative and the Company confirming the Company had net income of
$1.25 per share of Common Stock and a bid price of at least $25.00 per
share for the year ended and as of September 30, 2001, respectively, the
Custodian shall return to each Shareholder a certificate for his or her pro
rata share of the Custodial Shares. The Custodian shall return each
certificate only to the person named as the holder of record in Exhibit A
hereto, as modified by any transfers made pursuant to Section 3 above.
<PAGE>
c. In the event the Custodian receives written advice from the
Representative and the Company confirming that the Company has been merged
or consolidated with another company which is the survivor to the
transaction, or that the Company has sold all or substantially all of its
assets and the relevant transaction was approved by the holders of a
majority of the Company's outstanding voting securities exclusive of any
such securities held by any party to this Agreement, the Custodian shall
immediately prior to the closing of any such transaction return to each
Shareholder a certificate for his or her pro rata share of the Custodial
Shares. The Custodian shall return each certificate only to the person
named as the holder of record in Exhibit A hereto, as modified by any
transfers made pursuant to Section 3 above.
d. In the event none of the criteria for release specified in
subparagraphs (a), (b) or (c) above is not reached by the Company, the
Custodial Shares shall remain in the Custody Account until _____________,
2006. Upon termination of the Custody Period pursuant to the provisions of
this Section 6(d), the Custodian shall, as promptly as possible, return to
each Shareholder a certificate for his or her pro rata share of the
Custodial Shares remaining in the Custody Account by means of registered
mail, return receipt requested. The Custodian shall return each certificate
only to the person named as the holder of record in Exhibit A hereto, as
modified by any transfers made pursuant to Section 3 above.
e. At such time as the Custodian shall have returned all certificates
as provided in this Section, the Custodian shall be discharged completely
and released from any and all further liabilities and responsibilities
under this Agreement.
f. The determination of net income per share achieved by the Company
in the periods described above shall be solely the responsibility of the
Company and the Representative, and the Custodian shall have no liability
or responsibility therefor. The Company and the Representative agree that
the determination of net income per share shall include the effect of any
extraordinary items but shall not be based on fully diluted net income per
share. Further, the Company and the Representative agree that any expense
or charge to earnings incurred by the Company as a result of the release of
the Custodial Shares to the Shareholders will be excluded from the
calculation of whether the Company achieved or exceeded the net income
targets. The determination of net income will be made in accordance with
generally accepted accounting principles and will be based upon the audited
financial statements of the Company.
Section 7. Voting Rights. During the Custody Period, the Shareholder, or
any transferee receiving all or a portion of the Custody Shares pursuant to
Section 3 herein, shall have the right to vote the Custodial Shares in the
Custodial Account at any and all shareholder meetings without restriction.
Section 8. Limitation of Liability of Custodian. In acting pursuant to this
Agreement, the Custodian shall be protected fully in every reasonable exercise
of its discretion and shall have no obligation hereunder to either the
Shareholders or to any other party except as expressly set forth herein. In
performing any of its duties hereunder, the Custodian shall not incur any
liability to any person for any damages, losses or expenses, except for willful
default or negligence and it shall, accordingly, not incur any such liability
with respect to (1) any action taken or omitted in good faith upon advice of its
counsel, counsel for the Company or counsel for the Representative given with
respect to any question relating to the duties and responsibilities of the
Custodian under this Agreement, and (2) any action taken or omitted in reliance
upon any instrument, including written notices provided for herein, not only to
its due execution and validity and effectiveness of its provisions, but also to
the truth and accuracy of any information contained therein, which the Custodian
shall in good faith believe to be genuine, to have been signed and presented by
a proper person or persons and to be in compliance with the provisions of this
Agreement.
<PAGE>
Section 9. Indemnification. The Company, the Representative and the
Shareholders shall indemnify and hold harmless the Custodian against any and all
losses, claims, damages, liabilities and expenses, including reasonable costs of
investigation and counsel fees and disbursements, which may be imposed upon the
Custodian or incurred by the Custodian in connection with its acceptance of
appointment as Custodian or the performance of its duties hereunder, including
any litigation arising from this Agreement or involving the subject matter
hereof.
Section 10. Payment of Fees. The Company shall be responsible for all
reasonable fees and expenses of the Custodian incurred by it in the course of
performing hereunder.
Section 11. Change of Custodian. In the event the Custodian notifies the
Company and the Representative that its acceptance of the duties of Custodian
has been terminated by the Custodian, or in the event the Custodian files for
protection under the United States Bankruptcy Code or is liquidated or ceases
operations for any reason, the Company and the Representative shall have the
right to jointly designate a replacement Custodian who shall succeed to the
rights and duties of the Custodian hereunder. Any such replacement Custodian
shall be a trust or stock transfer company experienced in stock transfer, escrow
and related matters and shall have a minimum net worth of $1 million. Upon
appointment of such successor Custodian, the Custodian shall be discharged from
all duties and responsibilities hereunder.
Section 12. Notices. All notices, demands or requests required or
authorized hereunder shall be deemed given sufficiently if in writing and sent
by registered mail or certified mail, return receipt requested and postage
prepaid, or by telex, telegram or cable to, in the case of the Shareholder, the
address as set forth in the records of the Custodian:
In the case of the Representative to:
Schneider Securities, Inc.
The Chancery
1120 Lincoln Street, Suite 900
Denver, Colorado 80203
Attention: Thomas J. O'Rourke, President
With a copy to (which shall not constitute notice):
Robert W. Walter, Esq.
Berliner Zisser Walter & Gallegos, P.C.
One Norwest Center, Suite 4700
1700 Lincoln Street
Denver, Colorado 80203-4547
In the case of the Custodian to:
American Securities Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, Colorado 80202-1817
<PAGE>
In the case of the Company to:
Multi-Link Telecommunications, Inc.
With a copy to (which shall not constitute notice):
Thomas S. Smith, Esq.
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
In the case of the Shareholders to:
Nigel V. Alexander
1615 Osceola Street
Denver, Colorado 80204
and
Shawn B. Stickle
401 South Ingalls
Lakewood, Colorado 80226
Section 13. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same Agreement. Facsimile signatures shall be accepted by the
parties hereto as original signatures for all purposes.
Section 14. Governing Law. The validity, interpretation and construction of
this Agreement and of each part hereof shall be governed by the laws of the
State of Colorado.
<PAGE>
IN WITNESS WHEREOF, the Shareholders, the Company, the Representative and
the Custodian have executed this Custody Agreement to be effective as of the day
and year first above written.
AMERICAN SECURITIES TRANSFER & TRUST,
INC.
By:
-----------------------------------
Title:
--------------------------------
MULTI-LINK TELECOMMUNICATIONS, INC.
By:
-----------------------------------
Title:
--------------------------------
SCHNEIDER SECURITIES, INC.
By:
-----------------------------------
Title:
--------------------------------
THE SHAREHOLDERS:
By: /s/ Nigel V. Alexander
-----------------------------------
Nigel V. Alexander
By: /s/ Shawn B. Stickle
-----------------------------------
Shawn B. Stickle
<PAGE>
EXHIBIT A
TO CUSTODY AGREEMENT
Name Total Shares
- ---- ------------
Nigel V. Alexander 100,000
Shawn B. Stickle 100,000
1% to 5% Shareholders
LOCK-UP AGREEMENT
January __, 1999
Schneider Securities, Inc.
1120 Lincoln Street, Suite 900
Denver, Colorado 80203
Ladies and Gentlemen:
The undersigned understands that Schneider Securities, Inc. (the
"Representative") proposes to enter into an Underwriting Agreement with
Multi-Link Telecommunications, Inc., a Colorado corporation (the "Company"),
providing for the public offering of shares of common stock and/or common stock
purchase warrants of the Company (the "Securities") pursuant to a Registration
Statement on Form SB-2 (the "Registration Statement") to be filed with the
Securities and Exchange Commission. The date the Registration Statement is
declared effective by the Securities and Exchange Commission is hereinafter
referred to as the "Effective Date." The term "Common Stock" hereinafter means
the Common Stock of the Company.
In consideration of the agreement by the Representative to offer and sell
the Securities in the public offering and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees that he, she or it will not, directly or indirectly, for a
period of 13 months from the Effective Date, sell, offer to sell, contract to
sell, grant any option for the sale of, grant any security interest in, pledge,
hypothecate, or otherwise sell or dispose of any of the Common Stock, or any
options or warrants to purchase any Common Stock, or any securities convertible
into or exchangeable for Common Stock, or any Common Stock issuable or issued
upon exercise of any options or warrants, or any interest in such securities or
rights, owned directly by the undersigned or with respect to which the
undersigned has the power of disposition, in any such case whether now owned or
hereafter acquired at any time prior to the Effective Date, other than (i) in a
nonpublic transaction that is exempt from the registration requirements of the
Securities Act of 1933, as amended, if the transferee agrees, as a condition to
such transfer, to be bound by the restrictions contained herein and if the
undersigned (except in the case of the undersigned's death) continues to be
deemed the beneficial owner of the securities being transferred in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, or (ii) with the prior written consent of the Representative. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of any of
the Common Stock and any of the other securities of the Company described above
that are held by the undersigned except in compliance with the foregoing
restrictions. The Representative may, in its sole discretion without notice,
release all or any portion of the securities subject to this Lock-Up Agreement
or any similar agreement executed by any other security holder and, if the
Representative releases any securities of any other security holder, the
securities of the undersigned shall not be entitled to be released from this
Lock-Up Agreement.
<PAGE>
Schneider Securities, Inc.
January ___, 1999
Page 2
The undersigned further agrees that he, she or it shall not enter into any
swap or other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of any Common Stock owned by the
undersigned prior to the Effective Date for a period of 13 months from the
Effective Date without the prior written consent of the Representative.
The undersigned further agrees that for a period of three (3) years from
the Effective Date, all public sales of the Company's Common Stock by the
undersigned shall be effected through or with the Representative on an exclusive
basis, provided that the Representative offers the best price reasonably
available to the undersigned. In addition, for a period of three years
commencing two years from the Effective Date in the case of private transactions
in the Company's Common Stock, the undersigned shall offer the Representative
the exclusive opportunity to purchase or sell the Common Stock on terms at least
as favorable as the undersigned can obtain elsewhere. If the Representative
fails to accept in writing any such proposal for sale within three (3) business
days after receipt of a notice containing such proposal, then the Representative
shall have no claim or right with respect to any such sales contained in such
notice. If, thereafter, such proposal is modified in any material respect, the
undersigned shall adopt the same procedure as with respect to the original
proposal. Public or private sales of Common Stock by the undersigned shall not
include gifts, intra-family transfers or transfers for estate planning purposes,
which shall be exempt from the provisions of this paragraph only.
The undersigned further agrees that any rights that the undersigned may
have to cause the Company to register with the Securities and Exchange
Commission any Common Stock or any other securities of the Company are waived
until a date that is 13 months from the Effective Date.
The undersigned understands that the Company and the Representative will
undertake the public offering in reliance upon this Lock-Up Agreement which
shall only become effective on the Effective Date.
Very truly yours,
By:
-------------------------------
Print Name:
-----------------------
<PAGE>
Less than 1% Shareholders
LOCK-UP AGREEMENT
January __, 1999
Schneider Securities, Inc.
1120 Lincoln Street, Suite 900
Denver, Colorado 80203
Ladies and Gentlemen:
The undersigned understands that Schneider Securities, Inc. (the
"Representative") proposes to enter into an Underwriting Agreement with
Multi-Link Telecommunications, Inc., a Colorado corporation (the "Company"),
providing for the public offering of shares of common stock and/or common stock
purchase warrants of the Company (the "Securities") pursuant to a Registration
Statement on Form SB-2 (the "Registration Statement") to be filed with the
Securities and Exchange Commission. The date the Registration Statement is
declared effective by the Securities and Exchange Commission is hereinafter
referred to as the "Effective Date." The term "Common Stock" hereinafter means
the Common Stock of the Company.
In consideration of the agreement by the Representative to offer and sell
the Securities in the public offering and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees that he, she or it will not, directly or indirectly, for a
period of 12 months from the Effective Date, sell, offer to sell, contract to
sell, grant any option for the sale of, grant any security interest in, pledge,
hypothecate, or otherwise sell or dispose of any of the Common Stock, or any
options or warrants to purchase any Common Stock, or any securities convertible
into or exchangeable for Common Stock, or any Common Stock issuable or issued
upon exercise of any options or warrants, or any interest in such securities or
rights, owned directly by the undersigned or with respect to which the
undersigned has the power of disposition, in any such case whether now owned or
hereafter acquired at any time prior to the Effective Date, other than (i) in a
nonpublic transaction that is exempt from the registration requirements of the
Securities Act of 1933, as amended, if the transferee agrees, as a condition to
such transfer, to be bound by the restrictions contained herein and if the
undersigned (except in the case of the undersigned's death) continues to be
deemed the beneficial owner of the securities being transferred in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, or (ii) with the prior written consent of the Representative. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of any of
the Common Stock and any of the other securities of the Company described above
that are held by the undersigned except in compliance with the foregoing
restrictions. The Representative may, in its sole discretion without notice,
release all or any portion of the securities subject to this Lock-Up Agreement
or any similar agreement executed by any other security holder and, if the
Representative releases any securities of any other security holder, the
securities of the undersigned shall not be entitled to be released from this
Lock-Up Agreement.
The undersigned further agrees that he, she or it shall not enter into any
swap or other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of any Common Stock owned by the
undersigned prior to the Effective Date for a period of 12 months from the
Effective Date without the prior written consent of the Representative.
<PAGE>
Schneider Securities, Inc.
January ___, 1999
Page 1
The undersigned further agrees that for a period of three (3) years from
the Effective Date, all public sales of the Company's Common Stock by the
undersigned shall be effected through or with the Representative on an exclusive
basis, provided that the Representative offers the best price reasonably
available to the undersigned. In addition, for a period of three years
commencing two years from the Effective Date in the case of private transactions
in the Company's Common Stock, the undersigned shall offer the Representative
the exclusive opportunity to purchase or sell the Common Stock on terms at least
as favorable as the undersigned can obtain elsewhere. If the Representative
fails to accept in writing any such proposal for sale within three (3) business
days after receipt of a notice containing such proposal, then the Representative
shall have no claim or right with respect to any such sales contained in such
notice. If, thereafter, such proposal is modified in any material respect, the
undersigned shall adopt the same procedure as with respect to the original
proposal. Public or private sales of Common Stock by the undersigned shall not
include gifts, intra-family transfers or transfers for estate planning purposes,
which shall be exempt from the provisions of this paragraph only.
The undersigned further agrees that any rights that the undersigned may
have to cause the Company to register with the Securities and Exchange
Commission any Common Stock or any other securities of the Company are waived
until a date that is 12 months from the Effective Date.
The undersigned understands that the Company and the Representative will
undertake the public offering in reliance upon this Lock-Up Agreement which
shall only become effective on the Effective Date.
Very truly yours,
By:
-------------------------------
Print Name:
<PAGE>
Officers, Directors and
5% or more Shareholders
LOCK-UP AGREEMENT
January __, 1999
Schneider Securities, Inc.
1120 Lincoln Street, Suite 900
Denver, Colorado 80203
Ladies and Gentlemen:
The undersigned understands that Schneider Securities, Inc. (the
"Representative") proposes to enter into an Underwriting Agreement with
Multi-Link Telecommunications, Inc., a Colorado corporation (the "Company"),
providing for the public offering of shares of common stock and/or common stock
purchase warrants of the Company (the "Securities") pursuant to a Registration
Statement on Form SB-2 (the "Registration Statement") to be filed with the
Securities and Exchange Commission. The date the Registration Statement is
declared effective by the Securities and Exchange Commission is hereinafter
referred to as the "Effective Date." The term "Common Stock" hereinafter means
the Common Stock of the Company.
In consideration of the agreement by the Representative to offer and sell
the Securities in the public offering and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees that he, she or it will not, directly or indirectly, for a
period of 13 months from the Effective Date, sell, offer to sell, contract to
sell, grant any option for the sale of, grant any security interest in, pledge,
hypothecate, or otherwise sell or dispose of any of the Common Stock, or any
options or warrants to purchase any Common Stock, or any securities convertible
into or exchangeable for Common Stock, or any Common Stock issuable or issued
upon exercise of any options or warrants, or any interest in such securities or
rights, owned directly by the undersigned or with respect to which the
undersigned has the power of disposition, in any such case whether now owned or
hereafter acquired at any time prior to the Effective Date, other than (i) in a
nonpublic transaction that is exempt from the registration requirements of the
Securities Act of 1933, as amended, if the transferee agrees, as a condition to
such transfer, to be bound by the restrictions contained herein and if the
undersigned (except in the case of the undersigned's death) continues to be
deemed the beneficial owner of the securities being transferred in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, or (ii) with the prior written consent of the Representative. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of any of
the Common Stock and any of the other securities of the Company described above
that are held by the undersigned except in compliance with the foregoing
restrictions. The Representative may, in its sole discretion without notice,
release all or any portion of the securities subject to this Lock-Up Agreement
or any similar agreement executed by any other security holder and, if the
Representative releases any securities of any other security holder, the
securities of the undersigned shall not be entitled to be released from this
Lock-Up Agreement.
<PAGE>
Schneider Securities, Inc.
January ___, 1999
Page 1
The undersigned further agrees that he, she or it shall not enter into any
swap or other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of any Common Stock owned by the
undersigned prior to the Effective Date for a period of 13 months from the
Effective Date without the prior written consent of the Representative.
In addition, the undersigned agrees that he, she or it will not sell,
pledge, hypothecate or otherwise dispose of Common Stock or any of the other
securities of the Company the undersigned owns prior to the Effective Date of
the Registration Statement pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, during such 13-month period without the
prior written consent of the Representative.
The undersigned further agrees that for a period of three (3) years from
the Effective Date, all public sales of the Company's Common Stock by the
undersigned shall be effected through or with the Representative on an exclusive
basis, provided that the Representative offers the best price reasonably
available to the undersigned. In addition, for a period of three years
commencing two years from the Effective Date in the case of private transactions
in the Company's Common Stock, the undersigned shall offer the Representative
the exclusive opportunity to purchase or sell the Common Stock on terms at least
as favorable as the undersigned can obtain elsewhere. If the Representative
fails to accept in writing any such proposal for sale within three (3) business
days after receipt of a notice containing such proposal, then the Representative
shall have no claim or right with respect to any such sales contained in such
notice. If, thereafter, such proposal is modified in any material respect, the
undersigned shall adopt the same procedure as with respect to the original
proposal. Public or private sales of Common Stock by the undersigned shall not
include gifts, intra-family transfers or transfers for estate planning purposes,
which shall be exempt from the provisions of this paragraph only.
The undersigned further agrees that any rights that the undersigned may
have to cause the Company to register with the Securities and Exchange
Commission any Common Stock or any other securities of the Company are waived
until a date that is 13 months from the Effective Date.
The undersigned understands that the Company and the Representative will
undertake the public offering in reliance upon this Lock-Up Agreement which
shall only become effective on the Effective Date.
Very truly yours,
By:
-------------------------------
Print Name:
-----------------------
THE REPRESENTATIVE'S OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF (THE "SECURITIES") HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
AND WITH THE SECURITIES ADMINISTRATORS OF CERTAIN STATES UNDER THE
SECURITIES ("BLUE SKY") LAWS OF SUCH STATES. HOWEVER, NEITHER THE
REPRESENTATIVE'S OPTIONS NOR SUCH SECURITIES MAY BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT
TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT
UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
UNDER THE APPLICABLE BLUE SKY LAWS.
THIS REPRESENTATIVE'S OPTION MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT AS OTHERWISE PROVIDED HEREIN AND THE HOLDER OF THIS REPRESENTATIVE'S
OPTION, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR
ASSIGN THIS REPRESENTATIVE'S OPTION EXCEPT AS OTHERWISE PROVIDED HEREIN.
MULTI-LINK TELECOMMUNICATIONS, INC.
Representative's Option for the Purchase of Units
No. UWW-001 115,000 Representative's Options
THIS CERTIFIES that, for receipt in hand of $100 and other value received,,
SCHNEIDER SECURITIES, INC. (the "Holder"), is entitled to subscribe for and
purchase from MULTI-LINK TELECOMMUNICATIONS, INC., a Colorado corporation (the
"Company"), upon the terms and conditions set forth herein, at any time, or from
time to time, after __________, 2000 (12 months from the Effective Date, as
defined below) and before 5:00 p.m. Mountain time on _____, 2004 (the "Exercise
Period"), 115,000 Units (a "Unit" or the "Units") of the Company at an exercise
price of $_____ per Representative's Option or 120% of the offering price (the
"Purchase Price") of Units sold by the Company in the Public Offering
(hereinafter defined). Each Unit shall be identical to the Units sold in the
public offering to be underwritten by the Holder (the "Public Offering") and
shall consist of one share of Common Stock ("Common Stock") and one warrant
("Warrant"). Two Warrants shall be exercisable to purchase one share of Common
Stock (a "Warrant Share") at a price of $9.00 (150% of the exercise price of the
Units sold in the Public Offering; the "Exercise Price") until ______, 2002,
which is three years from the date on which the Company's Registration Statement
on Form SB-2, Registration No. 333-______ (the "Registration Statement") was
declared effective by the Securities and Exchange Commission (the "Effective
Date"). The terms and provisions of the Warrants, except with respect to
redemption, shall be governed by a warrant agreement between the Company and its
transfer agent (the "Warrant Agreement"). The term the "Holder" as used herein
shall include any transferee to whom this Representative's Option has been
transferred in accordance with the above. As used herein the term "this
Representative's Option" shall mean and include this Representative's Option and
any Representative's Option or Representative's Options hereafter issued as a
consequence of the exercise or transfer of this Representative's Option in whole
or in part, and the term "Common Stock" shall mean and include the Company's
Common Stock with ordinary voting power, which class at the date hereof is
publicly traded.
1. This Representative's Option may not be sold, transferred, assigned,
pledged or hypothecated until _______, 2000 (12 months from the Effective Date
of the Registration Statement) except that it may be transferred, in whole or in
part, (i) to one or more officers, employees or partners of the Holder (or the
officers, employees or partners of any such partner); (ii) to a member of the
underwriting syndicate and/or its officers, employees or partners; or (iii) by
operation of law. Notwithstanding any language to the contrary elsewhere herein,
in the event of transfer of this Representative's Warrant, the transferee agrees
that he, she or it will, upon receipt hereof, exercise this Representative's
Warrant not more than 72 hours after completion of such transfer. After ____,
2000, this Representative's Option may be sold, transferred, assigned or
hypothecated in accordance with applicable law.
<PAGE>
2. a. This Representative's Option may be exercised during the
Exercise Period as to the whole or any lesser number of Units, by the
surrender of this Representative's Option (with the election attached
hereto duly executed) to the Company at its office at 811 Lincoln
Street, Fifth Floor, Denver, Colorado 80203, or such other place as is
designated in writing by the Company, together with a certified or
bank cashier's check payable to the order of the Company in an amount
equal to the Purchase Price.
b. Upon written request of the Holder, and in lieu of payment
for the Units by check in accordance with paragraph 2(a) hereof, the
Holder may exercise this Representative's Option (or any portion
thereof) for and receive the number of Units equal to a fraction, the
numerator of which equals: (i) the amount by which the combined average
closing bid price of the Common Stock and the Warrants (or the closing
bid price of the Units if quoted as such) for the ten (10) trading days
preceding the date of exercise (the "Current Market Price" as further
defined below) exceeds the Purchase Price per Unit multiplied by, (ii)
the number of Units to be purchased; the denominator of which equals
the Current Market Price. Following exercise of this Representative's
Option, and at anytime thereafter through and until expiration of the
Warrants, the Holder may exercise the Warrants underlying this
Representative's Option by tendering a notice of exercise, together
with a certified or bank cashier's check payable to the order of the
Company, in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares as to which such exercise relates.
c. Upon written request of the Holder, and in lieu of payment
of the Exercise Price of the Warrants by check in accordance with
paragraph 2(b) hereof, the Holder may exercise the Warrants (or any
portion thereof) for and receive the number of Warrants equal to a
fraction, the numerator of which equals (i) the amount by which the
Current Market Price of the Common Stock for the ten (10) trading days
preceding the date of exercise exceeds the Exercise Price per Warrant,
multiplied by (ii) the number of Warrant Shares to be purchased; the
denominator of which equals the Current Market Price.
d. For the purposes of any computation under this
Representative's Option, the "Current Market Price" at any date shall
be the closing price of the Common Stock and/or Warrants, as the case
may be, on the business day next preceding the event requiring an
adjustment or calculation hereunder. If the principal trading market
for such securities is an exchange, the closing price shall be the
reported last sale price on such exchange on such day provided if
trading of such Common Stock and/or Warrants, as the case may be, is
listed on any consolidated tape, the closing price shall be the
reported last sale price set forth on such consolidated tape. If the
principal trading market for such securities is the over-the-counter
market, the closing price shall be the last reported sale price on such
date as set forth by The Nasdaq Stock Market, Inc., or, if the security
is not quoted on such market, the average closing bid and asked prices
as set forth in the National Quotation Bureau pink sheets or the
Electronic Bulletin Board System for such day. Notwithstanding the
foregoing, if there is no reported last sale price or average closing
bid and asked prices, as the case may be, on a date prior to the event
requiring an adjustment or calculation hereunder, then the Current
Market Price shall be determined as of the latest date prior to such
day for which such last sale price or average closing bid and asked
price is available.
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<PAGE>
3. Upon each exercise of this Representative's Option, the Holder shall be
deemed to be the holder of record of the Common Stock and Warrants comprising
the Units issuable upon such exercise, notwithstanding that the transfer books
of the Company shall then be closed or certificates representing such Warrants
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Representative's Option, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Common Stock and Warrants issuable upon such exercise, registered in the
name of the Holder or its designee. If this Representative's Option should be
exercised in part only, the Company shall, upon surrender of this
Representative's Option for cancellation, execute and deliver a new
Representative's Option evidencing the right of the Holder to purchase the
balance of the Units (or portions thereof) subject to purchase hereunder.
4. Any options issued upon the transfer or exercise in part of this
Representative's Option (together with this Representative's Option, the
"Representative's Options") shall be numbered and shall be registered in a
Representative's Option Register as they are issued. The Company shall be
entitled to treat the registered holder of any Representative's Option on the
Representative's Option Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Representative's Option on the part of any other person. The
Representative's Options shall be transferable only on the books of the Company
upon delivery thereof duly endorsed by the Holder or by his duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Representative's
Option or Representative's Options to the person entitled thereto. The
Representative's Options may be exchanged, at the option of the Holder thereof,
for another Representative's Option, or other Representative's Options of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Units (or portions thereof) upon surrender to
the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause Representative's Options to be
transferred on its books to any person if, in the opinion of counsel to the
Company, such transfer does not comply with the provisions of the Securities Act
of 1933, as amended (the "Act"), or applicable state blue sky laws and the rules
and regulations thereunder.
5. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Representative's Option and the Common Stock and Warrants
comprising the Units purchasable upon exercise of this Representative's Option,
such number of shares of Common Stock as shall, from time to time, be sufficient
therefor. The Company covenants that all shares of Common Stock issuable upon
exercise of this Representative's Option and the Warrants underlying this
Representative's Option shall be validly issued, fully paid, nonassessable, and
free of preemptive rights.
6. a. In case the Company shall sell or issue hereafter either its Common
Stock or any rights, options, warrants or obligations or securities containing
the right to subscribe for or purchase any Common Stock ("Options") or
exchangeable for or convertible into Common Stock ("Convertible Securities"), at
a price per share, as determined pursuant to paragraph (b) of this section, less
than the Purchase Price then in effect on the date of such sale or issuance,
then the number of Units thereafter purchasable upon exercise of this
Representative's Option shall be determined by multiplying the number of Units
theretofore purchasable upon exercise of this Representative's Option by a
fraction, (i) the numerator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such Common Stock, Options or
Convertible Securities and (ii) the denominator of which shall be the number of
shares of Common Stock outstanding on the date prior to the date of issuance of
such Common Stock or Convertible Securities plus the number of shares of Common
Stock which the aggregate consideration received by the Company upon such
issuance would purchase on such date at the Purchase Price then in effect.
3
<PAGE>
b. The following provisions, in addition to other provisions of this
section shall be applicable in determining any adjustment under (a) above:
i. In case of the issuance or sale of Common Stock part or all of
which shall be for cash, the cash consideration received by the
Company therefor shall be deemed to be the amount of cash proceeds of
such sale of shares less any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers
or others performing similar services or any expenses incurred in
connection therewith, plus the amounts, if any, determined as provided
in (b)(ii) below.
ii. In case of the issuance or sale of Common Stock wholly or
partly for a consideration other than cash, the amount of the
consideration other than cash received by the Company for such Common
Stock shall be deemed to be the fair value of such consideration as
determined by a resolution adopted by the Board of Directors of the
Company acting in good faith, less any compensation paid or incurred
by the Company for any underwriting of, or otherwise in connection
with such issuance, provided, however, the amount of such
consideration other than cash shall in no event exceed the cost
thereof as recorded on the books of the Company. In case of the
issuance or sale of Common Stock (otherwise than upon conversion or
exchange) together with other stock or securities or other assets of
the Company for a consideration which is received for both such Common
Stock and other securities or assets, the Board of Directors of the
Company acting in good faith shall determine what part of the
consideration so received is to be deemed to be the consideration for
the issuance of such Common Stock, less any compensation paid or
incurred by the Company for any underwriting of, or otherwise in
connection with such issuance, provided, however, the amount of such
consideration other than cash shall in no event exceed the cost
thereof as recorded on the books of the Company. In case at any time
the Company shall declare a dividend or make any other distribution
upon any stock of the Company payable in Common Stock then such Common
Stock issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
iii. The price per share of any Common Stock sold or issued by
the Company (other than pursuant to Options or Convertible Securities)
shall be equal to a price calculated by dividing (A) the amount of the
consideration received by the Company, as determined pursuant to
(b)(i) and (b)(ii) above, upon such sale or issuance by (B) the number
of shares of Common Stock sold or issued.
iv. In case the Company shall at any time after the date hereof
issue any Options or Convertible Securities, the following provisions
shall apply in making any adjustment:
(A) The price per share for which Common Stock is issuable
upon the exercise of the Options or upon conversion or exchange
of the Convertible Securities shall be determined by (1) dividing
the total amount, if any, received or receivable by the Company
as consideration for the issuance of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon exercise of
such Options or the conversion or exchange of such Convertible
Securities, by (2) the aggregate maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon
the conversion or exchange of such Convertible Securities.
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<PAGE>
(B) In determining the price per share for which Common
Stock is issuable upon exercise of the Options or conversion or
exchange of the Convertible Securities as set forth above and in
computing any adjustment pursuant to (a) above: the aggregate
maximum number of shares of Common Stock issuable upon the
exercise of such Convertible Securities shall be considered to be
outstanding at the time such Options or Convertible Securities
were issued and to have been issued for such price per share as
determined pursuant to (b)(iv)(A), and the consideration for the
issuance of such Options or Convertible Securities and the amount
of additional consideration payable to the Company upon exercise
of such Options or upon the conversion or exchange of such
Convertible Securities shall be determined in the same manner as
the consideration received upon the issuance or sale of Common
Stock as provided in paragraphs (b)(i) and (b)(ii).
(C) On the expiration of such Options or the termination of
any right to convert or exchange any Convertible Securities, the
number of Units subject to this Representative's Option shall
forthwith be readjusted to such number of Units as would have
been obtained had the adjustments made upon the issuance of such
Options or Convertible Securities been made upon the basis of the
delivery of only the number of shares of Common Stock actually
delivered upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities.
(D) If the minimum purchase price per share of Common Stock
provided for in any Option, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock,
shall change or a different purchase price or rate shall become
effective at any time or from time to time (other than pursuant
to any anti-dilution provisions of such Options or Convertible
Securities) then upon such change becoming effective, the number
of Units subject to this Representative's Option shall forthwith
be increased or decreased to such number of Units as would have
been obtained had the adjustments made upon the granting or
issuance of such Options or Convertible Securities been made upon
the basis of (1) the issuance of the number of shares of Common
Stock theretofore actually delivered upon the exercise of such
Options or upon the conversion or exchange of such Convertible
Securities, and the total consideration received therefor, and
(2) the granting or issuance at the time of such change of any
such Options or Convertible Securities then still outstanding for
the consideration, if any, received by the Company therefor and
to be received on the basis of such changed price or rate of
exchange or conversion.
v. Except as otherwise specifically provided herein, the date of
issuance or sale of Common Stock shall be deemed to be the date the
Company is legally obligated to issue such Common Stock or the date
the Company is legally obligated to issue any Option or Convertible
Security. If the Company shall take a record date for the purpose of
determining holders of Common Stock entitled to (A) receive a dividend
or other distribution payable in Common Stock or in Options or
Convertible Securities or (B) subscribe for or purchase Common Stock,
Options or Convertible Securities, such record date shall be deemed to
be the date of issue or sale of the Common Stock, Options or
Convertible Securities.
vi. The number of shares of Common Stock outstanding at any given
time shall not include treasury shares but the disposition of any such
treasury shares shall be considered an issue or sale of Common Stock
for the purposes of this section.
5
<PAGE>
vii. Anything hereinabove to the contrary notwithstanding, no
adjustment shall be made pursuant to (a) above to the Purchase Price
or to the number of Units purchasable upon:
(A) The issuance or sale by the Company of any Units, Common
Stock or Warrants pursuant to the Public Offering, the exercise
of any Warrants, the issuance or sale by the Company of any
Units, Common Stock or Warrants pursuant to the Representative's
Option, the issuance or sale of Units, Common Stock or Warrants
on exercise of a separate Representative's Option to purchase
Warrants, any securities offered in a public offering
underwritten by Schneider Securities, Inc., any shares, Options
or Convertible Securities issued and outstanding at the effective
date of such public offering, any shares issuable pursuant to the
Company's stock option plan currently in effect, provided the
total number of shares issuable pursuant to such plan does not
exceed 300,000 shares.
(B) The issuance or sale by the Company of any Common Stock
pursuant to any Options or Convertible Securities issued and
outstanding prior to the date of Effective Date of the
Registration Statement.
(C) The issuance or sale of Common Stock pursuant to the
exercise of Options or conversion or exchange of Convertible
Securities hereinafter issued for which an adjustment has been
made (or was not required to be made) pursuant to the provisions
hereof.
(D) The increase in the number of shares of Common Stock
subject to any Option or Convertible Security referred to in
subsections (A), (B) or (C) hereof pursuant to the provisions of
such Option or Convertible Securities designed to protect against
dilution.
c. If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the number
of Units subject to this Representative's Option immediately prior to such
subdivision shall be proportionately increased, and if the Company shall at
any time combine the outstanding Common Stock by recapitalization,
reclassification or combination thereof, the number of Units subject to
this Representative's Option immediately prior to such combination shall be
proportionately decreased. Any corresponding adjustment to the Purchase
Price shall become effective at the close of business on the record date
for such subdivision or combination.
d. If the Company after the date hereof shall distribute to the
holders of its Common Stock any securities or other assets (other than a
distribution of Common Stock or a cash distribution made as a dividend
payable out of earnings or out of any earned surplus legally available for
dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Purchase Price in effect immediately prior to the record
date of such distribution as may be necessary to preserve the rights
substantially proportionate to those enjoyed hereunder by the Holder
immediately prior to such distribution. Any such adjustment made in good
faith by the Board of Directors shall be final and binding upon the Holder
and shall become effective as of the record date for such distribution.
<PAGE>
e. No adjustment in the number of Units subject to this
Representative's Option shall be required unless such adjustment would
require an increase or decrease in such number of Units of at least 1%
of the then adjusted number of Units issuable upon exercise of this
Representative's Option, provided, however, that any adjustments which
by reason of the foregoing are not required at the time to be made
shall be carried forward and taken into account and included in
determining the amount of any subsequent adjustment; and provided
further, however, that in case the Company shall at any time subdivide
or combine the outstanding Common Stock or issue any additional Common
Stock as a dividend, said percentage shall forthwith be proportionately
increased in the case of a combination or decreased in the case of a
subdivision or dividend of Common Stock so as to appropriately reflect
the same. If the Company shall make a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend
or distribution and legally abandon its plan to pay or deliver such
dividend or distribution then no adjustment in the number of Units
subject to this Representative's Option shall be required by reason of
the making of such record.
f. Whenever the number of Units purchasable upon the exercise
of this Representative's Option is adjusted as provided herein, the
Purchase Price shall be adjusted (to the nearest one tenth of a cent)
by respectively multiplying such Purchase Price immediately prior to
such adjustment by a fraction, the numerator of which shall be the
number of Units purchasable upon the exercise of this Representative's
Option immediately prior to such adjustment, and the denominator of
which shall be the number of Units purchasable immediately thereafter.
g. In case of any reclassification of the outstanding Common
Stock (other than a change covered by (c) hereof or which solely
affects the par value of such Common Stock) or in the case of any
merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any
reclassification or capital reorganization of the outstanding Common
Stock), or in the case of any sale or conveyance to another corporation
of the property of the Company as an entirety or substantially as an
entirety in connection with which the Company is dissolved, the Holder
of this Representative's Option shall have the right thereafter (until
the expiration of the right of exercise of this Representative's
Option) to receive upon the exercise hereof, for the same aggregate
Purchase Price payable hereunder immediately prior to such event, the
kind and amount of shares of stock or other securities or property
receivable upon such reclassification, capital reorganization, merger
or consolidation, or upon the dissolution following any sale or other
transfer, by a holder of the number of Units obtainable upon the
exercise of this Representative's Option immediately prior to such
event; and if any reclassification also results in a change in Common
Stock covered by (c) above, then such adjustment shall be made pursuant
to both this paragraph (g) and paragraph (c). The provisions of this
paragraph (g) shall similarly apply to successive re-classifications,
or capital reorganizations, mergers or consolidations, sales or other
transfers.
If the Company after the date hereof shall issue or agree to
issue Common Stock, Options or Convertible Securities, other than as
described herein and other than excluded herein, and such issuance or
agreement would in the opinion of the Board of Directors of the Company
materially affect the rights of the Holders of the Representative's
Option, the Purchase Price and the number of Units purchasable upon
exercise of the Representative's Option shall be adjusted in such
matter, if any, and at such time as the Board of Directors of the
<PAGE>
Company, in good faith, may determine to be equitable in the circumstances.
The minutes or unanimous consent approving such action shall set forth the
Board of Director's determination as to whether an adjustment is warranted
and the manner of such adjustment. In the absence of such determination,
any Holder may request in writing that the Board of Directors make such
determination. Any such determination made in good faith by the Board of
Directors shall be final and binding upon the Holders. If the Board fails,
however, to make such determination within sixty (60) days after such
request, such failure shall be deemed a determination that an adjustment is
required.
h. i. Upon occurrence of each event requiring an adjustment of
the Purchase Price and of the number of Units purchasable upon
exercise of this Representative's Option in accordance with, and as
required by, the terms hereof, the Company shall forthwith employ a
firm of certified public accountants (who may be the regular
accountants for the Company) who shall compute the adjusted Purchase
Price and the adjusted number of Units purchasable at such adjusted
Purchase Price by reason of such event in accordance herewith. The
Company shall give to each Holder of the Representative's Options a
copy of such computation which shall be conclusive and shall be
binding upon such Holders unless contested by Holders by written
notice to the Company within thirty (30) days after receipt thereof.
ii. In case the Company after the date hereof shall propose (A)
to pay any dividend payable in stock to the holders of its Common
Stock or to make any other distribution (other than cash dividends) to
the holders of its Common Stock or to grant rights to subscribe to or
purchase any additional shares of any class or any other rights or
options, (B) to effect any reclassification involving merely the
subdivision or combination of outstanding Common Stock, or (C) any
capital reorganization or any consolidation or merger, or any sale,
transfer or other disposition of its property, assets and business
substantially as an entirety, or the liquidation, dissolution or
winding up of the Company, then in each such case, the Company shall
obtain the computation described above and if an adjustment to the
Purchase Price is required, the Company shall notify the Holders of
the Representative's Options of such proposed action, which shall
specify the record date for any such action or if no record date is
established with respect thereto, the date on which such action shall
occur or commence, or the date of participation therein by the holders
of Common Stock if any such date is to be fixed, and shall also set
forth such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action on the Purchase Price and the
number, or kind, or class of shares or other securities or property
obtainable upon exercise of this Representative's Option after giving
effect to any adjustment which will be required as a result of such
action. Such notice shall be given at least twenty (20) days prior to
the record date for determining holders of the Common Stock for
purposes of any such action, and in the case of any action for which a
record date is not established then such notice shall be mailed at
least twenty (20) days prior to the taking of such proposed action.
iii. Failure to file any certificate or notice or to give any
notice, or any defect in any certificate or notice, shall not effect
the legality or validity of the adjustment in the Purchase Price or in
the number, or kind, or class of shares or other securities or
property obtainable upon exercise of the Representative's Options or
of any transaction giving rise thereto.
i. The Company shall not be required to issue fractional Units upon
any exercise of the Representative's Options. As to any final fraction of a
Unit which the Holder of a Representative's Option would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the combined market price of such share of Common Stock and
Warrant on the business day preceding the day of exercise. The Holder of a
Representative's Option, by his acceptance of a Representative's Option,
expressly waives any right to receive any fractional Units.
<PAGE>
j. Regardless of any adjustments pursuant to this section in the
Purchase Price or in the number, or kind, or class of shares or other
securities or other property obtainable upon exercise of a Representative's
Option, a Representative's Option may continue to express the Purchase
Price and the number of Units obtainable upon exercise at the same price
and number of Units as are stated herein.
k. The number of Units, the Purchase Price and all other terms and
provisions of the Company's agreement with the Holder of this
Representative's Option shall be determined exclusively pursuant to the
provisions hereof.
l. The above provisions of this section 6 shall similarly apply to
successive transactions which require adjustments.
m. Notwithstanding any other language to the contrary herein, (i) the
anti-dilution terms of this Representative's Option will not be enforced so
as to provide the Holder the right to receive, or for the accrual of, cash
dividends prior to the exercise of this Representative's Option, and (ii)
the anti-dilution terms of this Representative's Option will not be
enforced in such a manner as to provide the Holder with disproportionate
rights, privileges and economic benefits not provided to purchasers of the
Units in the Public Offering.
7. The rights and privileges of the Warrants issuable on exercise of this
Representative's Option shall be as provided in the warrant certificate (the
"Warrant Certificate") to be delivered to the Holder on exercise of this
Representative's Option. All anti-dilution and other rights shall be as provided
for in the Warrant Certificate and as set forth in the warrant agreement by and
between the Company and the Warrant Agent for the Company (the "Warrant
Agreement"). The provisions of the Warrant Agreement relating to anti-dilution
rights and any other rights and privileges granted to holders of publicly traded
Warrants are incorporated by reference herein as if more fully set forth herein.
Notwithstanding any other language to the contrary herein or in the Warrant
Agreement by and between the Company and the Warrant Agent, in the event, prior
to the exercise of this Warrant, Holders of publicly-traded Warrants shall be
entitled to the benefit of any anti-dilution provisions of the Warrant Agreement
or the Warrant Certificate then, in such event, the Warrants issuable upon
exercise of this Representative's Option shall be adjusted in accordance with
the provisions of the anti-dilution provisions of the Warrant Certificate and
the Warrant Agreement in a manner identical to the adjustments made pursuant to
the anti-dilution provisions and other rights and privileges applicable to
publicly-traded warrants. Any such adjustment may be made at or immediately
prior to the date of exercise hereof. Notwithstanding any other language to the
contrary herein, (i) the anti-dilution terms of this Representative's Option
will not be enforced so as to provide the Holder the right to receive, or for
the accrual of, cash dividends prior to the exercise of this Representative's
Option, and (ii) the anti-dilution terms of this Representative's Option will
not be enforced in such a manner as to provide the Holder with disproportionate
rights, privileges and economic benefits not provided to purchasers of Warrants
in the Public Offering.
8. The issuance of any Units or other securities upon the exercise of this
Representative's Option or any Warrant Shares upon the exercise of the Warrants,
and the delivery of certificates or other instruments representing such
securities, or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
<PAGE>
9. a. If, at any time after ______, 1999 (the Effective Date of the
Registration Statement), and ending _______, 2006 (seven years after the
Effective Date of the Registration Statement), the Company shall file a
registration statement (other than on Form S-4, Form S-8, or any successor form)
with the Securities and Exchange Commission (the "Commission") while Units are
available for purchase upon exercise of this Representative's Option or while
any Common Stock, Warrants or Units (collectively, the "Representative's
Securities") are outstanding, the Company shall, on two occasions only, give the
Holder and all the then holders of such Representative's Options and
Representative's Securities at least 30 days prior written notice of the filing
of such registration statement. If requested by the Holder or by any such holder
in writing within 20 days after receipt of any such notice, the Company shall,
at the Company's sole expense (other than the fees and disbursements of counsel
for the Holder or such holder and the underwriting discounts and non-accountable
expenses, if any, payable in respect of the securities sold by the Holder or any
such holder), register or qualify the Common Stock included in the
Representative's Securities and underlying the Warrants that are included in the
Representative's Securities of the Holder or any such holders who shall have
made such request concurrently with the registration of such other securities,
all to the extent requisite to permit the public offering and sale of such
securities, and will use its best efforts through its officers, directors,
auditors and counsel to cause such registration statement to become effective as
promptly as practicable. The Common Stock to be registered is hereinafter
referred to as "Registrable Securities." Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then the
Holder or any such holder who shall have requested registration of his or its
Registrable Securities shall delay the offering and sale of such Registrable
Securities (or the portions thereof so designated by such managing underwriter)
for such period, not to exceed 90 days, as the managing underwriter shall
request, provided that no such delay shall be required as to any Registrable
Securities if any securities of the Company are included in such registration
statement for the account of any person other than the Company and the Holder
unless the securities included in such registration statement for such other
person shall have been reduced pro rata to the reduction of the Registrable
Securities which were requested to be included in such registration.
b. If at any time after ________, 1999 (the Effective Date of the
Registration Statement), and before _________, 2004 (five years after the
Effective Date of the Registration Statement), the Company shall receive a
written request from holders of Representative's Securities who, in the
aggregate, own (or upon exercise of all Representative's Options will own)
a majority of the total number of Units issuable upon exercise of the
Representative's Options, the Company shall, as promptly as practicable,
prepare and file with the Commission a registration statement sufficient to
permit the public offering and sale of the Registrable Securities, and will
use its best efforts through its officers, directors, auditors and counsel
to cause such registration statement to become effective as promptly as
practicable; provided, however, that the Company shall only be obligated to
file and obtain effectiveness of one such registration statement for which
all expenses incurred in connection with such registration (other than the
fees and disbursements of counsel for the Holder or such holders and
underwriting discounts and non-accountable expenses, if any, payable in
respect of the Registrable Securities sold by the Holder or any such
holder) shall be borne by the Company. In addition to the one demand
registration provided for herein above, the holders of the Registrable
Securities who, in the aggregate, own (or upon exercise of all
Representative's Options will own) a majority of the total number of Units
issued or issuable upon exercise of the Representative's Options may
request that the Company prepare and file a registration statement to
permit the public offering and sale of the Registrable Securities on two
additional occasions only, but the costs of preparation and filing of such
additional registration statements shall be at the then holders' cost and
expense unless the Company elects to register additional shares of Common
Stock, in which case the cost and expense of such registration statements
will be prorated between the Company and the holders of the Registrable
Securities according to the aggregate sales price of the securities being
issued.
<PAGE>
c. In the event of a registration pursuant to the provisions of this
paragraph 9, the Company shall use its best efforts to cause the
Registrable Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder
or such holders may reasonably request; provided, however, that the Company
shall not be required to qualify to do business in any state by reason of
this paragraph 9(c) in which it is not otherwise required to qualify to do
business and provided further, that the Company has no obligation to
qualify the Registrable Securities where such qualification would cause any
unreasonable delay or expenditure by the Company.
d. The Company shall keep effective any registration or qualification
contemplated by this paragraph 9 and shall from time to time amend or
supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period
of time as shall be required to permit the Holder or such holders to
complete the offer and sale of the Registrable Securities covered thereby.
The Company shall in no event be required to keep any such registration or
qualification in effect for a period in excess of nine months from the date
on which the Holder and such holders are first free to sell such
Registrable Securities; provided, however, that if the Company is required
to keep any such registration or qualification in effect with respect to
securities other than the Registrable Securities beyond such period, the
Company shall keep such registration or qualification in effect as it
relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
e. In the event of a registration pursuant to the provisions of this
paragraph 9, the Company shall furnish to the Holder and to each such
holder such reasonable number of copies of the registration statement and
of each amendment and supplement thereto (in each case, including all
exhibits), such reasonable number of copies of each prospectus contained in
such registration statement and each supplement or amendment thereto
(including each preliminary prospectus), all of which shall conform to the
requirements of the Act and the rules and regulations thereunder, and such
other documents as the Holder or such holders may reasonably request in
order to facilitate the disposition of the Registrable Securities included
in such registration.
f. In the event of a registration pursuant to the provisions of this
paragraph 9, the Company shall furnish the Holder and each holder of any
Registrable Securities so registered with an opinion of its counsel to the
effect that (i) the registration statement has become effective under the
Act and no order suspending the effectiveness of the registration
statement, preventing or suspending the use of the registration statement,
any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor to such counsel's actual knowledge
has the Securities and Exchange Commission or any securities or blue sky
authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order and (ii) the registration
statement and each prospectus forming a part thereof (including each
preliminary prospectus), and any amendment or supplement thereto, complies
as to form with the Act and the rules and regulations thereunder. Such
counsel shall also provide a Blue Sky Memorandum setting forth the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of paragraph 9(c).
g. The Company agrees that until all the Registrable Securities have
been sold under a registration statement or pursuant to Rule 144 under the
Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Registrable Securities to sell such securities under Rule 144.
<PAGE>
h. The Holder and any holders who propose to register their
Registrable Securities under the Act shall execute and deliver to the
Company a selling stockholder questionnaire on a form to be provided by the
Company.
i. In addition to the rights above provided, the Company will
cooperate with the then holders of the Representative's Options and
underlying Registrable Securities in preparing and signing a registration
statement, on two occasions only in addition to the registration statements
discussed above, required in order to sell or transfer the Registrable
Securities and will supply all information required therefor, but such
additional registration statements shall be at the then Holders' cost and
expense unless the Company elects to register additional shares of the
Company's Common Stock in which case the cost and expense of such
registration statements will be prorated between the Company and the
Holders of the Representative's Options and Registrable Securities
according to the aggregate sales prices of the securities being sold.
10. a. Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless the Holder, any holder of any of the
Registrable Securities, their officers, directors, partners, employees,
agents and counsel, and each person, if any, who controls any such person
within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 10, but
not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts
paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i) any untrue statement
or alleged untrue statement of a material fact contained (A) in any
registration statement, preliminary prospectus or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement
thereto, or (B) in any application or other document or communication (in
this Section 10 collectively called an "application") executed by or on
behalf of the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to register or
qualify any of the Registrable Securities under the securities or blue sky
laws thereof or filed with the Commission or any securities exchange; or
any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect
to the Holder or any holder of any of the Registrable Securities by or on
behalf of such person expressly for inclusion in any registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be, or (ii) any
breach of any representation, warranty, covenant or agreement of the
Company contained in this Representative's Option. The foregoing agreement
to indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under this Representative's
Option.
If any action is brought against the Holder or any holder of any of
the Registrable Securities or any of its officers, directors, partners,
employees, agents or counsel, or any controlling persons of such person (an
"indemnified party") in respect of which indemnity may be sought against
the Company pursuant to the foregoing paragraph, such indemnified party or
parties shall promptly notify the Company in writing of the institution of
such action (but the failure so to notify shall not relieve the Company
from any liability it may otherwise have to Holder or any holder of any of
the Registrable Securities) and the Company shall promptly assume the
defense of such action, including the employment of counsel (reasonably
satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties shall have the right to employ its or
<PAGE>
their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless
the employment of such counsel shall have been authorized in writing by the
Company in connection with the defense of such action or the Company shall
not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action
or such indemnified party or parties shall have reasonably concluded that
there may be one or more legal defenses available to it or them or to other
indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses
shall be borne by the Company and the Company shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties. Anything in this paragraph to the contrary notwithstanding, the
Company shall not be liable for any settlement of any such claim or action
effected without its written consent.
b. The Holder and each holder agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who
shall have signed any registration statement covering the Registrable
Securities held by the Holder and each holder and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Holder and each holder in paragraph
10(a), but only with respect to statements or omissions, if any, made in
any registration statement, preliminary prospectus, or final prospectus (as
from time to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with
written information furnished to the Company with respect to the Holder and
each holder by or on behalf of the Holder and each holder expressly for
inclusion in any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, and in respect of which
indemnity may be sought against the Holder and each holder pursuant to this
paragraph 10(b), the Holder and each holder shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of paragraph 10(a).
c. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph
10(a) or 10(b) (subject to the limitations thereof) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act or otherwise because the indemnification provided for in this
Section 10 is for any reason held to be unenforceable by the Company and
the Holder and any holder, then the Company (including for this purpose any
contribution made by or on behalf of any director of the Company, any
officer of the Company who signed any such registration statement and any
controlling person of the Company), as one entity, and the Holder and any
holder of any of the Registrable Securities included in such registration
in the aggregate (including for this purpose any contribution by or on
behalf of the Holder or any holder), as a second entity, shall contribute
to the losses, liabilities, claims, damages and expenses whatsoever to
which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and the Holder or
any such holder in connection with the facts which resulted in such losses,
liabilities, claims, damages and expenses. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission or alleged
<PAGE>
omission, shall be determined by, among other things, whether such
statement, alleged statement, omission or alleged omission relates to
information supplied by the Company, by the Holder or by any holder of
Registrable Securities included in such registration, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, alleged statement, omission or alleged
omission. The Company and the Holder agree that it would be unjust and
inequitable if the respective obligations of the Company and the Holder for
contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses (even if the
Holder and the other indemnified parties were treated as one entity for
such purpose) or by any other method of allocation that does not reflect
the equitable considerations referred to in this paragraph 10(c). No person
guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation. For purposes of this
paragraph 10(c), each person, if any, who controls the Holder or any holder
of any of the Registrable Securities within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act and each officer, director,
partner, employee, agent and counsel of each such person, shall have the
same rights to contribution as such person and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have
signed any such registration statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each
case to the provisions of this paragraph 10(c). Anything in this paragraph
10(c) to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This paragraph 10(c) is intended to supersede
any right to contribution under the Act, the Exchange Act or otherwise.
11. The securities issued upon exercise of the Representative's Options
shall be subject to a stop transfer order and the certificate or certificates
evidencing any such securities shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF (THE "SECURITIES") HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND WITH THE SECURITIES ADMINISTRATORS OF CERTAIN STATES
UNDER THE SECURITIES ("BLUE SKY") LAWS OF SUCH STATES. HOWEVER,
NEITHER THE REPRESENTATIVE'S OPTIONS NOR SUCH SECURITIES MAY BE SOLD,
TRANSFERRED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO (i) A
POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A
SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND UNDER THE APPLICABLE BLUE SKY
LAWS.
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Representative's Option (and upon
surrender of any Representative's Option if mutilated), and upon reimbursement
of the Company's reasonable incidental expenses, the Company shall execute and
deliver to the Holder thereof a new Representative's Option of like date, tenor
and denomination.
13. The Holder of any Representative's Option shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Representative's Option.
<PAGE>
14. This Representative's Option shall be construed in accordance with the
laws of the State of Colorado, without giving effect to conflict of laws.
Dated: _____________, 1999
MULTI-LINK TELECOMMUNICATIONS, INC.
By:
-------------------------------------
Nigel V. Alexander,
Chief Executive Officer
By:
-------------------------------------
Shawn B. Stickle,
President and Chief Operating Officer
[SEAL]
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Representative's Option.)
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers unto ________________________ Representative's Option to
purchase __________ Units of Multi-Link Telecommunications, Inc. (the
"Company"), together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ____________________________ attorney to
transfer such Representative's Option on the books of the Company, with full
power of substitution.
Dated:
-------------------------------------------
Signature:
---------------------------------------
Signature Guaranteed:
----------------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Representative's Option in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
<PAGE>
ELECTION TO EXERCISE
(To be executed by the holder if such holder desires to
exercise the attached Representative's Option)
The undersigned hereby exercises his or its rights to subscribe for
__________ Units covered by the within Representative's Option (each as defined
in the within Representative's Option) and tenders payment herewith in the
amount of $__________ in accordance with the terms thereof, and requests that
certificates for such Units be issued in the name of, and delivered to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print Name, Address and Social Security or
Tax Identification Number)
and, if such number of Units (or portions thereof) shall not be all the Units
covered by the within Representative's Option, that a new Representative's
Option for the balance of the Representative's Option (or portions thereof)
covered by the within Representative's Option be registered in the name of, and
delivered to, the undersigned at the address stated below.
Name:
--------------------------------------------------------------------------
(Print)
Address:
----------------------------------------------------------------------
- -----------------------------------------------
(Signature)
Dated: Signature Guaranteed:
--------------- ------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Representative's Option in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
WARRANT EXERCISE FEE AGREEMENT
AGREEMENT dated as of the ______ day of _____________, 1999, by and among
Schneider Securities, Inc. ("Schneider"), Multi-Link Telecommunications, Inc.
(the "Company") and American Securities Transfer & Trust, Inc. (the "Warrant
Agent").
W I T N E S S E T H:
WHEREAS, in connection with a public offering of 1,150,000 Units (or up to
1,322,500 Units including the over-allotment option), the Company proposes to
issue, in accordance with an agreement dated as of ____________________, 1999,
by and between the Company and the Warrant Agent (the "Warrant Agreement"),
Warrants to purchase shares of Common Stock; and
WHEREAS, the parties hereto wish to provide Schneider, a member of the
National Association of Securities Dealers, Inc. ("NASD"), with certain rights
on an exclusive basis in connection with the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Description of the Warrants. The Company's Warrants may be
exercised on or after _____________, 1999 and expire at 5:00 p.m. Colorado time
on ____________, 2002 (the "Expiration Date"), subject to redemption rights
commencing on or after _________, 2000. In accordance with the provisions of the
Warrant Agreement, the holder of each Warrant shall have the right to purchase
from the Company, and the Company shall issue and sell to such holders of
Warrants, one fully paid and non-assessable share of the Company's Common Stock
for every two Warrants exercised at an exercise price of $9.00 per share (the
"Exercise Price"), subject to adjustment as provided in the Warrant Agreement.
Section 2. Notification of Exercise. Within ten (10) days of the last day
of each month commencing one year from the date of the Company's Prospectus, the
Warrant Agent or the Company will notify Schneider of each Warrant certificate
which has been properly completed and delivered for exercise by holders of
Warrants during each such month, the determination of the proper completion to
be in the sole and absolute reasonable discretion of the Company and the Warrant
Agent. The Company or the Warrant Agent will provide Schneider with such
information, in connection with the exercise of each Warrant, as Schneider shall
reasonably request.
Section 3. Payment to Schneider. The Company hereby agrees to pay to
Schneider an amount equal to five (5%) percent of the exercise price (i.e. ,$.45
per share based on the initial Exercise Price of the Warrants which is $9.00 per
share) for each Warrant exercised (the "Exercise Fee") a portion of which may be
allowed by Schneider to the dealer who solicited the exercise (which may also be
Schneider) provided that:
(a) such Warrant is exercised on or after _________, 2000, which is
one year from the effective date of the Company's Registration Statement;
(b) at the time of exercise, the market price of the Company's Common
Stock is higher than the applicable Exercise Price of the Warrant being
exercised; (c) the holders of Warrants being exercised have specifically
indicated in writing, either in the Form of Election contained on the
specimen Warrant Certificate or by written documents signed and dated by
the holders that the exercise of such Warrants was solicited by Schneider
or another member of the NASD; and
(d) Schneider and/or the member of the NASD which solicited the
exercise of Warrants delivers a certificate to the Company within five (5)
business days of receipt of information relating to such exercised Warrants
from the Company or the Warrant Agent in the form attached hereto as
Exhibit A, stating that:
-1-
<PAGE>
(1) The Warrants exercised were not held in a discretionary
account;
(2) The member which solicited the exercise of Warrants did not
(unless granted an exemption by the Securities and Exchange Commission
("the Commission") from the provisions thereof), within the applicable
number of business days under Regulation M immediately preceding the
date of exercise of the Warrant bid for or purchase the Common Stock
of the Company or any securities of the Company immediately
convertible into or exchangeable for the Common Stock (including the
Warrants) or otherwise engage in any activity that would be prohibited
by Regulation M under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to a broker-dealer engaged in a distribution of
the Company's securities; and
(3) In connection with the solicitation, it disclosed the
compensation it would receive upon exercise of the Warrant.
Section 4. Payment of the Exercise Fee. The Company hereby agrees to pay
over to Schneider within two (2) business days after receipt by the Company of
the certificate described in Section 3(d) above, the Exercise Fee out of the
proceeds it received from the applicable Exercise Price paid for the Warrants to
which the certificate relates.
Section 5. Inspection of Records. Schneider may at any time during business
hours, at its expense, examine the records of the Company and the Warrant Agent
which relate to the exercise of the Warrants.
Section 6. Termination. Schneider shall be entitled to terminate this
Agreement prior to the exercise of all Warrants at any time upon five (5)
business days' prior notice to the Company and the Warrant Agent.
Notwithstanding any such termination notice, Schneider shall be entitled to
receive an Exercise Fee for the exercise of any Warrant for which it has already
delivered to the Company prior to any such termination the certificate required
by Section 3(d) of this Agreement.
Section 7. Representations and Warranties of Schneider. At the date of
execution hereof and at the time of solicitation of exercise of Warrants,
Schneider represents that it is, and will, (i) be registered as a broker-dealer
under the Exchange Act, (ii) be a member in good standing of the NASD, and (iii)
maintain its registration, qualification and membership in full force and effect
and in good standing throughout the term of this Agreement. Schneider
acknowledges and agrees that it will not solicit the exercise of Warrants, or
offer or sell the underlying Common Stock, in any state or jurisdiction except
those in which the Common Stock underlying the Warrants has been qualified or
qualification is not required. Further, Schneider agrees to comply with the laws
of the states in which it may solicit exercise of the Warrants or in which the
Common Stock underlying the Warrants may be offered or sold by it, with the
applicable rules and regulations of the NASD, and will comply with federal laws
including, but not limited to, the Securities Act of 1933, as amended (the
"Act"), the Exchange Act and the rules and regulations of the Commission
thereunder.
-2-
<PAGE>
Section 8. Indemnification.
a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless any and all statutory or designated
underwriters (the "Underwriters"), the representative of the Underwriters,
if any (the "Representative"), and each of their officers, directors,
partners, employees, agents, and counsel, and each person, if any, who
controls the Representative or any one of the Underwriters within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage, and expense whatsoever
(which shall include, for all purposes of this Section 8, but not be
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation) as and when incurred arising out of,
based upon, or in connection with (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any preliminary
prospectus, the registration statement, or any post-effective amendment
thereto, or the prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, relating to the offer or sale of
Common Stock underlying the Warrants or the solicitation of exercise of the
Warrants (such preliminary prospectus, registration statement,
post-effective amendment or prospectus hereinafter collectively, the
"Offering Documents") or (B) in any application or other document or
communication (in this Section 8 collectively called an "application") in
any jurisdiction in order to qualify the Common Stock and Warrants under
the "blue sky" or securities laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company contained
in this Agreement. The foregoing agreement to indemnify shall be in
addition to any liability the Company may otherwise have, including
liabilities arising under this Agreement; however, the Company shall have
no liability under this Section 8 if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company as stated in Section 8(b) with respect to the Underwriters by or on
behalf of the Underwriters expressly for inclusion in any of the Offering
Documents, or in any application, as the case may be.
If any action is brought against the Underwriters, the Representative
or any of their officers, directors, partners, employees, agents, or
counsel, or any controlling persons of an Underwriter or the Representative
(an "indemnified party") in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve
the Company from any liability it may have other than pursuant to this
Section 8(a)) and the Company shall promptly assume the defense of such
action, including the employment of counsel (satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified
party or parties shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly
employed counsel satisfactory to such indemnified party or parties to have
charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of
which events such fees and expenses shall be borne by the Company. Anything
in this paragraph to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent. The Company agrees promptly to notify the Underwriters and
the Representative of the commencement of any litigation or proceedings
against the Company or against any of its officers or directors in
connection with the sale of the Common Stock underlying the Warrants, any
Offering Documents, or any application.
b. The Underwriters agree to indemnify and hold harmless the Company,
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<PAGE>
each director of the Company, each officer of the Company who shall have
signed the Registration Statement, each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, to the same extent as the foregoing indemnity from the
Company to the Underwriters in Section 8(a), but only with respect to
statements or omissions, if any, made in any of the Offering Documents, or
in any application, in reliance upon and in conformity with written
information furnished to the Company as stated in this Section 8(b) with
respect to the Underwriters by or on behalf of the Underwriters expressly
for inclusion in any of the Offering Documents, or in any application, as
the case may be; provided, however, that the obligation of the Underwriters
to provide indemnity under the provisions of this Section 8(b) shall be
limited to the amount which represents the product of the number of shares
of Common Stock issued on exercise of Warrants and the Warrant Exercise
Price. For all purposes of this Agreement, the amounts of the Exercise Fee
set forth in the Offering Documents, the information under "Plan of
Distribution" and the identification of counsel to the Representative under
"Legal Matters" constitute the only information furnished in writing by or
on behalf of the Underwriters expressly for inclusion in any of the
Offering Documents, or in any application, as the case may be. If any
action shall be brought against the Company or any other person so
indemnified based on any of the Offering Documents, or any application, and
in respect of which indemnity may be sought against the Underwriters
pursuant to this Section 8(b), the Underwriters shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 8(a).
c. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section
8 is for any reason held to be unavailable to the Underwriters or the
Company, then the Company shall contribute to the damages paid by the
several Underwriters, and the several Underwriters shall contribute to the
damages paid by the Company; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by each party from the sale of
the Common Stock underlying the Warrants (taking into account the portion
of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations appropriate
in the circumstances. The Company and the Underwriters agree that it would
not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation (even if the Underwriters were treated as one
entity for such purpose). No Underwriter or person controlling such
Underwriter shall be obligated to make contribution hereunder which in the
aggregate exceeds the total Exercise Price of the Warrants, exercise of
which was solicited by such Underwriter under this Agreement, less the
aggregate amount of any damages which such Underwriter and its controlling
persons have otherwise been required to pay in respect of the same or any
substantially similar claim. The Underwriters' obligations to contribute
hereunder are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Offering Documents, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act, shall have the same rights to
contribution as the Company. Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to
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<PAGE>
the settlement of any claim or action effected without its written consent.
This Section 8(c) is intended to supersede any right to contribution under
the Act, the Exchange Act, or otherwise.
Section 9. Notices. Any notice or other communication required or permitted
to be given pursuant to this Agreement shall be in writing and shall be deemed
sufficiently given if sent by first class certified mail, return receipt
requested, postage prepaid, addressed as follows:
if to the Company: Shawn B. Stickle, President and Chief Operating Officer
Nigel V. Alexander, Chief Executive Officer
Multi-Link Telecommunications, Inc.
811 Lincoln Street
Fifth Floor
Denver, Colorado 80203
With a copy to: Thomas S. Smith, Esq.
Smith McCullough, P.C.
4643 South Ulster Street
Suite 900
Denver, Colorado 80237
If to Schneider: Keith Koch, Director of Corporate Finance
Schneider Securities, Inc.
1120 Lincoln Street, Suite 900
Denver, Colorado 80203
With a copy to: Robert W. Walter, Esq.
Berliner Zisser Walter & Gallegos, P.C.
1700 Lincoln Street, Suite 4700
Denver, Colorado 80203
and if to the Warrant
Agent: Administrative Services
American Securities Transfer & Trust, Inc.
938 Quail Street, Suite 101
Lakewood, Colorado 80215
or such other address as such party shall have given notice to other parties
hereto in accordance with this Section. All such notices or other communications
shall be deemed given three (3) business days after mailing, as aforesaid.
Section 10. Supplements and Amendments. The Company, the Warrant Agent and
Schneider may from time-to-time supplement or amend this Agreement by a written
instrument signed by the party to be charged, without the approval of any
holders of Warrants in order to cure any ambiguity or to correct or supplement
any provisions contained herein or to make any other provisions in regard to
matters or questions arising hereunder which the Company, the Warrant Agent and
Schneider may deem necessary or desirable and which do not adversely affect the
interest of the holders of Warrants.
Section 11. Assignment. This Agreement may not be assigned by any party
without the express written approval of all other parties, except that Schneider
may assign this Agreement to its successors, if any.
Section 12. Governing Law. This Agreement will be deemed made under the
laws of the State of Colorado with respect to matters of contract law and for
all purposes shall be governed by and construed in accordance with the internal
laws of said State, without regard to the conflicts of laws provisions thereof.
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<PAGE>
Section 13. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give any person or corporation other than the Company, the Warrant
Agent and Schneider any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of,
and be binding upon, the Company, the Warrant Agent and Schneider and their
respective successors and permitted assigns.
Section 14. Descriptive Headings. The descriptive headings of the sections
of this Agreement are inserted for convenience only and shall not control or
affect the meanings or construction of any of the provisions hereof.
Section 15. Superseding Agreement. This Agreement supersedes any and all
prior agreements between the parties with respect to the subject matter hereof.
Section 16. Exclusive Agreement. It is understood that this Agreement is on
an exclusive basis to solicit the exercise of the Warrants and that the Company
shall not engage other broker-dealers to solicit the exercise of Warrants
without the consent of Schneider.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MULTI-LINK TELECOMMUNICATIONS, INC.
By:
-------------------------------------
Nigel V. Alexander,
Chief Executive Officer
By:
-------------------------------------
Shawn B. Stickle,
President and Chief Executive Officer
SCHNEIDER SECURITIES, INC.
By:
-------------------------------------
Thomas Schneider, President
AMERICAN SECURITIES TRANSFER & TRUST, INC.
By:
--------------------------------------
Gregory Tubbs, Senior Vice President
<PAGE>
EXHIBIT A
CERTIFICATE
The undersigned, being the _______________ of _________________________
(the "NASD Member") pursuant to Section 3(d) of the Warrant Exercise Fee
Agreement relating to the exercise of Warrants dated _________, 1999 among
Multi-Link Telecommunications, Inc. (the "Company"), Schneider Securities, Inc.
and American Securities Transfer & Trust, Inc. (the "Warrant Agent") hereby
certifies that:
1. The Company or the Warrant Agent has notified the NASD Member that
____________ Warrants (as defined in the Agreement) have been exercised during
_______________.
2. The exercise of _________ of such Warrants was solicited by the NASD
Member.
3. Such Warrants were not held in a discretionary account.
4. The NASD Member did not, within _____ business days immediately
preceding _______________, bid for or purchase the Common Stock of the Company
or any securities of the Company immediately convertible into or exchangeable
for the Common Stock (including Warrants) or otherwise engage in any activity
that would be prohibited by Regulation M under the Securities Exchange Act of
1934, as amended, to one engaged in a distribution of the Company's securities.
5. In connection with the solicitation of the exercise of the Warrants, the
NASD Member disclosed to holders of the Warrants the compensation it will
receive.
DATED: _______________
------------------------------
(Firm Name)
By:
------------------------------
Title:
---------------------------
MULTI-LINK HOLDINGS, INC.
STOCK OPTION PLAN
1. Purpose.
This Multi-Link Holdings, Inc. Stock Option Plan ("Plan"), provides for the
grant of Stock Options, Reload Options and Stock Appreciation Rights to Key
Employees of Multi-Link Holdings, Inc. (the "Company"), and such of its
subsidiaries (as defined in Section 424(f) of the Code) as the Board of
Directors of the Company (the "Board") shall from time to time designate
("Participating Subsidiaries"), in order to advance the interests of the Company
and its Participating Subsidiaries, if any, through the motivation, attraction
and retention of their respective Key Employees.
2. Incentive Stock Options and Non-Incentive Stock Options.
The Stock Options granted under this Plan may be either (a) Incentive Stock
Options ("ISOs") which are intended to be "Incentive Stock Options" as that term
is defined in Section 422 of the Code; or (b) Nonstatutory Stock Options
("NSOs") which are intended to be options that do not qualify as "Incentive
Stock Options" under Section 422 of the Code. All Stock Options shall be ISOs
unless the Option Agreement clearly designates the Stock Options granted
thereunder, or a specified portion thereof, as NSOs. Subject to the other
provisions of this Plan, a Participant may receive ISOs and NSOs at the same
time, provided that the ISOs and NSOs are clearly designated as such.
3. Administration.
3.1 Committee. With respect to grants of Stock Options, Reload Options
and Stock Appreciation Rights to Key Employees other than officers and
directors of the Company, this Plan shall be administered by a committee
composed of at least two members of the Board, unless the Board is
comprised of only one director, in which case this Plan will be
administered by the Board (the "Committee"). With respect to grants of
Stock Options, Reload Options and Stock Appreciation Rights to Key
Employees who are officers or directors of the Company, this Plan shall be
administered by the Board, if each director is a Disinterested Person, or
by a special committee of two or more Disinterested Persons. Such special
committee may be the Committee if all of the members thereof are
Disinterested Persons, or a separate committee appointed by the Board
composed of at least two Disinterested Persons. The Committee or the Board,
as the case may be, shall have full authority to administer this Plan,
including, but not limited to, authority to interpret and construe any
provision of this Plan and any Stock Option, Reload Option or Stock
Appreciation Right granted hereunder, to adopt such rules and regulations
for administering this Plan as it may deem necessary in order to comply
with the requirements of this Plan or the Code or in order that Stock
Options that are intended to be ISOs will be classified as incentive stock
options under the Code, or in order to conform to any regulation or to any
change in any law or regulations applicable thereto and to take the actions
permitted hereunder. The Committee or the Board may delegate any of its
responsibilities under this Plan, other than its responsibility to make
grants of Stock Options, Reload Options and Stock Appreciation Rights, to
determine whether the Stock Appreciation Rights, if any, payable to a
Partic3.1ab to interpret and construe this Plan. If the Board is composed
entirely of or Disinterested Persons, the Board may reserve to itself any
of the authority granted to the Committee as set forth herein, and it may
perform and discharge all of the functions and responsibilities of the
Committee at any time that a duly constituted Committee is not appointed
and serving. All references in this Plan to the "Committee" shall be deemed
to refer to the Board whenever the Board is discharging the powers and
responsibilities of the Committee, and to any special committee appointed
by the Board to administer particular aspects of this Plan.
<PAGE>
3.2 Actions of Committee. All actions taken and all interpretations
and determinations made by the Committee in good faith (including
determinations of Fair Market Value) shall be final and binding upon all
Participants, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, and all
members of the Committee shall, in addition to their rights as directors,
be fully indemnified by the Company with respect to any such action,
determination or interpretation.
4. Definitions.
4.1 "Code." The Code is the Internal Revenue Code of 1986, as amended.
4.2 "Common Stock." A share of Common Stock means a share of no par
value common stock of the Company.
4.3 "Disinterested Person." A Disinterested Person is a director of
the Company who, during the shorter of (a) the one-year period prior to
service as an administrator of this Plan, or (b) the period between the
date on which capital stock of the Company is registered pursuant to
Section 12 of the Securities and Exchange Act of 1934, as amended (the
"1934 Act") and the director's service as an administrator of this Plan,
has not been granted or awarded equity securities pursuant to this Plan or
any other plan of the Company or any of its affiliates except as may be
permitted by Rule 16b-3(c)(2) promulgated under the 1934 Act or any
successor to such rule.
4.4 "Fair Market Value." If the Common Stock is not traded publicly,
the Fair Market Value of a share of Common Stock on any date shall be
determined, in good faith, by the Committee after such consultation with
outside legal, accounting or other experts as the Committee may deem
advisable, and the Committee shall maintain a written record of its method
of determining such value. If the Common Stock is traded publicly, the Fair
Market Value of a share of Common Stock on any date shall be the average of
the representative closing bid and asked prices, as quoted by the National
Association of Securities Dealers through NASDAQ (its automated system for
reporting quotes), for the date in question or, if the Common Stock is
listed on the NASDAQ National Market System or is listed on a national
stock exchange, the official quoted closing price on NASDAQ or such
exchange, as the case may be, on the date in question.
4.5 "Key Employee." A Key Employee is an employee of the Company or a
Participating Subsidiary, if any, whose judgment, initiative and continued
efforts are expected to contribute to the successful conduct of the
business of the Company, as determined by the Committee, in its sole
discretion.
4.6 "Option Agreement." An Option Agreement is a written agreement
evidencing a Stock Option.
4.7 "Option Price." An Option Price is the price which the Committee
designates for the exercise of a Stock Option.
4.8 "Participant." A Participant is a Key Employee to whom a Stock
Option, Reload Option and/or Stock Appreciation Right is granted.
4.9 "Redemption Value." The Redemption Value of shares of Common Stock
purchasable under a Stock Option shall be the amount, if any, by which the
Fair Market Value of one share of Common Stock on the date on which the
Stock Option is exercised exceeds the Option Price for such share.
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<PAGE>
4.10 "Reload Option." A Reload Option is a Stock Option granted under
and subject to the terms of Section 8 of this Plan.
4.11 "Stock Appreciation Right." A Stock Appreciation Right is the
right to receive payment, in shares of Common Stock, cash or a combination
of shares of Common Stock and cash, of the Redemption Value of a specified
number of shares of Common Stock then purchasable under the Stock Option.
4.12 "Stock Option." A Stock Option is the right granted under this
Plan to a Key Employee to purchase, at such time or times and at such
Option Price as are determined by the Committee and specified in the Option
Agreement, the number of shares of Common Stock determined by the Committee
and specified in the Option Agreement.
5. Eligibility and Participation.
Grants of Stock Options, Reload Options and Stock Appreciation Rights may
be made to Key Employees of the Company or any Participating Subsidiary, if any.
Any director of the Company or of a Participating Subsidiary who is also a Key
Employee shall also be eligible to receive Stock Options, Reload Options and
Stock Appreciation Rights, provided, however, members of the Committee and
directors who are not Key Employees shall not be eligible to receive Stock
Options, Reload Options or Stock Appreciation Rights under this Plan. The
Committee shall from time to time determine the Key Employees to whom Stock
Options shall be granted, the number of shares of Common Stock subject to the
Stock Options to be granted to each such Key Employee, the Option Price of such
Stock Options, and the terms and provisions of such Stock Options, all as
provided in this Plan. The Option Price of any ISO shall be not less than the
Fair Market Value of a share of Common Stock on the date on which the Stock
Option is granted, but the Option Price of an NSO may be less than the Fair
Market Value on the date the NSO is granted if the Committee so determines. If
an ISO is granted to a Key Employee who then owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
subsidiary corporation of the Company, the Option Price of such ISO shall be at
least 110% of the Fair Market Value of the Common Stock subject to the ISO at
the time such ISO is granted, and such ISO shall not be exercisable after five
years after the date on which it was granted. Each Stock Option shall be
evidenced by an Option Agreement containing such terms and provisions as the
Committee may determine, subject to the provisions of this Plan.
6. Shares of Common Stock Subject to this Plan.
6.1 Maximum Number. The maximum aggregate number of shares of Common
Stock that may be made subject to Stock Options granted under this Plan
shall be 400,000 authorized but unissued shares. The aggregate Fair Market
Value (determined as of the time the ISO is granted) of the Common Stock
subject to ISOs granted to a Participant which may first become exercisable
in a particular calendar year may not exceed $100,000. If any shares of
Common Stock subject to Stock Options are not purchased or otherwise paid
for before such Stock Options expire, such shares may again be made subject
to Stock Options.
6.2 Capital Changes. Except as otherwise provided by and subject to
Section 13 hereof, in the event any changes are made to the shares of
Common Stock (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares,
exchange of shares, change in corporate structure or otherwise),
proportionate adjustments shall be made in: (i) the number of shares of
Common Stock theretofore made subject to Stock Options; (ii) the purchase
price of shares of Common Stock theretofore made subject to Stock Options;
and (iii) the aggregate number of shares of Common Stock which may be made
subject to Stock Options. If any of the foregoing adjustments shall result
in a fractional share, the fraction shall be disregarded, and the Company
shall have no obligation to make any cash or other payment with respect to
such fractional share.
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<PAGE>
7. Exercise of Stock Options.
7.1 Time of Exercise. Subject to the provisions of this Plan, the
Committee, in its discretion, shall determine the time when a Stock Option,
or a portion of a Stock Option, shall become exercisable, and the time when
a Stock Option, or a portion of a Stock Option, shall expire. Such time or
times shall be set forth in the Option Agreement evidencing such Stock
Option. A Stock Option shall expire, to the extent not exercised, no later
than the tenth anniversary of the date on which it was granted. The
Committee may accelerate the vesting of any Participant's Stock Option by
giving written notice to the Participant. Upon receipt of such notice, the
Participant and the Company shall amend the Option Agreement to reflect the
new vesting schedule, if, however, the Option Agreement is not amended, the
notice given by the Committee shall be deemed to amend the Option Agreement
with respect to the vesting schedule. The acceleration of the exercise
period of a Stock Option shall not affect the expiration date of that Stock
Option. Any shares of Common Stock not purchased at the time a Stock Option
first becomes exercisable shall remain purchasable at any time until the
Stock Option expires.
7.2 Exchange of Outstanding Stock. The Committee, in its sole
discretion, may permit a Participant to surrender to the Company shares of
Common Stock previously acquired by the Participant as part or full payment
for the exercise of a Stock Option. Such surrendered shares of Common Stock
shall be valued at their Fair Market Value on the date of exercise. A
Participant may not surrender shares of Common Stock having a Fair Market
Value in excess of the aggregate purchase price of the shares of Common
Stock purchased upon exercise of a Stock Option. Shares of Common Stock
surrendered to the Company under this Section 7.2 shall not thereafter be
included in the shares of Common Stock available under Section 6.1.
7.3 Termination of Employment Before Exercise. If a Participant's
employment with the Company or a Participating Subsidiary, if any, shall
terminate by reason of the Participant's death or disability within the
meaning of Section 22(e)(3) of the Code, any Stock Options then held by the
Participant, to the extent then exercisable under the applicable Option
Agreement(s), shall remain exercisable after the termination of his
employment for a period of twelve months (but in no event beyond ten years
from the date of grant of the Stock Option). If a Participant's employment
with the Company or a Participating Subsidiary, if any, shall terminate for
any reason other than the Participant's death or disability, any Stock
Options then held by the Participant, to the extent then exercisable under
the applicable Option Agreement(s), shall remain exercisable after the
termination of his or her employment for a period of three months. If the
Stock Option is not exercised during the applicable period, it shall be
deemed to have been forfeited and of no further force or effect.
7.4 Disposition of Forfeited Stock Options. Any shares of Common Stock
subject to Stock Options forfeited by a Participant under this Plan shall
not thereafter be eligible for purchase by the Participant, but may be made
subject to Stock Options granted to other Participants.
8. Reload Options.
8.1 Authorization of Reload Options. Concurrently with the award of
Stock Options to any Participant, the Committee may authorize Reload
Options to purchase, for cash or shares of Common Stock, a number of shares
of Common Stock. The number of Reload Options shall equal:
(a) the number of shares of Common Stock used to exercise the
underlying Stock Options; and
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<PAGE>
(b) to the extent authorized by the Committee, the number of
shares of Common Stock used to satisfy any tax withholding requirement
incident to the exercise of the underlying Stock Options. The grant of
a Reload Option will become effective upon the exercise of underlying
Stock Options or Reload Options through the use of shares of Common
Stock held by the Participant for at least twelve months.
Notwithstanding the fact that the underlying Stock Option may be an
Incentive Stock Option, a Reload Option is not intended to qualify as
an "incentive stock option" under Section 422 of the Code.
8.2 Reload Option Amendment. Each Option Agreement shall state whether
the Committee has authorized Reload Options with respect to the underlying
Stock Options. Upon the exercise of an underlying Stock Option or other
Reload Option, the Reload Option will be evidenced by an amendment to the
underlying Option Agreement.
8.3 Reload Option Price. The Option Price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the Fair Market
Value of a share of Common Stock on the date the grant of the Reload Option
becomes effective.
8.4 Term and Exercise. Each Reload Option shall be fully exercisable
six months from the date the grant of the Reload Option becomes effective.
The term of each Reload Option shall be equal to the remaining option term
of the underlying Stock Option.
8.5 Termination of Employment. No additional Reload Options shall be
granted to Participants when Stock Options and/or Reload Options are
exercised pursuant to the terms of this Plan following termination of the
Participant's employment with the Company or a Participating Subsidiary.
8.6 Applicability of Stock Option Sections. Section 7 of this Plan
shall apply equally to Reload Options. Section 7 of this Plan is
incorporated by reference in this Section 8 as though fully set forth
herein.
9. Stock Appreciation Rights.
9.1 Grant of Stock Appreciation Rights. The Committee may, from time
to time, grant Stock Appreciation Rights to a Participant with respect to
not more than the number of shares of Common Stock which are, or may
become, purchasable under the Stock Options held by the Participant. The
Committee may, in its sole discretion, specify the terms and conditions of
such rights, including without limitation the time period or time periods
during which such rights may be exercised and the date or dates upon which
such rights shall expire and become void and unexercisable; provided,
however, that in no event shall such rights expire and become void and
unexercisable later than the time when the related Stock Option is
exercised, expires or terminates. Each Option Agreement shall state whether
the Committee has granted Stock Appreciation Rights and shall specify the
terms and conditions of such rights, which shall be subject to all the
provisions of this Plan.
9.2 Exercise of Stock Appreciation Rights. Subject to Section 9.3, and
in lieu of purchasing shares of Common Stock upon the exercise of a Stock
Option held by him, a Participant may elect to exercise the Stock
Appreciation Rights, if any, he has been granted and receive payment of the
Redemption Value of all, or any portion, of the number of shares of Common
Stock subject to such Stock Option with respect to which he has been
granted Stock Appreciation Rights; provided, however, that the Stock
Appreciation Rights may be exercised only when the Fair Market Value of the
shares of Common Stock subject to such Stock Option exceeds the exercise
price of the Stock Option. A Participant shall exercise Stock Appreciation
5
<PAGE>
Rights by delivering a written notice to the Committee specifying the
number of shares of Common Stock with respect to which he exercises Stock
Appreciation Rights and agreeing to surrender the right to purchase an
equivalent number of shares of Common Stock subject to his Stock Option. If
a Participant exercises Stock Appreciation Rights, payment of his Stock
Appreciation Rights shall be made in accordance with Section 9.3 on or
before the 90th day after the date of exercise of the Stock Appreciation
Rights.
9.3 Form of Payment. If a Participant elects to exercise Stock
Appreciation Rights as provided in Section 9.2, the Committee may, in its
absolute discretion, elect to pay any part or all of the Redemption Value
of the shares with respect to which the Participant has exercised Stock
Appreciation Rights in: (i) cash; (ii) shares of Common Stock; or (iii) any
combination of cash and shares of Common Stock. The Committee's election
pursuant to this Section 9.3 shall be made by giving written notice to the
Participant within 90 days after the date of exercise of the Stock
Appreciation Rights, which notice shall specify the portion which the
Committee elects to pay in cash, shares of Common Stock or a combination
thereof. In the event any portion is to be paid in shares of Common Stock,
the number of shares of Common Stock to be delivered shall be determined by
dividing the amount which the Committee elects to pay in shares of Common
Stock by the Fair Market Value of one share of Common Stock on the date of
exercise of the Stock Appreciation Rights. Any fractional share resulting
from any such calculation shall be disregarded. The shares of Common Stock,
together with any cash payable to the Participant, shall be delivered
within the 90-day period required above.
10. No Contract of Employment.
Nothing in this Plan shall confer upon the Participant the right to
continue in the employ of the Company, or any Participating Subsidiary, if any,
nor shall it interfere in any way with the right of the Company, or any
Participating Subsidiary, if any, to discharge the Participant at any time for
any reason whatsoever, with or without cause. Nothing in this Section 10 shall
affect any rights or obligations of the Company or any Participant under any
written contract of employment.
11. No Rights as a Shareholder.
A Participant shall have no rights as a shareholder with respect to any
shares of Common Stock subject to a Stock Option granted under this Plan. Except
as provided in Section 6.2, no adjustments shall be made in the number of shares
of Common Stock issued to a Participant, or in any other rights of the
Participant upon exercise of a Stock Option, by reason of any dividend,
distribution or other right granted to shareholders for which the record date is
prior to the date of exercise of the Participant's Stock Option.
12. Assignability.
No Stock Option, Reload Option or Stock Appreciation Right awarded under
this Plan, nor any other rights acquired by a Participant under this Plan, shall
be assignable or transferable by a Participant, other than by will or applicable
laws of intestate succession. During a Participant's lifetime, Stock Options may
be exercised only by such Participant or the guardian or legal representative of
the Participant. Notwithstanding the foregoing, the Committee may, in its sole
discretion, permit the assignment or transfer of an NSO by a Participant, other
than an officer or director, and the exercise thereof by a person other than
such Participant, on such terms and conditions as the Committee in its sole
discretion, may determine. Any such terms shall be determined at the time the
NSO is granted, and shall be set forth in the Option Agreement. In the event of
a Participant's death, the Stock Option or any Reload Option or Stock
Appreciation Right may be exercised by the personal representative of the
Participant's estate or, if no personal representative has been appointed, by
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<PAGE>
the successor or successors in interest determined under the Participant's will
or under the applicable laws of intestate succession.
13. Termination of Plan.
In the event of dissolution or liquidation of the Company, or upon any
reorganization, merger or consolidation of the Company with one or more
corporations where the Company is the surviving corporation and the shareholders
of the Company immediately prior to such transaction do not own at least fifty
percent (50%) of the issued and outstanding Common Stock immediately after such
transaction, or upon any reorganization, merger or consolidation of the Company
with one or more corporations where the Company is not the surviving
corporation, or upon a sale of substantially all of the assets of the Company to
another corporation or entity or upon the sale of Common Stock to another person
or entity in one or a series of transactions with the result that such person or
entity owns more than fifty percent (50%) of the issued and outstanding Common
Stock immediately after such sale(s), the Plan and all Stock Options and Reload
Options and Stock Appreciation Rights, if any, outstanding under the Plan shall
terminate on the effective date of the transaction (or, in the event of a tender
offer resulting in the sale of fifty percent (50%) or more of the then
outstanding Common Stock (a "Tender Offer"), 30 days after the final expiration
of the Tender Offer) unless prior to the effective date of the transaction the
Board elects, in its sole discretion, to continue the Plan. In the event the
Board does not elect to continue the Plan, however, any Stock Options, Reload
Options and Stock Appreciation Rights, theretofore granted and outstanding under
the Plan shall become immediately exercisable in full at such time as the
approval of the transaction by the Board, or the final expiration of any Tender
Offer (notwithstanding any performance, vesting or other criteria contained
therein), and shall remain exercisable until the effective date of such
transaction or 30 days after the final expiration of the Tender Offer, whichever
is applicable (unless the Stock Option, Rel oad Option or Stock Appreciation
Right would otherwise expire by its own terms on an earlier date). The Company
shall give each optionee written notice at least 30 days prior to the effective
date of any termination of the Plan as a result of a transaction described above
in order to permit the optionee to exercise his Stock Options and/or Reload
Options and Stock Appreciation Rights, if any, prior to the effective date of
termination. Unless the Board has elected to continue the Plan, any option not
exercised by the effective date of a transaction described above shall terminate
on such date.
14. Withholding Taxes.
The Company or Participating Subsidiary, if any, may take such steps as it
may deem necessary or appropriate for the withholding of any taxes which the
Company or the Participating Subsidiary, if any, is required by any law or
regulation or any governmental authority, whether federal, state or local,
domestic or foreign, to withhold in connection with any Stock Option, Reload
Option or Stock Appreciation Right, including, but not limited to, the
withholding of all or any portion of any payment or the withholding of issuance
of shares of Common Stock to be issued upon the exercise of any Stock Option,
Reload Option or Stock Appreciation Right, until the Participant reimburses the
Company or Participating Subsidiary, if any, for the amount the Company or
Participating Subsidiary, if any, is required to withhold with respect to such
taxes, or cancelling any portion of such award in an amount sufficient to
reimburse itself for the amount it is required to so withhold.
15. Amendment.
The Board may from time to time alter, amend, suspend or discontinue this
Plan, including, where applicable, any modifications or amendments as it shall
deem advisable in order that ISOs will be classified as incentive stock options
under the Code, or in order to conform to any regulation or to any change in any
law or regulations applicable thereto; provided, however, that no such action
7
<PAGE>
shall adversely affect the rights and obligations with respect to Stock Options
at any time outstanding under this Plan; and provided further that no such
action shall, without the approval of the shareholders of the Company, (i)
increase the maximum number of shares of the Common Stock that may be made
subject to Stock Options (unless necessary to effect the adjustments required by
Section 6.2), (ii) materially increase the benefits accruing to Participants
under this Plan, or (iii) materially modify the requirements as to eligibility
for participation in this Plan.
16. Application of Section 16.
With respect to persons subject to Section 16 of the 1934 Act, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of this
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
17. Registration of Optioned Shares.
The Stock Options shall not be exercisable unless the purchase of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933, as amended (the "Act"), or unless, in the
opinion of counsel to the Company, the proposed purchase of such optioned shares
would be exempt from the registration requirements of the Act, and from the
registration or qualification requirements of applicable state securities laws.
The Company shall have no obligation to register any shares of Common Stock.
18. Stock Restrictions.
The Committee may provide that shares of Common Stock issuable upon the
exercise of a Stock Option, Reload Option or Stock Appreciation Right, be
subject to various restrictions, including restrictions which provide that the
Company has a right to prohibit sales of such shares of Common Stock, a right of
first refusal with respect to such shares of Common Stock or a right or
obligation to repurchase all or a portion of such shares of Common Stock, which
restrictions may survive a Participant's term of employment with the Company.
The acceleration of time or times at which the Stock Option becomes exercisable
may be conditioned upon the Participant's agreement to such restrictions.
19. Nonexclusivity of this Plan.
Neither the adoption of this Plan by the Board nor the submission of this
Plan to shareholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any Participating Subsidiary, if any, has lawfully put into
effect, including, without limitation, any retirement, pension, savings and
stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
20. Effective Date.
This Plan was adopted by the Board and became effective on January 15,
1997, and was approved by the shareholders of the Company on January 15, 1997.
No ISOs shall be granted under this Plan subsequent to 10 years after its
original effective date, although NSOs may continue to be granted under this
Plan after such ten-year period. ISOs outstanding subsequent to ten years after
the original effective date of this Plan shall continue to be governed by the
provisions of this Plan.
FIRST AMENDMENT TO
MULTI-LINK TELECOMMUNICATIONS, INC.
STOCK OPTION PLAN
THIS FIRST AMENDMENT ("Amendment") is made as of this 2nd day of February,
1999 to the Multi-Link Telecommunications, Inc. ("Company") Stock Option Plan
("Plan"). In the event of any conflict between the terms of this Amendment and
the terms of the Plan, the terms of this Amendment shall control. All
capitalized terms not defined in this Amendment shall have their respective
meanings set forth in the Plan.
The Plan shall be amended as follows:
1. Stock Subject to the Plan. The first sentence of Section 6.1 of the Plan
is hereby deleted and replaced with the following sentence:
"The maximum aggregate number of shares of Common Stock that may
be made subject to Stock Options granted under this Plan shall be
300,000 authorized but unissued shares (taking into account the
three for five reverse stock split approved by the shareholders
of the Company on February 2, 1999)."
2. Ratification. Except as modified herein, the terms and conditions of the
Plan are hereby ratified by this Amendment.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Amendment effective as of the date first set forth above.
MULTI-LINK TELECOMMUNICATIONS, INC.,
a Colorado corporation
By: /s/ Nigel V. Alexander
------------------------------------------
Nigel V. Alexander, Chief Executive Officer
Agency Agreement
This agreement is made between Multi-Link Communications, Inc., a Colorado
Corporation ("MLC") and _____________________________________, ("Agent"), on
this Day _________, Month_________________, 1999.
Background
Multi-Link is a provider of off-site Voice Messaging Services in the Denver and
Boulder local calling area. MLC provides Services to businesses, homes, and in
conjunction with mobile telephones and pagers.
Agent wishes to sell Multi-Link Services to businesses and/or homes that are
within the Denver local calling area. Agent understands that it must uphold the
very highest standards of customer care during its dealing with MLC and its
customers.
Term of Agreement
This agreement shall commence for a period of one year upon execution by an
Authorized representative of Multi-Link Communications, Inc. Following one year
of execution, a revised Agency agreement may be proposed. If no new agreements
are proposed, this agreement shall automatically renew for a period of one-year
following original date of execution. Both parties may terminate this agreement
upon 30 day written notice or immediately for "cause" including but not limited
to misrepresentation or unethical business practices.
Non-Exclusive Agent
Agent Understands that this is a non-exclusive agency and MLC will appoint other
agents to sell Services in the same geographic territory. In addition, MLC may
sell Services through any means it deems fit, and may offer terms, which may not
be available through agency programs.
Compensation
Agent Commission is based on the total monthly value of all contracts received
and dated within the same month and confirmed by MLC.
$1.00 to $2,999.00 - 5 times the monthly value.
$3,000.00 + - 10 times the monthly value.
At the discretion of MLC, after 6 months, stock options may be awarded to agents
who meet or exceed $3,000.00 in total monthly contract value in any month.
No commission is due on usage charges or other non-fixed revenues. The initial
commission pays Agent for the entire expected life of the customer. Existing MLC
clients renewing contracts and/or purchasing additional services are not
commissioned sales to Agent unless approved by MLC in conjunction with special
programs, which may be offered from time to time.
Commissions are payable the 25th of the month following contract date
Cancellations, Reductions, Bad Debts and Charge Backs
MLC-Agent Agreement 1.1.99 Pg 1 of 2
<PAGE>
Except in cases of suspected fraud, Agents will not be charged back commissions
for cancellations, reductions or non payment once the fourteen day cancellation
period has expired. Agent will be responsible for the repayment of commissions
already paid in the event client cancels or reduces service prior to or within
the fourteen-day cancellation period.
Independent Contractor
The parties expressly declare and agree that Agent shall be an independent
contractor and not an employee or servant of MLC. Agent shall be responsible for
the payment of all city, state and federal taxes in connection with sale made
under this agreement. Agent shall maintain adequate insurance to cover workers
compensation and general liability for all personnel involved in the sale of
MLC's services.
By: ____________________________________________________ Date: _________________
Authorized Representative ("Agent")
By: ____________________________________________________ Date: _________________
Authorized Representative Multi-Link Communications, Inc.
<PAGE>
Mr. Steven R. Inman
President
Telcom Sales Associates, Inc.
811 Lincoln Street
Suite 600
Denver
CO 80203
February 3, 1999
Dear Steve,
Our attorneys have pointed out to me that when we signed the new agency
agreement dated effective January 1, 1999 that we did not confirm that this new
agreement superceded the old agreement in all respects.
Please sign a copy of this letter and return it to me to confirm that this is
the case.
Sincerely,
/s/ Nigel V. Alexander
- --------------------------------
Nigel Alexander
Chief Executive Officer
I hereby confirm that the Agency Agreement dated effective January 1, 1999
supercedes all prior agency agreements between Telcom Sales Associates and
Multi-Link Communications, Inc.
/s/ Steve R. Inman
- ----------------------------------
Steven R. Inman
President
Telcom Sales Associates, Inc.
MLC-Agent Agreement 1.1.99 Pg 2 of 2
MULTI-LINK BUSINESS SERVICE AGREEMENT
Name DIFFERENT BILLING INFORMATION
Address
City/State/Zip
Telephone
Facsimile MULTI-LINK COMMUNICATIONS TAX ID# 84-1179417
Contact Person
<TABLE>
<CAPTION>
Product Initial Setup Price per Service
Qty Description Setup Total Month Total Comments
- ---- ----------- ------- ----- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
SERVICES ATTACHED TO TELEPHONE LINES
1D Company-Link Service 25.00 10.00
Internal System Overflow Mailbox 25.00 9.00 For Use with Internal Voice Mail Systems
4D Company Business Dev. Service 35.00 20.00 Includes Three One Minute Announcements
Company Router 25.00 3.00 No Messages (No zero revert over 3 extensions)
Home Link Service 5.00 5.00 For Billing Home Services on business bill.
SERVICES NOT ATTACHED TO TELEPHONE LINES
Directory 10.00 3.00 No zero revert
Direct-Link Mail Box 5.00 10.00
OTHER SERVICES
Fax Messaging Service No Setup 8.00 Plus Monthly Usage Charges Initials
888 Number Access No Setup 2.00 Plus Monthly Usage Charges Initials
Constant Touch Service (2 Numbers) No Setup 10.00 Plus Monthly Usage Charges Initials
Additional Constant Touch Number(s) No Setup 3.00
Auto 1000 Automated Attendant 25.00 100.00 1000 Minutes plus $0.10 per minute overage
Auto 2500 Automated Attendant 25.00 225.00 2500 Minutes plus $0.09 per minute overage
Auto 5000 Automated Attendant 25.00 350.00 5000 Minutes plus $0.08 per minute overage
External Transfer 5.00 4.00 All outdial extensions from Router or
Directory
Local Pager Airtime No Setup 8.00 1000 Free each month then $0.10 per page
Nationwide Pager Airtime No Setup 31.00 200 Free each month then $0.30 per page
Local Pager Rental & Airtime No Setup 15.00 1000 Free each month then $0.10 each
(Credit Card)
Nationwide Pager Rental & Airtime No Setup 38.00 200 Free each month then $0.30 per page
(Credit Card)
TOTAL SETUPS (Billed First Month or Prepayment) $________ $________ MONTHLY BILLING AMOUNT
CUSTOMER INITIALS CONFIRM SETUP CHARGES 12 MONTHS PLUS SETUPS
PREPAYMENT OPTION (DEDUCT 10%)
Monthly Invoice _____
Prepay Check _____ #_________ Cardholder ______________________________
Prepay Cash _____ Card Number ______________________________
Prepay Credit Card _____ Expiration ______________________________ Visa___ MC ___
</TABLE>
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
This contract is for a total of $_____________________. Multi-Link recognizes
the need for flexibility to increase and decrease your messaging services as
your employee base grows or shrinks from time to time. By signing this agreement
you are agreeing to pay Multi-Link no less than the amount shown above during
the period of our business relationship. In the event you cancel our service
before you have paid this amount, a termination charge equal to the difference
between the amount you have paid, and the total contract value shown above will
be added to your final bill.
With written notice you may cancel this contract up to 14 days after your
service is first established without any further obligation except to pay usage
charges already incurred to the time of cancellation (if any). Any amounts
prepaid to Multi-Link in respect of his contract will be refunded.
The terms and conditions on the reverse side constitute a valid and binding part
of this service agreement. You acknowledge having read and understood all the
terms and conditions of this contract. This agreement is not valid unless signed
by an authorized Multi-Link Agent. A copy of this signed agreement is provided
to you in all cases. MULTI-LINK COMMUNICATIONS, INC.
Tel: 303.831.1977
- ------------------------------------------------------------ Fax: 303.831.1988
Authorized Signature For Multi-Link Communications, Inc.
Position: Date of Contract http://www.multilinkcom.com
MLC CONTROL NUMBER______________ AGENT NUMBER D____________
MLC - Advanced Agent Business Agreement - 7/1/98
<PAGE>
TERMS AND CONDITIONS OF MULTI-LINK SERVICE
ADMINISTRATIVE FUNCTIONS Multi-Link Communications, Inc. ("MultiLink") will
perform all administrative functions necessary to establish and maintain the
correct function of the Voice Mail and Paging services provided under this
Agreement including (i) addition or deletion of users, (ii) ordering of
necessary services from US West and other local phone service providers and
(iii) changes to menus or other flexible options. Subject to delays occasioned
by any phone company or Subscriber, MultiLink will establish service within ten
working days from date of contract.
USE OF VOICE MESSAGING SERVICES The Subscriber agrees not to use any services
provided by MultiLink for any purpose that may be deemed immoral, illegal, or
unethical. Subscriber agrees not to permit the publication of any Voice Mail
Number provided by MultiLink in any magazine, periodical or advertisement
without the prior written consent of MultiLink. In the event that Subscriber
breaches this condition, MultiLink may either (i) cancel the Voice Mail contract
immediately without notice or (ii) apply a charge for all usage in connection
with such advertised Voice Mail number in accordance with the MultiLink standard
price list.
PAYMENT OF MONTHLY INVOICES Subscriber's first monthly invoice will include:
setup charges, pro-rated first month service and usage charges and second month
service in advance. Invoices are due upon receipt. In the event that payment is
not received promptly, MultiLink may, with or without notice, suspend or
terminate its performance hereunder and the provision of services. The failure
of MultiLink to exercise its rights hereunder as to any given failure of
customer to pay an invoice does not constitute a waiver of MultiLink's rights to
suspend or terminate services hereunder. In the event that any invoice falls
more than 90 days past due, MultiLink may declare the entire balance of the
contract due and payable immediately. Subscriber understands and agrees that
MultiLink may utilise a third party billing firm for invoicing hereunder, and
that MultiLink may assign any or all of its rights hereunder without
restriction.
PREPAYMENTS MultiLink offers subscribers the opportunity to prepay annual
contracts for a 10% discount. Usage charges are billed monthly in arrears in all
cases. Upon expiration of any prepaid period, MultiLink will automatically
resume monthly billing at the appropriate monthly rate. Subscribers wishing to
cancel service at the end of a prepaid period are required to give the standard
30 days notice of cancellation. Subscribers wishing to repeat the prepayment
should simply notify MultiLink and billing will be adjusted accordingly.
LATE PAYMENT FEES AND COLLECTION EXPENSES MultiLink reserves the right to charge
interest at 1.5% per month on past due balances, or such other rate as is the
maximum allowable by law. In the event that collection action and/or lawsuit is
necessary to enforce collection of past due amounts, Subscriber agrees to pay
reasonable collection agency fees, court costs and any other expenses incurred
by MultiLink in the collection of such past due amounts.
BILLING OF USAGE CHARGES Subscriber understands and acknowledges that certain
services provided by MultiLink are subject to 'per minute' charges as shown in
the MultiLink standard price list. Subscriber agrees to pay all such usage
charges when due. Subscriber understands and agrees that precise details of call
activity which cause usage charges to become due will not routinely be supplied
in the Subscriber's monthly bill. Such information is available upon request and
in the event that a dispute arises over charges applied to a Subscriber's
account. Charges are billed in six-second increments.
SECURITY CODE Subscriber acknowledges that the security of the Voice Mail Box is
the Subscriber's sole responsibility. Subscriber agrees not to disclose the
personal security code to any unauthorised users, and agrees to pay all charges
of whatever nature which may be incurred through use of Subscriber's Voice Mail
Box.
<PAGE>
TERM OF AGREEMENT AND CANCELLATION After the expiration of fourteen days (14)
from the date service is first established, this Agreement shall be fully
enforceable in accordance with its terms for so long as the Subscriber and
MultiLink have a business relationship. Subscriber confirms that it has
contracted to purchase services from Multi-link for a value not less than the
total shown on the face of this contract, and that if Subscriber terminates the
service relationship before that obligation has been met, that a termination
charge equal to the difference will be charged by MultiLink, and is immediately
due and payable. Once the subscriber has fulfilled its total contractual
obligations to MultiLink, this contract shall continue on a month to month
basis, and may be cancelled on 30 days written notice. In the event that
Subscriber cancels without 30 days notice, MultiLink shall bill one extra
month's charges in lieu of the required notice period.
NO CONSEQUENTIAL DAMAGES MultiLink shall not have any liability to Subscriber,
its customers or any third parties for any direct, indirect, special or
consequential damages of any kind arising out of this Agreement including
without limitation, damages based on strict liability, tort, or warranty. The
maximum damages which may be awarded against MultiLink in any circumstances
shall be limited to the return of moneys paid by Subscriber to MultiLink for
Voice Mail or Paging Services.
PAGING SERVICE RESELLER Subscriber understands that MultiLink is a reseller for
various Paging Broadcast Companies and not the operator of the paging system.
Customer acknowledges that Multi-Link has no direct control over the operation
of such networks and Multi-Link cannot be held accountable for the pager service
provided under the terms of this agreement. MultiLink will always insure that it
selects pager companies with a reputation for quality products and service at
the time such service is established.
APPLICABLE LAW This contract shall be governed and construed in accordance with
Colorado Law.
Agreement Number C37315
Billing Number K 303 831-7680 387 Billing
Number K 303 831-7695 325 Billing Number K
303 831-7751 371 Billing Number K 303
831-7770 265 Billing Number K 303 831-7783
347 Billing Number K 303 832-3001 257
Billing Number K 303 832-3002 267 Billing
Number K 303 832-3053 918
U S WEST COMMUNICATIONS DIGITAL SWITCHED SERVICE
RATE STABILITY PLAN AGREEMENT
This is a Service Agreement between Multi-Link Communications Inc. ("CUSTOMER"),
and U S WEST COMMUNICATIONS, INC. ("USWC"), for the provision of U S WEST
COMMUNICATIONS Digital Switched Service.
1. SCOPE. USWC shall provide and CUSTOMER shall purchase Digital Switched
Service ("Service"). USWC supplies CUSTOMER with use of digital DS1 exchange
telecommunications service facility and common equipment, linking CUSTOMER'S
premises to USWC's local exchange switching office. Service includes: (1)
use of digital facility (transmission capacity at a maximum speed of 1.544
megabits per second); (2) use of common equipment to interconnect with
USWC's local exchange switch.
This Agreement pertains to use of the digital DS1 facility and common
equipment only. Flat usage trunks for accessing the local exchange and toll
networks are supplied out of the Digital Switched Service Tariff, Price
List, or Catalog. USWC provides Service in accordance with the applicable
Tariff, Price List, or Catalog ("Tariff") for the state in which Service is
provided, incorporated herein by this reference.
USWC agrees to furnish Service between the following locations.
Customer's USWC's
Quantity USOC Address Address
-------- ---- ---------- -------
8 D7Z 811 Lincoln, #500, Denver, Co2485 Curtis, Denver, CO
------- --- -----------------------------------------------------
------- --- -----------------------------------------------------
USWC will terminate Service at the USWC Standard Network Interface (SNI) at
CUSTOMER premises. The SNI is that location where USWC's protected network
facilities and service end and CUSTOMER's inside wire or network begins.
2. TERM. The term of this Agreement shall commence on the latest signature date
in the execution section hereto. This Agreement will terminate One hundred
twenty (120) months from either:
a. The first installation date of Service (as evidenced by USWC's
records), if Service is new; or
b. The date of _______________________________________.
Should USWC continue to provide Service after this term without a further
agreement, the Service charges will convert to the applicable month-to-month
rate under the terms and conditions of the applicable Tariff; or, in its
absence, this Agreement.
3. CHARGES. CUSTOMER agrees to pay the following charges for Service:
Total Monthly Recurring Charge $223.44 each
Total Nonrecurring Charge $0.00
Accelerated Installation Charge $_______
<PAGE>
Applicable taxes shall be added to the above charges. Charges shall commence
upon provision of Service as evidenced by USWC records and shall be
guaranteed for the term of this Agreement. The charges for Services under
this Agreement, including any and all discounts to which CUSTOMER may be
entitled, will be offered and charged to CUSTOMER independently from and
regardless of the CUSTOMER's purchase of any customer premises equipment or
enhanced services from USWC.
4. BILLING FOR SERVICE. CUSTOMER shall pay each bill in full by the payment due
date. If late payment charges are applicable and permitted by law, they may
be assessed and billed at 1 1/2 percent per month or the highest lawful
rate, which ever is less, on the unpaid balance.
5. SERVICE MOVES AND CHANGES. CUSTOMER may make changes in Service from the
original quantity(ies) and/or installation location(s) identified above
("Change"). The Change is subject to the following conditions: (1) CUSTOMER
and USWC agree and execute a separate written Supplement or Agreement
covering the Change; and (2) CUSTOMER agrees to pay charges associated with
the Change including but not limited to reasonable costs incurred by USWC at
the vacated location(s).
If CUSTOMER changes the type of digital DS1 facility and common equipment,
termination charges will not apply as long as CUSTOMER maintains Service
over the same or greater number of facilities and common equipment. However,
the applicable monthly and nonrecurring Tariff charges, at the time of
Change, shall apply for such Changes. In the event CUSTOMER reduces the
number of facilities over which Service is provided, termination charges, as
stated in Section 6, shall apply.
6. TERMINATION. Either party may terminate this Agreement for cause provided
written notice specifying the cause for termination and requesting
correction within thirty (30) days is given the other party and such cause
is not corrected within such thirty (30) day period. Cause is any material
breach of the terms of this Agreement. If USWC terminates this Agreement for
cause, or if CUSTOMER terminates this Agreement WITHOUT cause, CUSTOMER
shall pay early termination charges. If termination is prior to installation
of Service, early termination charges shall be those reasonable costs
incurred by USWC through the date of termination. If CUSTOMER disconnects
all or part of Service after installation to a level that is below the
Service quantities established under this Agreement, CUSTOMER shall pay a
termination charge equal to twenty-five percent (25%) of the monthly rate
for Service terminated multiplied by the number of months, or portion
thereof, remaining in the term of this Agreement; plus the balance of all
billed but unpaid recurring and outstanding nonrecurring charges.
A termination charge will be waived when the CUSTOMER discontinues Service
and ALL of the following conditions are met: 1) CUSTOMER signs a new service
agreement for any other USWC provided service(s). All applicable
nonrecurring charges will be assessed for the new service(s); 2) Both the
current Service and the new service(s) are provided solely by USWC; 3) The
order to discontinue Service and the order to establish new service(s) are
received by USWC at the same time; 4) The new service(s) installation must
be completed within thirty (30) calendar days of the disconnection of
Service, unless such installation delay is caused by USWC; 5) The total
value of the new service(s), excluding any special construction charges, is
equal to or greater than one hundred fifteen percent (115%) of the remaining
value of this Agreement; 6) A new Minimum Service Period, if applicable,
will go into effect when the new service(s) agreement term begins; and, 7)
CUSTOMER agrees to pay any previously billed, but unpaid recurring, and any
outstanding non-recurring charges - these charges cannot be included as part
of the new service(s) agreement.
<PAGE>
7. STATE TARIFF CHARGE DECREASES. Charges shall commence upon provision of
Service as evidenced by USWC records and shall be guaranteed against any
increase initiated by USWC during the term of this Agreement. However, if
the applicable USWC Tariff monthly stabilized charges for Service decrease
during the term of this Agreement, such decrease shall be automatically
applied for the remainder of the term of this Agreement.
8. OUT-OF-SERVICE. If USWC causes a Service interruption, an out-of-service
credit will be calculated as specified in the applicable USWC Exchange
Services Tariff for the state in which Service is provided under this
Agreement.
9. SERVICE SUSPENSION/MAINTENANCE. USWC may from time to time suspend Service
for routine maintenance or rearrangement of facilities or equipment. USWC
will give CUSTOMER advance notification of the Service suspension. Such
Service suspension is not considered an Out-of-Service condition provided
Service is restored by the end of the period specified in the notification.
10. PERSONAL INJURY; PROPERTY DAMAGE. Each party shall be responsible for any
actual physical damages it directly causes in the course of its performance
under this Agreement, limited to damages resulting from personal injuries,
death, or property damage arising from negligent acts or omissions; PROVIDED
HOWEVER, THAT NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL,
CONSEQUENTIAL, INDIRECT, OR SPECIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT
LIMITED TO ANY LOSS OF USE, LOSS OF BUSINESS, OR LOSS OF PROFIT.
11. LIMITATION OF LIABILITY. USWC SHALL NOT BE LIABLE TO CUSTOMER FOR ANY
INCIDENTAL, INDIRECT SPECIAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND INCLUDING
BUT NOT LIMITED TO ANY LOSS OF USE, LOSS OF BUSINESS, OR LOSS OF PROFIT.
EXCEPT AS PROVIDED IN SECTION 10, ANY USWC LIABILITY TO CUSTOMER FOR ANY
DAMAGES OF ANY KIND UNDER THIS AGREEMENT SHALL NOT EXCEED, IN AMOUNT, A SUM
EQUIVALENT TO THE APPLICABLE OUT-OF-SERVICE CREDIT UNDER THIS AGREEMENT.
REMEDIES UNDER THIS AGREEMENT ARE EXCLUSIVE AND LIMITED TO THOSE EXPRESSLY
DESCRIBED IN THIS AGREEMENT.
12. NO WARRANTIES. THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
13. UNCONTROLLABLE CONDITIONS. Neither party shall be deemed in violation of
this Agreement if it is prevented from performing any of the obligations
hereunder by reason of severe weather and storms; earthquakes or other
natural occurrences; strikes or other labor unrest; power failures; nuclear
or other civil or military emergencies; acts of legislative, judicial,
executive or administrative authorities; or any other circumstances which
are not within its reasonable control.
14. DISPUTE RESOLUTION.
a. Other than those claims over which a regulatory agency has exclusive
jurisdiction, all claims, regardless of legal theory, related directly
or indirectly to this Agreement, whenever bought and whether between the
parties or between one of the parties to this Agreement and the
employees, agents or affiliated businesses of the other party, shall be
resolved by arbitration. A single arbitrator engaged in the practice of
law and knowledgeable about telecommunications law shall conduct the
arbitration in accordance with the then current rules of the American
Arbitration Association ("AAA").
b. All expedited procedures prescribed by the AAA shall apply. There shall
be no discovery other than the exchange of information which is provided
to the arbitrator by the parties. The arbitrator's decision shall be
final and binding and judgment may be entered in any court having
jurisdiction thereof.
<PAGE>
c. Other than the determination of those claims over which a regulatory
agency has exclusive jurisdiction, federal law (including the provisions
of the Federal Arbitration Act, 9 U.S.C. Sections 1-15) shall govern and
control with respect to any issue relating to the validity of this
Agreement to arbitrate and the arbitrability of the claims.
d. If any party files a judicial or administrative action asserting claims
subject to arbitration, and another party successfully stays such action
and/or compels arbitration of such claims, the party filing the action
shall pay the other party's costs and expenses incurred in seeking such
stay or compelling arbitration, including reasonable attorney's fees.
15. LAWFULNESS. This Agreement and the parties' actions under this Agreement
shall comply with all applicable federal, state, and local laws, rules,
regulations, court orders, and governmental agency orders. Service under
this Agreement shall only be effective when mandatory regulatory filing
requirements are met, if applicable. This Agreement will be governed by the
laws of the state where Service is provided.
16. SEVERABILITY. In the event that a court or a governmental or regulatory
agency, with proper jurisdiction determines that this Agreement or a
provision of this Agreement is unlawful, this Agreement, or that provision
of the Agreement to the extent it is unlawful, shall terminate. If a
provision of this Agreement is terminated but the parties can legally
commercially and practicably continue without the terminated provision, the
remainder of this Agreement shall continue in effect.
17. GENERAL PROVISIONS.
a. Failure or delay by either party to exercise any right, power, or
privilege hereunder will not operate as a waiver hereto.
b. This Agreement will not be assignable by CUSTOMER without the express
written consent of USWC.
c. This Agreement benefits CUSTOMER and USWC. There are no third party
beneficiaries.
d. This Agreement constitutes the entire understanding between CUSTOMER and
USWC with respect to Service provided herein and supersedes any prior
agreements or understandings.
The parties hereby execute and authorize this Agreement as of the latest date
shown below:
CUSTOMER U S WEST COMMUNICATIONS, INC.
- ---------------------------------- ----------------------------------
Signature Signature
- ---------------------------------- ----------------------------------
Name Printed or Typed/Title Name Printed or Typed/Title
- ---------------------------------- ----------------------------------
Date Date
- ---------------------------------- ----------------------------------
Address for Notice Address for Notice
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement") is made and entered effective
January 1, 1999, by and between MULTI-LINK TELECOMMUNICATIONS, INC., a Colorado
corporation ("Multi-Link"), having an office at 811 Lincoln Street, Suite 500,
Denver, Colorado 80203 and OCTAGON STRATEGIES, INC., a Colorado corporation,
having an office at 1615 Osceola Street, Denver, Colorado 80204 ("Consultant").
RECITALS
A. Multi-Link is engaged in the business of providing advanced voice and
facsimile messaging services to predominately small and medium sized businesses
in the Denver, Colorado local calling area;
B. Consultant is a consulting company owned and operated by Nigel V.
Alexander; and
C. Consultant desires to provide consulting services to Multi-Link, and
Multi-Link desires to obtain consulting services from Consultant, as an
independent contractor, under the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties do hereby agree and contract as follows:
1. Appointment. Multi-Link hereby appoints Consultant, and Consultant
hereby accepts such appointment, to provide consulting services to Multi-Link on
a full time basis in the capacity as an independent contractor of Multi-Link.
The parties agree that the consulting services shall be performed by Nigel V.
Alexander, an officer of Consultant.
2. Scope of Appointment. Consultant's scope of appointment as a Consultant
to and independent contractor of Multi-Link shall include:
(a) Consulting with the other Managing Directors of Multi-Link and
such other persons as Multi-Link may designate from time to time on matters
relating to the business and operations of Multi-Link;
(b) Providing assistance and advice towards Multi-Link's goal of
becoming the preeminent provider of complex voice and data messaging
services for small businesses in the United States;
(c) Maintaining responsibility for Multi-Link's financing and
strategic planning departments;
(d) Identifying acquisition candidates for Multi-Link; and
(e) Such other related duties as Multi-Link and Consultant shall agree
upon from time to time.
<PAGE>
3. Relationship Between the Parties. It is the intention of the parties
that Consultant shall act only as its agent for a particular purpose and as an
independent contractor of Multi-Link. Consultant shall represent itself only as
being "associated with" or a "representative of" or an "agent of" or an
"independent contractor of" Multi-Link. Nothing contained in this Agreement is
intended to create or shall be construed to create the relationship of employer
and employee between Multi-Link and Consultant as such relationship is construed
under federal or state tax law or regulations or pronouncements by taxing
authorities. Further, this Agreement is not intended to be and shall not be
construed as a partnership or joint venture.
4. Compensation Arrangements. Multi-Link shall compensate Consultant for
the provision of the consulting services being provided under the terms of this
Agreement as follows:
(a) Consulting Fees. Multi-Link shall pay Consultant annual consulting
fees ("Consulting Fees") in the amount of $53,333 per year, payable in
equal monthly installments on or before the first day of each month during
the term of this Agreement for the consulting services performed in the
immediately preceding month. The Consulting Fees shall be prorated for any
partial months at the beginning or end of the term during which Consultant
provides consulting services to Multi-Link. The Consulting Fees may be
increased during the term of this Agreement by the Board of Directors of
Multi-Link, in its sole discretion.
(b) Expense Reimbursement. On a monthly basis, Multi-Link shall
reimburse Consultant for reasonable expenses incurred by Consultant during
the previous month while performing Consultant's duties under this
Agreement, including expenses for entertainment, travel, automobile and
similar items incurred on behalf of Multi-Link. In order to receive
reimbursement for its expenses, Consultant shall submit invoices to
Multi-Link and attach copies of receipts showing that Consultant has paid
the amounts for which Consultant is requesting reimbursement. In any event,
any expenses over $1,000 in any month must be approved in writing by
Multi-Link before being incurred by Consultant.
5. Consultant Actions.
(a) Nondisclosure. Consultant recognizes and acknowledges that, as a
Consultant to Multi-Link, Consultant will have access to certain
proprietary and confidential information that are valuable and unique
assets of Multi-Link and its subsidiaries and affiliates (collectively
"Affiliates"), including but not limited to financial information and
information pertaining to the software, marketing and sales operations,
financing operations, potential acquisitions and customer lists
(hereinafter "Confidential Information") used by Multi-Link or the
Affiliates in their businesses. As a condition to having such access to the
Confidential Information during the Term of this Agreement (as defined in
Paragraph 10 of this Agreement), Consultant shall not, during the Term of
this Agreement or for a period of three years thereafter, except as
permitted by the next sentence, disclose any Confidential Information to
any person, firm, corporation, association or other entity for any reason
or purpose whatsoever without the prior written consent or authorization of
the Board of Directors of Multi-Link and the Affiliates. Notwithstanding
the prohibitions contained in the foregoing sentence, Consultant shall be
permitted to disclose such information during the Term of this Agreement to
other persons employed by or providing consulting services to Multi-Link or
the Affiliates who have a need to know such information for a proper
purpose related to the consulting services being provided hereunder or to
the business of Multi-Link or the Affiliates. Upon termination of this
Agreement, Consultant shall neither take nor retain any papers, customer
lists, manuals, files or other documents or copies thereof belonging to
Multi-Link or the Affiliates. To the extent any items of Confidential
Information constitute trade secrets under Colorado law, Consultant's
obligations of confidentiality and nondisclosure shall continue to survive
after said three year period to the greatest extent permitted by applicable
law. These rights of Multi-Link are in addition to those Multi-Link has
under the common law or applicable statutes for the protection of trade
secrets.
(b) Noncompetition. As a further condition to having such access to
the Confidential Information described in Section 5.a above, Consultant
shall not, without the prior written consent of the Board of Directors of
Multi-Link, directly or by assisting others, whether through itself, its
shareholders or any entity in common control with Multi-Link, during the
Term of this Agreement and for a period of six months after the termination
of this Agreement for any reason (the "Restrictive Period"), on
Consultant's own behalf or in the service or on behalf of others, whether
or not for compensation, engage in any activity or consulting service that
involves leasing, selling or operating voice mail systems in any state of
the United States where Multi-Link is engaged in the business of leasing,
marketing, selling or operating voice mail systems or in any country
outside of the United States where Multi-Link is engaged in the business of
leasing, marketing, selling or operating voice mail systems. In addition,
<PAGE>
during the Restrictive Period, Consultant and its shareholders shall not
have any controlling interest in any person, firm, corporation or business,
through a subsidiary or parent entity or other entity which engages in
leasing, marketing, selling or operating voice mail systems.
Notwithstanding the foregoing, Consultant and its shareholders may own
shares of other competing companies whose securities are publicly traded,
so long as such securities do not constitute five percent or more of the
outstanding securities of any such company.
(c) Non-Solicitation of Multi-Link Employees. Consultant further
agrees that during the Term of this Agreement and for six months
immediately following cessation for any reason of Consultant's services
provided hereunder, Consultant shall not solicit or in any manner encourage
employees of Multi-Link or the Affiliates to leave the employ of Multi-Link
or the Affiliates. The foregoing prohibition applies only to employees with
whom Consultant or its employees, agents or representatives had material
contact pursuant to Consultant's duties during the Term of this Agreement.
"Material contact" means interaction between Consultant and an employee of
Multi-Link or the Affiliates: (i) with whom Consultant actually dealt; or
(ii) whose dealings with Multi-Link or the Affiliates or services for
Multi-Link or the Affiliates were handled, coordinated or supervised by
Consultant.
(d) Non-Solicitation of Multi-Link Customers. During the Term of this
Agreement and for six months immediately following cessation for any reason
of Consultant's services provided hereunder, Consultant shall not, on
Consultant's own behalf or on behalf of any person, partnership,
association, corporation or business organization, entity or enterprise
(except Multi-Link and the Affiliates), solicit any customer of Multi-Link
or the Affiliates, or any representative of any such customer with a view
to selling or providing any product, equipment or service competitive or
potentially competitive with any product, equipment or service sold or
provided by Multi-Link or the Affiliates during the two year period
immediately preceding cessation of Consultant's services provided
hereunder, provided that the restrictions set forth herein shall apply only
to customers of Multi-Link or the Affiliates, or representatives of such
customers with whom Consultant or its employees, agents or representatives
had material contact during such two year period. "Material contact" exists
between Consultant and each of the existing customers of Multi-Link or its
Affiliates: (i) with whom Consultant actually dealt; or (ii) whose dealings
with Multi-Link or the Affiliates were handled, coordinated or supervised
by Consultant.
(e) Intellectual Property. Consultant shall disclose to Multi-Link all
ideas and business plans developed by Consultant during the term of this
Agreement which relate to the business conducted by Multi-Link or the
Affiliates. All patents, patent applications, patent licenses, formulas,
inventions, improvements, designs, discoveries, processes, software,
copyrights, know-how, proprietary information, rights, trademarks, or trade
names, or future improvements thereto developed or conceived of by
Consultant or its employees or agents during any period of providing
consulting services to Multi-Link shall be promptly disclosed to, and all
rights with respect thereto shall be assigned by Consultant or its
employees or agents to Multi-Link in consideration of the remuneration paid
or payable to Consultant hereunder, and shall be considered work made for
hire for Multi-Link within the meaning of Title 17 of the United States
Code. Consultant acknowledges that "software" as used in this Section 5.e
shall include without limitation all ideas, concepts, know-how, methods,
techniques, structures, information and materials relating to the software
including source code, object and load modules, requirements
specifications, design specifications, design notes, flow charts, decoding
sheets, annotations, documentation, and the structures, organization,
sequence, designs, formulas and algorithms which reside in the software and
which are not generally known to the public or within the industries of
trades in which Multi-Link competes.
<PAGE>
(f) Remedies. Consultant acknowledges and agrees that its obligations
provided in this Section 5 are necessary and reasonable in order to protect
Multi-Link and the Affiliates and their respective businesses and
Consultant expressly agrees that monetary damages could be inadequate to
compensate Multi-Link or the Affiliates for any breach by Consultant of its
covenants and agreements set forth herein. Accordingly, Consultant agrees
and acknowledges that any such violation or threatened violation of this
Section 5 will cause irreparable injury to Multi-Link or the Affiliates and
that, in addition to any other remedies that may be available, in law, in
equity or otherwise, Multi-Link and the Affiliates may be entitled to
obtain injunctive relief against the prospective breach of this Section 5
or the continuation of any such breach by Consultant.
(g) Construction. In the event that any provision of this Section 5
should ever be deemed to exceed the time, geographic, or other limitations
permitted by applicable law, then such provision shall be reformed to the
maximum time geographic, or other limitations permitted by applicable law.
The provisions of this Section 5 shall be applicable for the period
indicated and shall survive the termination of this Agreement.
6. Consultant Responsibilities. Consultant hereby agrees to be responsible
for, pay, and fully indemnify and hold harmless Multi-Link from, and contribute
to Multi-Link all losses, claims, actions and expenses which are incurred by
Multi-Link and arises by reason of any of the following:
(a) Any loss or damage suffered by Multi-Link or other party with
respect to a transaction originated by Consultant as a result of a material
error by Consultant or any agent, other employee, or third party utilized
by Consultant in conducting its consulting services, including such
person's fraudulent activity or negligence; and
(b) Any liability resulting from Consultant's failure to comply with
this Agreement or any applicable federal or state law, rules or
regulations, with respect to any other person who is either an employee,
agent or an independent contractor of Multi-Link, Consultant or of any
other person or firm with which Multi-Link or Consultant may have a
business relationship.
Consultant hereby agrees that the foregoing indemnification shall survive the
termination of this Agreement and shall be valid and binding irrespective of any
investigation made by or on behalf of Multi-Link.
7. Other Terms. The following additional terms and understandings shall
apply to this Agreement:
(a) Consultant shall supply Consultant's own equipment, office
supplies, copies and tools necessary or appropriate for Consultant's
performance under this Agreement.
(b) Consultant shall be responsible for all transportation for
Consultant and shall assume all responsibility and liability in connection
therewith.
(c) Consultant shall be available such time and hours as are necessary
to perform Consultant's duties hereunder and shall have no obligation to
work any particular hours nor any obligation to perform any services other
than those described in Section 2 above and other services related to
performing those duties.
(d) Consultant agrees that, with respect to each transaction on which
Consultant performs consulting services, Consultant will use Consultant's
best efforts to comply with the reasonable requests of Multi-Link's
authorized representatives or agents.
<PAGE>
(e) Consultant agrees that all transactions originated through any
consulting services provided by Consultant for Multi-Link during the term
of this Agreement are for the sole benefit of, and as such shall be deemed
the sole property of, Multi-Link.
(f) Consultant agrees to conduct Consultant's activities under this
Agreement in accordance with all applicable laws, rules, regulations which
may be established from time to time by applicable governmental, and with
all applicable procedures which may be established from time to time by
Multi-Link.
(g) Neither Multi-Link nor Multi-Link's agents or representatives
shall have any right to control or direct the details, manner or means by
which Consultant accomplishes the tasks which Consultant is obligated to
perform under this Agreement, provided that Consultant shall apply and
follow reasonable and ethical business practices and procedures.
(h) Consultant shall have the right to hire assistants or use
Consultant's employees to complete some or any portion of the services to
be furnished by Consultant, provided that Consultant (i) agrees that work
performed by such persons is performed in accordance with the terms of this
Agreement, (ii) that Consultant shall be responsible for all aspects of
obligations which may be deemed to arise as a result of the hiring or
employment of others by Consultant and (iii) that all such persons shall be
deemed to be employees of Consultant and not Multi-Link.
(i) Consultant agrees and acknowledges that Consultant does not have
the authority to incur obligations, responsibilities or liabilities on
behalf of Multi-Link.
8. Tax Obligations. Consultant agrees to furnish Consultant's internal
revenue service tax identification or social security number to Multi-Link and
to comply with all tax laws applicable to the operation of a business such as
that to be conducted by Consultant, including, but not limited to, the reporting
of all gross receipts therefrom as income from the operation of a business, the
payment of all self-employment taxes, compliance with all employment tax
requirements or withholding obligations on any employees used by Consultant, and
compliance with state employment and workmen's compensation laws. Consultant
hereby acknowledges that Consultant will not be treated as an employee with
respect to the services rendered under this Agreement for federal or state tax
purposes, that no federal or state taxes will be withheld from amounts paid to
Consultant under this Agreement, that Multi-Link will not be obligated to make
any tax payments on behalf of Consultant or relating to the services to be
performed under this Agreement and that Multi-Link will file an appropriate Form
1099 with the Internal Revenue Service relating to compensation to be paid to
Consultant. Consultant shall indemnify and hold Multi-Link harmless from any and
all tax liabilities which may be imposed upon Consultant or upon Multi-Link due
to payments made by Multi-Link to Consultant, at any time by any governmental
agency, whether state or federal, as a result of this Agreement or the
relationship created hereby.
9. Term and Termination. The term ("Term") of this Agreement shall commence
on January 1, 1999 and terminate on January 1, 2002 unless terminated pursuant
to the following:
(a) By the mutual agreement of the parties.
(b) By Consultant upon 30 days written notice to Multi-Link delivered
in accordance with this Agreement.
(c) By Consultant, in its sole discretion, if Multi-Link desires to
require over 25% of the consulting services to be performed at a location
outside of the Denver, Colorado metropolitan area, in which event
Multi-Link shall pay Consultant, in a single lump-sum payment ("Termination
<PAGE>
Payment") which shall be paid within 30 days after the effective date of
Consultant's termination under this Section 9.c, an amount equal to the
greater of (i) the Consulting Fees payable to Consultant pursuant to the
terms of this Agreement for the remaining Term hereof, or (ii) the
Consulting Fees that Consultant was entitled to receive pursuant to this
Agreement during the 12 months immediately preceding Consultant's
termination pursuant to this Section 9.c.
(d) By Multi-Link upon 30 days written notice delivered in accordance
with this Agreement to Consultant; provided, however, that Multi-Link shall
pay Consultant the Termination Payment described in Section 9.c above in a
single lump-sum payment which shall be paid within 30 days after the
effective date of Consultant's termination under this Section 9.d.
(e) By Multi-Link in the event of Consultant's material failure or
refusal to observe the provisions of this Agreement or perform any of the
duties required of Consultant under this Agreement, but only after
Multi-Link shall have provided Consultant with written notice of such
failure or refusal and Consultant shall have failed to correct such failure
or refusal within five days after the giving of such notice. Under such
circumstances, Multi-Link shall pay Consultant all Consulting Fees accrued
under this Agreement to the date of termination.
(f) By Multi-Link immediately upon providing written notice to
Consultant in the event of Consultant's or its agent's or employee's fraud,
misappropriation or embezzlement of funds, or conviction for any crime
punishable as a felony. Under such circumstances, Multi-Link shall pay
Consultant all Consulting Fees accrued under this Agreement to the date of
termination, subject to any offset by Multi-Link due to the fraud,
misappropriation or embezzlement of funds.
(g) This Agreement shall automatically be terminated upon the death of
Nigel V. Alexander, if Consultant files a voluntary petition in bankruptcy
or is adjudicated bankrupt as a result of an involuntary petition in
bankruptcy being filed against Consultant, a receiver is appointed for
Consultant's business, Consultant makes a general assignment for the
benefit of creditors, Nigel V. Alexander is convicted of a crime or offense
that is reasonably likely, in the sole opinion of Multi-Link, to materially
and unfavorably affect Multi-Link or its reputation or goodwill, or Nigel
V. Alexander becomes disabled and unable to perform Consultant's services
hereunder for a period of two continuous months.
In the event of a termination of Consultant's services under this Agreement for
cause in accordance with Sections 9.e and 9.f, Multi-Link shall have no further
obligation to Consultant. However, termination of Consultant's consulting
services for cause shall not terminate or extinguish Consultant's obligation or
liability to pay to Multi-Link or any of the Affiliates any amount owed to them
by Consultant, including, but not limited to, any amounts misappropriated,
embezzled or otherwise obtained by Consultant or its agents or employees without
prejudice to any other rights or remedies of Multi-Link or the Affiliates at law
or in equity.
10. Relationship Following Termination. In the event of termination of this
Agreement for any reason, Multi-Link and Consultant will cooperate reasonably
with each other to complete business pending on the date of termination, to
account in a reasonable manner to each other for services performed prior or
subsequent to termination and for other matters which may require mutual
cooperation. Notwithstanding the foregoing, Consultant shall surrender to
Multi-Link all files and documents relating to any transactions with which
Consultant provided consulting services, whether such transactions have closed,
are pending, or have been terminated for other reasons, and all supplies and
other materials and properties owned or furnished by Multi-Link in the
possession of Consultant. Multi-Link and Consultant agree that if this Agreement
<PAGE>
is terminated for any cause or reason, all amounts due under this Agreement
shall be determined as if the date of termination was the last day of a month
and payment of all amounts due Consultant or Multi-Link shall be made within a
reasonable time after such termination but not later than 10 days after the end
of the calendar month in which the termination occurred, unless otherwise stated
herein.
11. Governing Law and Venue. This Agreement shall be construed in
accordance with the laws of the State of Colorado. The parties agree that this
Agreement was entered into in the City and County of Denver, in the State of
Colorado and that Multi-Link's principal place of business is in the City and
County of Denver, Colorado. Therefore, the parties agree that any legal actions
instituted by either party relating to this Agreement shall be instituted and
heard in the appropriate state court in the City and County of Denver, Colorado.
12. Headings. Headings are not to be considered a part of this Agreement
and are included solely for convenience and are not intended to be accurate
descriptions of the contents hereof.
13. Assignment, Binding Effect. Consultant may not assign this Agreement.
All of the terms and provisions of this Agreement shall be binding upon and
shall insure to the benefit of the parties hereto and their respective
successors and Multi-Link's assigns.
14. Attorneys' Fees and Costs. In the event of any default or breach on the
part of Consultant of any provision of this Agreement, in addition to all other
remedies available to Multi-Link, Consultant shall pay Multi-Link all amounts
due and all damages, costs and expenses, including reasonable attorneys' fees
and costs, incurred by Multi-Link, whether or not Multi-Link actually commences
any legal action or proceeding as a result of such default, plus interest at the
highest rate allowable by law, accruing from the date of such default.
15. No Waiver. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.
16. Notices. All notices and other transmissions to be given or required to
be given hereunder shall be in writing and delivered to the person entitled
thereto by hand delivery or by certified or registered mail, postage prepaid and
return receipt requested, or by an overnight courier service that maintains
delivery records with charges prepaid, or by facsimile transmission, to such
other party's address (or to such party's facsimile transmission number). If the
notice is sent by hand delivery or facsimile transmission, it shall be deemed to
have been given to the party on the date when receipt thereof is acknowledged.
If the notice is sent by mail or courier service, it shall be deemed to have
been given to the party entitled thereto on the date after the day when
deposited in the United States mail or with a courier service for delivery to
that party, addressed as follows:
If to Multi-Link:
Multi-Link Telecommunications, Inc.
811 Lincoln Street, Suite 500
Denver, Colorado 80203
Attention: President
Fax: (303) 831-1988
If to Consultant:
Octagon Strategies, Inc.
1615 Osceola Street
Denver, Colorado 80204
Fax: (303) 313-2001
or such other address as any party may hereafter designate by giving written
notice to the other party.
<PAGE>
17. Duplicate of Originals. This Agreement may be executed in several
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
18. Severability. If any provision of this Agreement is declared by any
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions which shall be fully severable and
this Agreement shall be construed and enforced as if such invalid provisions had
never been included.
19. Entire Agreement. This Agreement is the sole and entire agreement
between the parties relating to the subject matter hereof, and supersedes all
prior understandings, agreements and documentation relating to the subject
matter hereof. This Agreement may be amended only by a written instrument
executed by the authorized representatives of both parties.
WHEREFORE, the parties have set their hands and seals effective the day and
year first above written.
CONSULTANT:
OCTAGON STRATEGIES, INC.
By: /s/ Nigel V. Alexander
-----------------------------------------
Nigel V. Alexander, President
MULTI-LINK:
MULTI-LINK TELECOMMUNICATIONS, INC.
By: /s/ Shawn B. Stickle
-----------------------------------------
Shawn B. Stickle
President and Chief Operating Officer
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective January 1, 1999, by and
between MULTI-LINK TELECOMMUNICATIONS, INC., a Colorado corporation (the
"Company"), and SHAWN B. STICKLE (the "Employee"). The Company hereby continues
the employment of the Employee and the Employee hereby accepts continued
employment with the Company on the terms and conditions hereinafter set forth.
1. Term. Subject to the provisions for termination as provided in Section 4
of this Agreement, the term of this Agreement shall commence on January 1, 1999,
and shall terminate on January 1, 2002.
2. Nature of Employment. The Company hereby continues the employment of the
Employee as the President and Chief Operating Officer of the Company to perform
such duties and have such powers as the Employee substantially performed for the
Company on the date of this Agreement as well as those additional duties and
powers as may be agreed upon between the Board of Directors of the Company and
the Employee. The Employee shall perform the Employee's duties hereunder
primarily in the Denver, Colorado metropolitan area. The Board of Directors of
the Company may not materially change the Employee's duties or positions without
the Employee's consent. The Employee agrees to abide by the Articles of
Incorporation, Bylaws, Company policies and the provisions of this Agreement,
and agrees to devote the Employee's full business time and best efforts to the
Employee's employment under this Agreement as is reasonably required. The
Employee may carry on outside activities so long as those activities do not
conflict with nor compete with the Employee's job responsibilities and corporate
duties. The Employee shall, at all times, faithfully with due diligence and to
the best of the Employee's ability, experience and talent, perform all the
duties hereunder.
3. Compensation, Vacations and Expenses.
a. Salary. The Company shall pay to the Employee a salary during the
term of this Agreement in accordance with the amount set forth on Schedule
A hereof. This amount may be increased as determined by the Board of
Directors of the Company through an amendment to Schedule A.
b. Vacations and Fringe Benefits. The Employee shall be entitled to an
annual vacation of at least the minimum vacation time established by the
Company for its employees. The Employee shall further be entitled to
participate in and receive the benefits provided under any employee benefit
program which may be adopted and maintained by the Company (including,
without limitation, those described on Schedule A) and for which the
Employee is eligible by virtue of Employee's employment hereunder, but only
as and to the extent the Employee would otherwise be eligible as provided
in any said program.
c. Reimbursement of Expenses. The Employee is authorized to incur
reasonable expenses while performing the Employee's duties under this
Agreement, including expenses for entertainment, travel, automobile, and
similar items incurred on behalf of the Company in an amount consistent
with Company policies. The Company will reimburse the Employee upon the
presentation by the Employee of itemized accounts of such reasonable and
appropriate expenditures.
1
<PAGE>
4. Termination of Agreement.
a. Termination by Employee Upon Notice. The Employee may terminate
this Agreement without cause upon 30 days prior written notice to the
Company. In such event, the Employee shall continue to render the services
required under this Agreement and shall be paid on the regular payment
dates the compensation set forth in Schedule A up to the date of
termination.
b. Termination by Employee Upon Change of Location. The Employee may
terminate this Agreement in the Employee's sole discretion upon five days
prior written notice to the Company in the event that the Company requires
the Employee to perform over 25% of the Employee's work in person at a
location outside of the Denver, Colorado metropolitan area, in which event
the Company shall pay the Employee, in a single lump-sum payment
("Termination Payment") which shall be paid within 30 days after the
effective date of the Employee's termination hereunder, an amount equal to
the greater of (i) the Employee's then salary and other compensation
payable to the Employee pursuant to this Agreement for the remaining term
hereof, or (ii) the Employee's salary and other compensation that the
Employee was entitled to receive pursuant to this Agreement during the 12
months immediately preceding the Employee's termination hereunder. In such
event, the Employee shall continue to render the services required under
this Agreement and shall be paid on the regular payment dates the
compensation set forth in Schedule A up to the date of termination.
c. Termination by the Company Without Cause. The Company may terminate
this Agreement without cause upon 30 days prior written notice to the
Employee, so long as the Company pays the Employee the Termination Payment
described in Section 4.b above in a single lump-sum payment which shall be
paid within 30 days after the effective date of the Employee's termination
hereunder. In such event, the Employee shall continue to render the
services required under this Agreement and shall be paid on the regular
payment dates the compensation set forth in Schedule A up to the date of
termination.
d. Termination by the Company for Cause. If the Employee materially
fails or refuses to observe the provisions of this Agreement or if the
Company determines in its sole discretion that the Employee is not
satisfactorily performing any of the duties required of the Employee under
this Agreement, the Company shall give the Employee written notice of such
failure or refusal and, if the Employee does not correct such failure or
refusal within five (5) days after the giving of such notice, this
Agreement may be terminated by the Company immediately upon written notice
of such termination to the Employee and upon payment by the Company to the
Employee for all compensation accrued under this Agreement to the date of
termination. In the event of the Employee's fraud, misappropriation or
embezzlement of funds, or conviction for any crime punishable as a felony,
the Company may terminate this Agreement immediately upon written notice of
such termination to the Employee and upon payment by the Company to the
Employee for all compensation accrued under this Agreement to the date of
termination. In the event of a termination of the Employee's employment for
cause in accordance with this Section 4.b, the Company shall have no
further obligation to the Employee. However, termination of the Employee's
employment for cause shall not terminate or extinguish the Employee's
obligation or liability to pay to the Company or any of its affiliates any
amount owed to them by the Employee, including, but not limited to, any
amounts misappropriated, embezzled or otherwise obtained by the Employee by
reason of any of the occurrences referred in this Section 4.d without
prejudice to any other rights or remedies of the Company or it affiliates
at law or in equity.
e. Termination Upon Death of Employee. This Agreement shall
automatically terminate in the event of the Employee's death. In such case,
any accrued compensation or benefits shall inure to the estate of the
Employee and the payment thereof shall be the only liability the Company
shall have to the Employee's estate.
2
<PAGE>
5. Employee Actions.
a. Employee Shall Not Disclose Information. The Employee recognizes
and acknowledges that the list of the customers, as it may exist from time
to time, of the Company or of its subsidiaries and affiliates (collectively
"Multi-Link"), and any other proprietary or confidential information,
including, but not limited to financial information and information
pertaining to the software, marketing and sales operations, financing
operations and potential acquisitions (hereinafter "Confidential
Information"), used by the Company or Multi-Link, in their businesses are
valuable and unique assets of the Company and Multi-Link. Except as
permitted by the next sentence, the Employee will not during or for a
period of three years after the term of the Employee's employment, disclose
any Confidential Information to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever without the prior
written consent or authorization of the boards of directors of the Company
and Multi-Link. Notwithstanding the prohibitions contained in the foregoing
sentence, the Employee shall be permitted to disclose such information
during the term of his employment to other persons employed by or providing
consulting services to the Company or Multi-Link who have a need to know
such information for a proper purpose related to the business of the
Company or Multi-Link. Upon termination of the Employee's employment by the
Company, the Employee shall neither take nor retain any papers, customer
lists, manuals, files, or other documents or copies thereof belonging to
the Company or Multi-Link. To the extent any items of Confidential
Information constitute trade secrets under Colorado law, Employee's
obligations of confidentiality and nondisclosure shall continue to survive
after said three year period to the greatest extent permitted by applicable
law. These rights of the Company are in addition to those the Company has
under the common law or applicable statutes for the protection of trade
secrets.
b. Non-Compete. The Employee hereby covenants and agrees that the
Employee will not, without the prior written consent of the Board of
Directors of the Company, directly or by assisting others, whether
individually or through any entity controlled by the Employee, during the
term of this Agreement and for a period of six months after the termination
of this Agreement for any reason (the "Restrictive Period"), on Employee's
own behalf or in the service or on behalf of others, whether or not for
compensation, engage in any activity that involves leasing, marketing,
selling or operating voice mail systems in any state of the United States
where the Company is engaged in the business of leasing, marketing, selling
or operating voice mail systems or in any country outside of the United
States where the Company is engaged in the business of leasing, marketing,
selling or operating voice mail systems. In addition, during the
Restrictive Period, the Employee shall not have any controlling interest in
any person, firm, corporation or business, through a subsidiary or parent
entity or other entity which engages in leasing, marketing, selling or
operating voice mail systems. Notwithstanding the foregoing, the Employee
may own shares of other competing companies whose securities are publicly
traded, so long as such securities do not constitute five percent or more
of the outstanding securities of any such company.
c. Non-Solicitation of Company Employees. During the Employee's
employment and for six months thereafter, Employee shall not solicit or in
any manner encourage employees of the Company or of Multi-Link to leave the
employ of the Company or Multi-Link. The foregoing prohibition applies only
to employees with whom the Employee had material contact pursuant to
Employee's duties during Employee's employment term. "Material contact"
means interaction between the Employee and another employee of the Company
or Multi-Link: (i) with whom Employee actually dealt; or (ii) whose
employment or dealings with the Company or Multi-Link or services for the
Company or Multi-Link were handled, coordinated or supervised by the
Employee.
<PAGE>
d. Non-Solicitation of Company Customers. During the Employee's
employment and for six months immediately following cessation of Employee's
employment with the Company for any reason, Employee shall not, on
Employee's own behalf or on behalf of any person, partnership, association,
corporation or business organization, entity or enterprise (except Company
and Multi-Link), solicit any customer of the Company or Multi-Link, or any
representative of any such customer with a view to selling or providing any
product or service competitive or potentially competitive with any product
or service sold or provided by the Company or Multi-Link during the two
year period immediately preceding cessation of Employee's employment with
the Company, provided that the restrictions set forth herein shall apply
only to customers of the Company or Multi-Link, or representatives of such
customers with whom Employee had material contact during such two year
period. "Material contact" exists between Employee and each of the existing
customers of the Company or Multi-Link: (i) with whom Employee actually
dealt; or (ii) whose dealings with the Company or Multi-Link were handled,
coordinated or supervised by Employee.
e. Intellectual Property. The Employee shall disclose to the Company
all ideas and business plans developed by the Employee during the term of
the Employee's employment with the Company which relate to the business
conducted by the Company or by Multi-Link. All patents, patent
applications, patent licenses, formulas, inventions, improvements, designs,
discoveries, processes, software, copyrights, know-how, proprietary
information, rights, trademarks, or trade names, or future improvements
thereto developed or conceived of by the Employee during any period of
employment with the Company shall be promptly disclosed to, and all rights
with respect thereto shall be assigned by the Employee to the Company in
consideration of the remuneration paid or payable to the Employee
hereunder, and shall be considered work made for hire for the Company
within the meaning of Title 17 of the United States Code. The Employee
acknowledges that "software" as used in this Section 5.e shall include
without limitation all ideas, concepts, know-how, methods, techniques,
structures, information and materials relating to the software including
source code, object and load modules, requirements specifications, design
specifications, design notes, flow charts, decoding sheets, annotations,
documentation, and the structures, organization, sequence, designs,
formulas and algorithms which reside in the software and which are not
generally known to the public or within the industries of trades in which
the Company competes.
f. Remedies. The Employee acknowledges and agrees that Employee's
obligations provided in this Section 5 are necessary and reasonable in
order to protect the Company, Multi-Link and their respective businesses
and the Employee expressly agrees that monetary damages would be inadequate
to compensate the Company or Multi-Link for any breach by Employee of
Employee's covenants and agreements set forth herein. Accordingly, Employee
agrees and acknowledges that any such violation or threatened violation of
this Section 5 will cause irreparable injury to the Company and Multi-Link
and that, in addition to any other remedies that may be available, in law,
in equity or otherwise, the Company and Multi-Link may be entitled to
obtain injunctive relief against the prospective breach of this Section 5
or the continuation of any such breach by the Employee without the
necessity of proving actual damages.
g. Construction. In the event that any provision of this Section 5
should ever be deemed to exceed the time, geographic, or other limitations
permitted by applicable law, then such provision shall be reformed to the
maximum time geographic, or other limitations permitted by applicable law.
The provisions of this Section 5 shall be applicable for the period
indicated and shall survive the termination of this Agreement.
3
<PAGE>
6. General Matters.
a. Governing Law. This Agreement shall be governed by the laws of the
State of Colorado and shall be construed in accordance therewith.
b. No Waiver. No provision of this Agreement may be waived except by
an Agreement in writing signed by the waiving party. A waiver of any term
or provision shall not be construed as a waiver of any other term or
provision.
c. Amendment. This Agreement may be amended or altered at any time, in
whole or in part, by filing with this Agreement a written instrument
setting forth such changes, signed by all parties.
d. Binding Effect. This Agreement shall be binding upon the Employee,
the Company, and their successors and assigns.
e. Construction. Throughout this Agreement the singular shall include
the plural, the plural shall include the singular, and the masculine shall
include the feminine wherever the context so requires.
f. Text to Control. The headings of Sections are included solely for
convenience of reference. If any conflict between any heading and the text
of this Agreement exists, the text shall control.
g. Severability. If any provision of this Agreement is declared by any
court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions which shall be fully
severable, and the Agreement shall be construed and enforced as if such
invalid provision had never been included.
h. Entire Agreement of the Parties. The parties agree that this
document contains the entire agreement and understanding between them in
relation to the subject matter hereof and no representations, warranties,
covenants, understandings, or agreements in relation thereto exist between
the parties except as expressly set forth herein.
i. Notices. Every notice or other communication to be given by either
party to the other party with respect to this Agreement, shall be in
writing and shall not be effective for any purpose unless the same shall be
served personally or by national air courier service, or United States
certified mail, return receipt requested, postage prepaid, addressed, if to
the Company at 811 Lincoln Street, Suite 500, Denver, Colorado 80203,
Attention, Nigel V. Alexander and if to the Employee at 401 South Ingalls,
Lakewood, Colorado 80226, or such other address or addresses as the Company
or the Employee may from time to time designate by written notice given as
above provided. Every notice or other communication hereunder shall be
deemed to have been given as of the third business day following the date
of such mailing (or as of any earlier date evidenced by a receipt from such
national air courier service or the United States Postal Service) or
immediately if personally delivered. Notices not sent in accordance with
the foregoing shall be of no force and effect until received by the
foregoing parties as such addresses specified herein.
j. Duplicate Originals. This Agreement may be executed in several
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
4
<PAGE>
k. Arbitration. Any dispute or controversy of or relating to this
Agreement, or any breach of this Agreement, shall be settled by arbitration
to be held in Denver, Colorado, in accordance with the rules then in effect
of the American Arbitration Association or any successor thereto. The
decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's
decision in any court having jurisdiction and the parties irrevocably
consent to the jurisdiction of the Colorado state courts for this purpose.
The Company shall pay the costs and expenses of such arbitration.
l. Attorneys' Fees. In the event that the Company or the Employee
retains an attorney or attorneys to enforce performance of this Agreement
by the other party or to obtain damages or other relief because of
violation of the terms of this Agreement by the other party, then all
reasonable attorneys' fees and costs of arbitration or litigation are to be
borne and paid by the party determined to have failed to perform this
Agreement or to be liable for damages or against which other relief is
granted.
m. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of the Employee's employment to the
extent necessary to the intended preservation of such rights and
obligations.
n. Remedies Cumulative; No Waiver. No remedy conferred upon a party by
this Agreement is intended to be exclusive of any other remedy and each and
every such remedy shall be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity. No
delay or omission by a party in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof and any such right, remedy or power may be exercised by such party
from time to time and as often as may be deemed expedient or necessary by
such party in such party's sole discretion.
The parties have executed this Agreement to be effective as of the date
first above written.
MULTI-LINK TELECOMMUNICATIONS, INC.
By: /s/ Nigel V. Alexander
--------------------------------------
Nigel V. Alexander
Attest:
/s/
--------------------------------
EMPLOYEE:
/s/ Shawn B. Stickle
------------------------------------------
Shawn B. Stickle
5
<PAGE>
SCHEDULE A
DESCRIPTION OF DUTIES AND COMPENSATION
EMPLOYEE: Shawn B. Stickle
POSITION WITH COMPANY: President and Chief Operating Officer
COMPENSATION:
Salary: $48,000
BENEFITS:
Insurance: Medical, dental, disability (long and short term)
and life to the extent available to all employees
of the Company and paid in accordance with Company
policy if elected by Employee.
401(k) Plan: Available for Employee's election if eligible.
Medical Reimbursement: Available for Employee's election if eligible.
February 21, 1999
United States Securities and
Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Multi-Link Telecommunications, Inc.
Dear Sir or Madam:
We have read and agree with the comments in the "Experts" section of the
Registration Statement on Form SB-2 filed by Multi-Link Telecommunications, Inc.
Very Truly Yours,
/s/ James E. Sheifley & Associates, PC
James E. Sheifley & Associates, PC
Subsidiaries of the Registrant
- ------------------------------
Multi-Link Communications, Inc.
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Registration Statement and Prospectus of Multi-Link
Telecommunications, Inc. of our report dated January 21, 1999, except for Note 4
of the financial statements, for which the date is February 10, 1999,
accompanying the consolidated financial statements of Multi-Link
Telecommunications, Inc. contained in such Registration Statement, and to the
use of our name and the statements with respect to us, as appearing under the
heading "Experts" in the Registration Statement.
/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
February 19, 1999
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Registration Statement and Prospectus of
Multi-Link Telecommunications, Inc. of our report dated February 13, 1998,
relating to the financial statements of Multi-Link Telecommunications, Inc.
(formerely Multi-Link Holdings, Inc.) contained in the Registration Statement
and to the reference to our firm under the caption "EXPERTS" in the Registration
Statement.
/s/ James E. Scheifley & Associates, P.C.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
February 21, 1999
Englewood, Colorado
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