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:
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.
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.
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
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.
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:
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Title:
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MULTI-LINK TELECOMMUNICATIONS, INC.
By:
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Title:
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SCHNEIDER SECURITIES, INC.
By:
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Title:
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THE SHAREHOLDERS:
By: /s/ Nigel V. Alexander
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Nigel V. Alexander
By: /s/ Shawn B. Stickle
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Shawn B. Stickle
EXHIBIT A
TO CUSTODY AGREEMENT
Name Total Shares
- ---- ------------
Nigel V. Alexander 100,000
Shawn B. Stickle 100,000